
China Bans Financial Companies From Bitcoin Transactions - kunle
http://www.bloomberg.com/news/2013-12-05/china-s-pboc-bans-financial-companies-from-bitcoin-transactions.html
======
olalonde
According to someone on Bitcointalk.org, it might not be as bad as it seems
([https://bitcointalk.org/index.php?topic=358341.msg3832549#ms...](https://bitcointalk.org/index.php?topic=358341.msg3832549#msg3832549)):

No. You Western guys completely misunderstood the news. To me, this is
actually BULLISH!

TL;DR, the document says:

1\. Bitcoin is a virtual commodity, not a real currency

2\. People have the freedom to trade bitcoin, but they need to take their own
risk

3\. At this stage, financial institutions cannot denominate services and
products in bitcoin, cannot trade bitcoin, cannot run bitcoin exchange, cannot
provide bitcoin related services, cannot store bitcoin for clients, cannot
establish bitcoin trust or fund, etc.

4\. Bitcoin exchanges must be registered, and follow AML and KYC rules

This means major Chinese bitcoin exchanges like BTCChina will stay. You just
won't see any Chinese bitcoin ETF anytime soon.

~~~
jval
I disagree. This is not good news for Bitcoin.

>3\. At this stage, financial institutions cannot denominate services and
products in bitcoin, cannot trade bitcoin, cannot run bitcoin exchange, cannot
provide bitcoin related services, cannot store bitcoin for clients, cannot
establish bitcoin trust or fund, etc.

I don't speak Chinese so I can't speculate too much, but by the sounds of the
Reuters article this basically rules out any hope of a Coinbase equivalent
emerging in China, allowing people to transact freely between their bank and
their BTC wallet. Banks in China aren't going to touch Bitcoin, or BTC-related
businesses with a barge pole now. Not only this, anyone else planning on
starting a Bitcoin business will probably have trouble with banks. It's really
not good at all for BTC in China.

~~~
pacofvf
I disagree with you, I think that it means that a chinese Coinbase can't also
be a bank, and since they just ruled that bitcoin is not a currency, it will
be sold and bought freely as a commodity in this case a virtual commodity

~~~
alttab
Trading physical goods for virtual commodities? No thank you.

The pudding of bitcoin was the promise of a new currency.

~~~
pitnips
Since it's decentralized, it doesn't need banks to prosper. That's the beauty
of bitcoin. It can function as a currency while still being seen as a
commodity in the eyes of the law.

~~~
fragsworth
Yes - it doesn't need banks. I think there is lots of confusion as to how this
system works. As long as it's legal to own and exchange bitcoins, everyone can
be _their own_ financial institution.

~~~
alttab
I think I cant understand what a world run on bitcoin would look like without
a global war.

------
ars
Pretty disappointed in this statement from Greenspan:

“It has to have intrinsic value. You have to really stretch your imagination
to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it.
Maybe somebody else can.”

All money has no intrinsic value, including gold. Things have value because
other people want them. That's it. People want bitcoin, then it has value.

Pretty much the only thing with intrinsic value is food since people don't
want it, they require it.

Everything else has value because people say it has value.

~~~
molf
Intrinsic value (in the context of finance) usually refers to the value of
something when not used as investment or money. Gold has intrinsic value
because you can use it for jewellery and electronics. A bitcoin has no
intrinsic value because you only have it to get something else in return
later.

Physical money has intrinsic value equal to the metal or paper it's made of.
Of course that is not what makes physical money valuable and I am equally
confused by that quote.

~~~
w0utert
>> _Physical money has intrinsic value equal to the metal or paper it 's made
of. Of course that is not what makes physical money valuable and I am equally
confused by that quote._

USD/EUR/JPY currency (either physical as bank notes and coins, or electronic)
has intrinsic value because it is almost universally accepted, taxable, and
backed by debt that (at least in theory) will have to be repaid at some point
in time. Bitcoin proponents like to point out that bitcoins are decentralized
as if that's only an advantage of the currency, but it's the fact that
commonly accepted currencies are centralized, controlled and regulated that
makes them trustworthy enough that people keep accepting them in exchange for
goods or labor. It's called 'fiat money' for a reason. Bitcoin has none of
this, and the 'value' it derives from the 'trust' people buying them is based
on nothing but speculation and hype. Anyone who thinks otherwise is fooling
themselves.

