Saturday, 7 December 2013

Bitcoins are a serious matter now

The data on is updated between 30 seconds to every minute. At this very moment (21.36 7/12/2013), the Chinese Yuan accounts for 42.2% of the global Bitcoin trades while the US dollar is 52.4%. The smaller trades include the Euro, British Pounds, and Canadian Dollars at 3.0%, 0.4% each respectively.

On 5 December, the Chinese government barred banks from trading in the digital currency, in what is said to be a first step in regulating Bitcoin. As a result, Chinese Bitcoin exchanges saw the currency drop in value. It is also worthy mentioning that Baidu, China's largest web services company, stopped accepting the digital currency after this announcement. To understand the impact of Bitcoins, the surge in value is clearly observed by looking at the data. On 6 November, it was trading for 1,621 Yuan. Today, one month later, the value has soared by 256% to 5,766 Yuan even though the latter figure is after a 20% drop after the announcement.

A quick conversion suggests that in the last 24 hours, 1.1bn Yuan and 219m dollars have been converted into the digital currency, one which has no trail of transactions after the conversion.

Representatives of the People's Bank of China have indicated that Bitcoins renders money laundering effortless for illegal operations simply because there is no regulation over the currency. Analysts have indicated that the government will be left with no choice but to take Bitcoins more seriously if the share of transactions in the currency increase. They do point out that the value of Bitcoins in circulation in relation to other currencies is tiny and that it is not likely to have much impact on the economy in general.

Does China's action mean danger for the pseudo-currency? "As Bitcoin transactions can be done anonymously and are not restricted by location, it's difficult to monitor capital flows and it therefore facilitates money laundering and financing for terrorist activities," the People's Bank of China stated. Fact is, the Chinese government hasn't outlawed the bitcoins but rather they have placed it under tighter control so as to regulate it as it asserts that ordinary investors are subject to high level of risk in this volatile currency.

Even though this open source, decentralised pseudo-currency may be put under regulation and control, can the Bitcoin really be flattened out to stability and thus, cleansed of the excess risk it carries?

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