November 24, 2013 6:03:32 am
This week,the Chinese government issued its most direct statement to date on the legitimacy of Bitcoin,the thus-far-unregulated digital currency that has taken China,the United States and other countries by storm in recent months.
Speaking at an economic forum on Wednesday,Yi Gang,the deputy governor of the Peoples Bank of China and director of the State Administration of Foreign Exchange,said that it would be impossible for Chinas central bank to recognise the Bitcoin as a legitimate financial instrument in the near future. But,Yi added,people are free to participate in the Bitcoin market and he would personally adopt a long-term perspective on the currency.
The statement comes during a week of remarkable turbulence on Chinas numerous Bitcoin exchanges.
On BTC China,the worlds largest exchange platform for the digital currency,the value of a Bitcoin more than doubled from about 3,000 renminbi,or about $500,on Sunday to nearly 7,000 renminbi on Tuesday. By midday on Wednesday it was back below 4,000 renminbi and on Friday it was hovering around 5,000 renminbi.
Such volatility in large part reflects uncertainty over how the Chinese government as well as other governments may decide to regulate the currency. As a result,even minor policy or media signals have triggered wild fluctuations in the currencys value.
Analysts suspect that the currencys sharp rise on Tuesday came in response to the United States Federal Reserve chairman Ben S Bernankes letter to the United States Congress,in which he wrote that financial innovations like Bitcoin may hold long-term promise,particularly if the innovations promote a faster,more secure and more efficient payment system.
Favourable media coverage on CCTV,Chinas state-run broadcaster,has also pushed up the currencys value. A segment that aired on October 28 about the worlds first Bitcoin ATM,in Vancouver,precipitated a rise on Chinas Bitcoin exchanges.
Although Yis remarks were the most direct government statement to date,his words are far from conclusive. He stopped short of calling Bitcoin illegal and he explicitly stated that ordinary Chinese citizens retain the freedom to trade in Bitcoins,given its status as a form of online trading.
At the same time,China has historically maintained very strict control over the renminbi,and some experts speculate that the government could still outlaw or restrict Bitcoin if it grows too large or proves socially or financially destabilising.
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