Disclaimer: I'm not 'anti-bitcoin', 'anti-cryptocurrency', 'pro-government' or
a big fan of fiat money and how central banks are handling it. I'm just
stating my observation how the bitcoin hype and echo-chamber has made people
almost blind to see the risk it will some day go to zero (maybe soon)

~~~
wyager
If you consider those things to bestow "intrinsic value" (a fallacious
concept), the Bitcoin has "intrinsic value" because it is portable, divisible,
fungible, scarce, and has all the other properties we want from a scarcity-
based currency while having all the great benefits (and more) of digital fiat
money.

~~~
XorNot
Bitcoin isn't portable (you can't carry it, try using it without the
internet).

All regular currencies are fungible and its super-questionable that BTC is
divisible (the network can't handle more then what, a million transactions per
second? What's the use of a currency that splits into microscopic sizes if you
can't make lots of micropayments with it).

~~~
aryastark
This must be red herring day on HN.

USD may be the most ubiquitous currency on the planet. However, go visit a
country like Japan. Once you're out of reach of any currency exchange, you
won't have much luck using your USD. Ironically, you'll have better luck using
a Visa/Mastercard (which, btw, are not used anywhere other than perhaps ATMs).
Those credit cards require a network to be used.

I've been to Internet cafes in Japan. But I never bought a single thing with
USD. I don't see Bitcoin having any issues here. Internet is more widely
available than places that take whatever your paper currency is.

You can easily take Bitcoin with you. You take your credit card with you. Both
require electronic communication to work. There is no difference here.

~~~
XorNot
Once your out of the reach of any currency exchange, you won't be able to use
Bitcoin either, what's your point?

The difference is, all national currencies have an offline only form which is
good anywhere within that nation. Bitcoin does not.

------
rms
From the Google translation of the original source:

"However, Bitcoin transaction as a commodity trading behavior on the Internet,
ordinary people have the freedom to participate in the premise own risk."

The new bitcoin policy here isn't that much more conservative than the USA's
bitcoin policy, and Beijing just legalized bitcoin for ordinary citizen
gamblers, speculators, savers, and options traders! This is a good sign for
bitcoin, and the market is reacting negatively anyways, probably encouraged by
whales selling off trying to hit stop loss orders.

As the Chinese social-mediasphere dissects this announcement over the next
day, the price should recover. Great buying opportunity right now for the
short term, even if you're not long on bitcoin.

~~~
salient
I don't see how it's a "good sign for Bitcoin". Until now people thought
Bitcoin is going to explode in China, but now China put some serious
restrictions on it. Why would that be a good sign?

Also, what happens if exchanges won't be allowed to have a bank account with
the banks either? That's always been one of the biggest fears regarding
Bitcoin - that if the governments decided to go after Bitcoin, that may not
kill Bitcoin, but it would seriously slow down its growth and liquidity if
they made it illegal for exchange companies to exchange Bitcoin.

~~~
ashray
The restrictions appear to be placed on banks and other financial institutions
creating any bitcoin related instruments (ETFs, etc.) or dealing directly with
bitcoin (eg. exchange RMB for BTC or the reverse). Also, it would essentially
prevent a bank using it's reserve for a bitcoin investment.

Exchanges can still operate as exchanges and can continue to have bank
accounts as long as said banks do not deal themselves in bitcoins.

Individuals and businesses are free to use bitcoin. This is actually very good
news. The government was silent all this while and though they haven't said
"Bitcoin is the new reserve currency", the Chinese stance is essentially the
exact same stance that the US Senate took last month. I'm sure US banks also
cannot deal with something that isn't a 'valid currency'.

This is a much better translation of the bitcoin notice:
[http://www.reddit.com/r/Bitcoin/comments/1s5hzl/my_human_tra...](http://www.reddit.com/r/Bitcoin/comments/1s5hzl/my_human_translation_of_the_china_regulation/)

------
SwellJoe
_" Bitcoin prices plunged after the PBOC announcement."_

Where? It's still trading over $1000 on every exchange I follow. This
announcement seems to have almost no perceptible effect on the price of
Bitcoin.

