SHANGHAI (Reuters) – China’s government banned financial institutions from trading in bitcoin on Thursday, in what analysts said was a restrained first step towards regulating the digital currency that has exploded in popularity in China and soared in value in recent months.
A statement by the central bank and four other agencies said that, while the computer-generated currency does not yet pose a threat to China’s financial system, it carries risks. It did not, however, curtail the use of bitcoin by individuals.
“I think it’s measured and it’s positive,” said Zennon Kapron, of the financial consultancy Kapronasia. “It does add legitimacy to the idea that it could be a nationwide accepted currency.”
The value of bitcoins on Chinese exchanges fell after the announcement, however, with one expert predicting the price could halve in the short-term. Digital currencies are generally highly volatile.