Baidu Stops Accepting Bitcoins After China Ban
Baidu Inc., China’s biggest search engine, stopped accepting Bitcoins after the nation’s central bank barred financial institutions from handling transactions, triggering a drop in the virtual currency.
Bitcoin fell more than 20 percent and was quoted at 4,250 yuan ($863) as of 3:25 p.m. Shanghai time on BTC China, the most active online exchange where it’s traded. It lost 30 percent to $575 on Bitstamp, another web platform where the digital money is exchanged for dollars and other currencies.
A Baidu website-hosting venture started accepting the digital money on Oct. 14 as Bitcoins gained popularity in China, fueling a global rally. Prices topped $1,000 last week, compared with about $138 two months ago on Bitstamp. The People’s Bank of China said Bitcoin isn’t a currency with “real meaning” and can’t be accorded the same legal status.
“Baidu’s website-acceleration platform decided to suspend Bitcoin payment acceptance from Friday as recent large fluctuations in Bitcoin’s value makes it unable to safeguard users’ interests,” the company said in a statement on its website today.
The decision follows the Chinese government’s announcement, according to the Beijing-based company.
China’s central bank said the public is free to participate in Internet transactions provided they take on the risk themselves. The ban on financial institutions handling Bitcoins signals concerns that the digital currency may threaten capital controls and financial stability. The country became the world’s biggest Bitcoin trader this year, according to BTC China.
Bitcoin’s rally was also blunted after Alan Greenspan, the former chairman of the U.S. Federal Reserve, said Bitcoin prices are unsustainably high, calling the gain in prices a “bubble.”
“It has to have intrinsic value,” Greenspan said in a Bloomberg Television interview in Washington on Dec. 4. “You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.”
Bitcoins, which exist as software and aren’t regulated by any country or banking authority, have surged amid increased interest from investors, while merchants are starting to accept Bitcoins. U.S. officials have also told lawmakers such payments could be a legitimate means of exchange.
Bitcoin was introduced in 2008 by a programmer or group of programmers under the name of Satoshi Nakamoto as an alternative means of exchange to government-backed currencies. There are 12.1 million Bitcoins in circulation, and supply is governed by rules embedded in the software. The total of the Bitcoins at current prices is about $10.5 billion.
The People’s Bank of China said financial institutions and payment companies can’t give pricing in Bitcoin, buy and sell the virtual currency or insure Bitcoin-linked products, according to a statement on the central bank’s website.
“We’re happy to see the government start regulating the Bitcoin exchanges,” Bobby Lee, the chief executive officer of BTC China, said in a phone interview before the PBOC announcement yesterday. Regulations would be for “the good of the consumer,” he said. BTC is seeking recognition of the currency so it can be used to buy goods and services instead of being used for speculation, he said.
There are stores and online retailers that accept Bitcoins as payment for goods ranging from cupcakes and Gummi bears, to smartphones and blenders. A California dealership recently accepted the virtual currency as payment for a Tesla Motors Inc. Model S electric car.
U.S. authorities have indicated a willingness to accept Bitcoins as legitimate and regulate the currency, while making sure the digital money isn’t used for illegal purposes.
A Justice Department official said at a Senate committee hearing last month that Bitcoins can be a “legal means of exchange.” Like any financial service, the virtual currency can be exploited by “malicious actors” and should be subject to rules to protect people, according to the agency.
The U.S. government in October shut the Silk Road Hidden Website, an online marketplace where people could obtain drugs, guns and other illicit goods using Bitcoins.
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