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Bitcoins bounce around after Chinese trading crackdown

Bitcoins bounce around after Chinese trading crackdown
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A Chinese government crackdown on domestic trading of the virtual currency bitcoin is starting to have an effect.

A leading Shanghai-based exchange platform has said it will stop taking yuan deposits.

BTC China, which is the world’s largest bitcoin exchange in terms of volume, was responding to new regulations under which financial institutions were banned from trading them.

Beijing said that was to prevent money laundering. Individual trading was not banned.

BTC’s decision sent the price of the virtual currency down sharply.

The yuan-bitcoin exchange rate fell dramatically two weeks ago when the Chinese restrictions were first announced. The dollar price almost halved then having been just over 1,100 dollars. They had started the year at less than 14 dollars.

Over the past two months, the value of bitcoin relative to the dollar has skyrocketed some 800 percent as speculators have piled into the currency, according to

“Chilling effect”

The US government is also keeping a close eye on businesses linked to Bitcoin.

The Treasury Department’s anti money-laundering unit has this week contacted many of them saying they may have to comply with US law and regulation as money transmitters.

Bitcoin has grown popular among users who lack faith in the established banking system. It has also raised concerns among law-enforcement authorities that digital currencies could be used for laundering money.

The letters have had a “chilling effect” on Bitcoin businesses, which are intimidated by the threat of civil and criminal sanctions for non-compliance, said Jon Matonis, executive director of the Bitcoin Foundation, an advocacy group.

The firms, he said, may effectively be “put out of business in an extrajudicial manner.”

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