China Turns Bitcoin into Digital Monopoly Money

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By Katrina Dianne Gimenez | December 19, 2013 9:47 PM EST

Bitcoins plunged to $625 in value as China bans the virtual money on real world use. Its price dropped by $200 when Zhou Jinhuang, People's Bank of China's deputy director of payment clearance, told third party payment providers that "they can no longer work with Bitcoin exchanges," Forbes reported.

This would mean that the Chinese people would only be able to buy and sell Bitcoins by meeting up personally for one-on-one exchange and only on a small scale. The announcement had caused the Bitcoin's market share to fall considerably.

There are two speculations as to why China banned the virtual money. Chinese press claims that the reason was the Hong Kong Bitcoin Exchange that went bankrupt causing millions of losses to its investors. Some analysts say that its China's way of controlling its currency as it sees Bitcoin as a way for people to move their money out of RMB.

"By shunning Bitcoin, China, home to innovative e-commerce companies like Alibaba and an underdeveloped consumer banking sector, may be passing up the chance to leapfrog the rest of the world by fostering the growth of bitcoin-esque digital currencies and the secure, efficient payments that they may enable," Adam Pasick of Quartz wrote.

What China did only shows that Bitcoin can be killed within a country's borders.

Bitcoin is a stateless currency which still needs an approval from the government to enable widespread use. It is used to purchase both legal, and illegal, things. There was even a 24, 500 square-foot mansion sold in Las Vegas at a price of $7.85M.

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