This is an interestingly biased article, actually. It quotes Alan Greenspan,
whose history as a stubborn gold bug (in his Ayn Rand worshiping days) and
whose pretty awful performance at the Federal Reserve make his opinion on this
matter somewhat expected and mostly moot.

I'm willing to believe Bitcoin is overvalued for its current utility. Maybe.
But, this article exhibits such a lack of understanding of what it is that I
find it hard to take them seriously when they discuss what it might be worth
or how this policy in China will effect it.

~~~
Svip
> Where? It's still trading over $1000 on every exchange I follow. This
> announcement seems to have almost no perceptible effect on the price of
> Bitcoin.

Well, the prices did drop about $200 on MtGox after the news. It's debatable
whether this qualifies as 'plunged'.

~~~
rtpg
in any other situation a 20% drop in value would be considered a "plunge" I
think

~~~
vidarh
The thing is this is relatively "normal" volatility for Bitcoin. It bounced up
80-90 points again briefly at my broker a short while ago. Back down. Up 50 or
so points again since then.

------
jackgavigan
Well, this was predictable.
[https://news.ycombinator.com/item?id=6818821](https://news.ycombinator.com/item?id=6818821)

Edit: Having read the (Google translation of the) PBOC's Notice, it looks like
concern over money laundering contributed to the decision to issue this
notice. There's a fairly comprehensive ban on financial institutions doing any
kind of Bitcoin-denominated business. It also appears that Bitcoin exchanges
must register with the telecommunications regulatory agencies and comply with
anti-money laundering provisions (i.e. similar to the approach FinCEN took in
the US).

~~~
dmix
Predictable?

> the price would plunge.

9 hours later... the prices have stabilized after dropping $100. We can add
that to the hundredth time people have predicted the death of Bitcoin.

------
ddeck
The PBOC notice (in Chinese):

[http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/201312...](http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/20131205153156832222251/20131205153156832222251_.html)

------
simondlr
So, in short, they are still allowed to trade with it and use it, as long as
they are 'okay' with the 'risk'. It's only financial institutions that can't
work with Bitcoin anymore? Is this right?

~~~
be5invis
Yes. I read the full text and it said that websites are people can have and
trade bitoins at their own risk. Financial institutions cannot join this
market due to the non-currency property.

~~~
Fuxy
I doubt any financial institutions were using it to begin with so this is a
non issue for the moment.

------
bobbles
Difficult to understand at this point what this decision really means. Are
bitcoins still able to be traded as a commodity but not currency?

What does "The public is free to participate in Internet transactions provided
they take on the risk themselves, it said" even mean?

Are they saying people deciding to exchange goods and services for bitcoin is
ok, but not exchanging it directly into currency?

If anyone has actual insight or knowledge here it would be greatly
appreciated.

~~~
nazgulnarsil
it might mean that currently operating exchanges need licenses, need to
confirm IDs, or even get shut down. Shrug. Wild West.

~~~
eterm
I read it as the opposite, that trading websites effectively cannot be
licensed.

This keeps the inherent risk with the buyers.

------
mwilcox
BTCChina reaction:
[http://i.imgur.com/cNuESY7.png](http://i.imgur.com/cNuESY7.png)

~~~
chrismorgan
So it went down from 6979 to 6200.01 quite quickly. That's about 11%, not the
utter plummet that ignoring the scale on your picture would suggest.

~~~
steveklabnik
If an actual currency was devauled 11% from a news article...

~~~
user24
What do you think would happen to the XAU/CNY rate if China announced that
gold was no longer accepted in banks?

~~~
steveklabnik
... which is why they wouldn't do that, because it would be catastrophic.

~~~
user24
so in other words, XBT behaved exactly as you expected XAU would in the same
situation, yet somehow to you that reflects badly on XBT but not on XAU.

~~~
steveklabnik
No my point is that the Chinese government can control things so that this
never happens. BTC cannot.

------
eof
My read of this is that businesses are not allowed to price their goods in
bitcoin which is a huge hit; beyond this nothing seems terribly surprising.

