Central bank 'unlikely to legitimize bitcoin'

By Chen Boyuan
0 Comment(s)Print E-mail China.org.cn, November 22, 2013
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China's banking authority has finally declared its position on the increasingly popular online bitcoin currency when Yi Gang, vice governor of the People's Bank of China (PBOC), said on Wednesday that the central bank is unlikely to legitimize the use of bitcoins in the near future.

Yi did admit that bitcoins, as a digital currency for online banking transfers, bears no threshold for people's participation. He also recognized that the bitcoin system was sufficiently "unique" and "instructive" to keep his attention.

Yi's remark came in the wake of the nation's booming bitcoin market. Three major online bitcoin trading platforms - BTC China, OKCoin.com and Huobi.com - all reported a more than doubled growth during the first 20 days in November compared with the same period in October.

Most investors acclaimed Yi's acknowledgement of bitcoin, saying it was good news for the the market. One anonymous bitcoin trading platform CEO said that PBC's prudence was within insider expectations, but Yi's comments already reflected the government's consent to bitcoin development.

That same person predicted that the current bitcoin craze would cause investors to swarm in, but cautioned that the lack of regulation would foster non-performing deals, which are detrimental to the bitcoin value.

On Tuesday, United States Federal Reserve Chairman Ben Bernanke said in a letter to senators that the bitcoin, similar to other virtual currencies, "may hold a long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system." Bernanke also gave his "cautious blessing" to the online cash.

Following the Federal Reserve's acknowledgement, the bitcoin value at once shot up to more than 8,000 yuan (US$1,300), before sliding back to 5,200 yuan (US$846) later that day. By contrast, on Nov. 1, the bitcoin was merely sold at 1,250 yuan (US$203) across all major online exchange platforms.

Debuting in 2008, bitcoin is a distributed, peer-to-peer (P2P) digital currency that functions without the intermediation of any central authority. The bitcoin is known as a crypto-currency because it uses cryptography to control transactions and prevent double-spending, a common problem with digital currencies.

Individuals who seek to find the encrypted currency on cyberspace are called "miners," a vivid metaphor as they will have to operate a network of private computers to fulfill the task.


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