After warning about cracking down on 'virtual' capital outflows earlier in the week, Chinese officials have come out more directly against Bitcoin this morning with the country's central bank urging China's institutional and individual investors should take a rational approach to investing in virtual currencies. Bitcoin in China has legged lower on the news.
As Reuter reports,
Bitcoin prices had showed abnormal fluctuations, the Shanghai head office of the People's Bank of China (PBOC) said in a notice.
This prompted branch officials to meet representatives of a major bitcoin trading platform in China, BTCC.
They cautioned against potential risks in the platform's operations and asked it to carry out "self-inspection" according to the law, the bank said.
It stressed bitcoin is not a currency and cannot be circulated as a real currency in the market.
The reaction is clear with Bitcoin China tumbling to 5700 Yuan - down 35% from record highs...
Of course, this is no surprise, as we noted earlier, for those buying the dip here in bitcoin, having been driven by Chinese momentum, we urge readers to be cautious as by now the PBOC has certainly noticed that the digital currency remains one of the final, and most successful, means of bypassing capital controls in China. Should Beijing mandate that bitcoin no longer be a means to illegally transfer capital offshore, there is risk of an even more dramatic, and sharp, drop in its price.