> "Notice" requirement, at this stage, financial institutions and payment
> institutions are not allowed to Bitcoin price for the product or service,

edit: from:
[http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/201312...](http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/20131205153156832222251/20131205153156832222251_.html)

~~~
ashray
I'm confused about what constitutes a payment institution. Does this mean that
credit card processors cannot price in bitcoin ? Or does this mean that
Starbucks cannot price in bitcoin ?

There seems to be a distinction between a business and a payment institution.
Or maybe what's said here is that a bitcoin transaction is like a 'coupon
code' and not governed under the same rules that paying with money would be.

------
be5invis
I read the full text. They said that "Bitcoin is not currency. It is a
tradable virtual good. You can buy and sell it, but financial institutions
cannot work with BTC."

------
epaga
Here is a human-made translation of the actual notice:
[http://www.reddit.com/r/Bitcoin/comments/1s5hzl/my_human_tra...](http://www.reddit.com/r/Bitcoin/comments/1s5hzl/my_human_translation_of_the_china_regulation/)

Seems far less dramatic than would justify the price correction we are
seeing...

------
kolev
I personally think this is bad news for Bitcoin as it limits it to a
speculator tool. With price growing constantly, it's not a good tool for
e-commerce either - price in BTC needs to have 20-30%, plus, who'd spend their
BTC and not their fiat if fiat stays the same and BTC keeps growing? I think
BTC will drop under $1,000 and will stay there for a bit until some "real"
positive news come in. Currently at the moment there's a pump-and-dump process
going on as not everybody was able to sell yesterday. I'd say, ether buy below
$900 or above $1,300 as for days BTC was trying to break $1,200 without
success. I don't think there's positive enough news for it to break it today
or tomorrow. Volumes of trading dropped significantly above the $1,100 levels,
so, that's a good sign of Bitcoin running out of steam.

------
spdy
Its a good thing more and more states acknowledge the existence of BTC and its
clones.

Its not some spooky internet stuff its on the radar of the biggest financial
regulators on this planet. Not bad for something created 2009 and only really
took off 1-2 years ago.

But BTC is still in its infancy.

------
kunle
Don't think strict currency activity was affected by this, but one of the main
reasons this is important is that it's really really difficult to convert
large amounts of RMB into any other currency. BTC provides an alternative to
going through the banking system which I suspect drives some of its popularity
in China. A lot of light is made about the problems BTC poses for the dollar -
it's much more of a threat to anywhere that currency is controlled, because
it's a straight bypass. The volatility is obviously a stumbling block but when
you have no other alternative, it's pretty attractive.

------
the_watcher
Am I wrong to read the Chinese comments as essentially "We can't manipulate,
control, or interfere with Bitcoin, therefore it is bad?"

That sounds like basically the entire argument in favor of BTC to me.

------
obiefernandez
There's a lot of money sitting on the sidelines waiting for an entry point.
The question is how low will the price go before it all starts piling in.

~~~
wavesounds
Also a lot of people who think its too high and were waiting for a sign it was
time to take their profits and get out.

~~~
obiefernandez
Well, either way, the next few hours should be interesting as the east coast
wakes up and sees the headlines. Will they panic sell and push the price down
further? Or will they notice that selloff at BTC-China exchange is over and
see it as buying signal?

~~~
alphonse23
I tried logged into coinbase to sell my bitcoins after hearing the news and
seeing the price dropping on btcchina. While I was doing this, coinbase's
security sms messager took forever to come in, and because I sent in a request
too many times coinbase blocked me out and said to try logging in again in 24
hours...

oh well, the price for the most part is recovered after the bump (here and in
China) -- so I'm luck in some sense, BUT ... It's nice to know that if I ever
needed to sell my btc in a jiffy coinbase will try to screw me...

------
nbody
It's boring to see all these "news" and some trying to manipulate the mass'
sentiment. Cba really.

------
ishiboy
Down to 860 on coinbase.

~~~
elie_CH
Back beyond 1000 now

------
ausjke
Bitcoin threatens the dollar system. China bought a lot of US debt in dollar.
China has to keep dollar strong to get its money back, anything that could
affect US Dollar is a no-no to China.

does this simple logic make sense...

------
dschiptsov
The beginning of a great sell off?)

~~~
BrokenPipe
Or the beginning of another soar.

------
dutchbrit
And the Bitcoin drops...

But will rise again :)

