Bitcoin has been facing trouble this week due to a series of crackdowns by the Chinese government. First, the People’s Bank of China stated that bitcoins did not qualify as currency and barred its banks and payment systems from being involved. Later, this ruling was extended to third party payment processors, meaning that bitcoin could only be exchanged in private transactions. The initial justification given was that people must be protected from speculation and wild changes in price – but the chilling effect has led to bitcoin losing half of its value. Presumably Chinese investors must now return to property speculation.
Negative reactions from government agencies, law enforcement, and established financial businesses are to be expected because they see digital currencies as a threat to their existing systems of checks and controls over financial transactions, their ability to regulate the market, to implement monetary policy, to protect consumers, and to oppose organized