A few months after China placed strict regulations on the peer-to-peer decentralized digital currency, many expected last week that Beijing might be on the verge of imposing more stringent guidelines against bitcoin.
According to one report, financial institutions would prohibit permitting bitcoin businesses to hold accounts, which would cut them out of the economy. This has already taken place in Canada and Australia when two big banks announced it would be shutting down accounts that were affiliated with the virtual currency.
This week, it was reported that two Chinese bitcoin exchanges will have their trading accounts at certain domestic institutions closed down by lenders sometime next week. Huobi.com said the Industrial and Commercial Bank of China would shut down its account Apr. 18 and BTC Trade confirmed the Agricultural Bank of China would freeze all its bitcoin trading accounts beginning Apr. 15.
Even though it may seem that China’s capital control policies are establishing a precedent to issuing a complete prohibition on bitcoin, one central bank head says that the country has no intentions of banning the virtual currency, according to a statement he made at a recent conference.
One local report cited Zhou Xiaochuan, the governor of the People’s Bank of China (PBOC), as saying at the Boao Forum, a regional economic conference: “It is out of the question of banning bitcoin as it is not started by central bank.” He added: “Bitcoin is more a kind of tradable and collectible asset, such as stamps rather than a payment currency.”
Many are rejoicing at this news, while others are taking it with a grain of salt.
Whatever the case, this could turn out to be very good news for bitcoiners everywhere and remove the uncertainty since China is one of the biggest hubs of holders of the digital currency. A lot of governmental actions and central bank initiatives that affect bitcoins have either hurt or helped the price of the virtual currency over the past year.
Following the several news reports coming out of China, the price of bitcoin declined 10 percent during Wednesday. At one point, bitcoin’s value actually fell to under $400.
Bitcoin has been ravaged with bad news for the past couple of weeks. The Internal Revenue Service (IRS) issued a statement in which it confirmed that it would not classify bitcoin as a legitimate currency but rather as an asset subjected to a capital gains tax. It also required every bitcoin user to maintain an in-depth record of each transaction all year long and then perform calculations to account for each change in bitcoin’s value.
The bitcoin community vehemently criticized the tax collection agency for this new guideline because it would create a nightmare for everyone, including the casual users. The Tax Foundation said the IRS got it wrong and now Texas Republican Congressman Steve Stockman is urging the federal department to treat bitcoin as a currency for tax purposes.
At the time of this writing, bitcoin is trading at just under $420.