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China's Largest Bank ICBC Bars Bitcoin Services, Threatens Account Closures

China's Largest Bank ICBC Bars Bitcoin Services, Threatens Account Closures

By Agence France-Presse | Updated: 9 May 2014 11:53 IST

China's biggest bank ICBC has banned activities related to trading in Bitcoin, it said Thursday, joining at least 10 other Chinese banks participating in a government crackdown on virtual currencies.

Bitcoin, invented in the wake of the global financial crisis by a mysterious computer guru, is a form of cryptography-based e-money that can be stored either virtually or on a user's hard drive, and offers a largely anonymous payment system.

Speculators drove China's Bitcoin prices into the financial stratosphere last year, peaking at 7,588.88 yuan (now $1,224) in November, before they crashed following moves by exchanges, financial institutions and the government to rein in the virtual currency.

"From this date, any institution or individual must not use accounts set up with our bank for the deposit and withdrawal... and transfer of funds for Bitcoin and Litecoin trading," the Industrial and Commercial Bank of China (ICBC) said in a statement on its website.

Litecoin is another virtual currency.

The move aimed to "protect the property rights and interests of the public, prevent money laundering risks as well as to safeguard the status of the renminbi as the legal currency", ICBC said, referring to China's yuan currency.

China tightly controls the yuan and enforces capital controls, which e-currencies threaten by their very nature.

ICBC threatened to suspend and close bank accounts if clients failed to comply with the new rules.

Earlier this week, China's main Bitcoin exchanges pledged to practise "self discipline" including tracking suspicious trading and preventing money laundering.

Five markets, including China's largest BTC China, said they would halt risky activities such as margin trading and short-selling, and make regular reports to the government, according to a joint statement posted Tuesday.

In its annual financial stability report released late last month, China's central bank labelled Bitcoin "a tool for speculation" and warned against risks the e-money could pose to capital flows as well as its possible use in illegal activities including drug dealing and money laundering.

Last month, the central People's Bank of China instructed banks and third-party payment providers to "completely cut off the capital chain" for Bitcoin trading, the Southern Metropolis Daily newspaper reported.

The central bank has so far made no public statement to confirm the action but at least 11 banks have ceased providing services related to Bitcoin, according to separate announcements.

They include China's "Big Four": ICBC, Bank of China, China Construction Bank and Agricultural Bank of China.

The moves have hurt the value of Bitcoin in China. On Thursday afternoon, Bitcoin was trading at 2,781.97 yuan each on BTC China, down 11 percent from April 25 when banks began announcing the bans.

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