The Chinese central bank has banned banks from transacting in Bitcoin, classifying it as a ‘virtual good’ rather than a currency.
While individuals are free to trade in the currency, the central bank has said it is concerned about the volatility of Bitcoin and its use as a tool for money laundering and by criminal gangs.
Go deeper with GlobalData
The regulator said in a statement: "Judged by its nature, Bitcoin is one particular kind of a virtual product. It does not have the legal status of a currency, and it cannot and moreover should not be allowed to circulate in the market as a currency.
"Although there are people calling it a ‘currency’, it is not issued by the monetary authority, it does not possess the attributes of a currency such as legal repayment and enforcement abilities."
The central bank also said that the digital currency had no "real meaning".
Bitcoin’s value tumbled by 28% after the announcement, but regained stability later in the day.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe Chinese government’s clampdown came just hours after the Bank of France warned its citizens against trading in Bitcoin.
The central bank said: "Even if Bitcoin is not currently a credible investment vehicle and therefore does not pose a significant risk to financial stability, they represent a financial risk for those who hold them."
In the last few weeks the Dutch Central Bank said: "The exchange rate is volatile and there is no central issuer which may be held liable."
Related articles:
Neo Easycoin launches range of Bitcoin shops
Bitcoin smashes through $1,000 mark
Hackers seize $1.2m in Bitcoins from digital wallet service
