These are stories Report on Business is following Wednesday, Dec. 18, 2013.
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China clamps down on bitcoin
A Chinese bitcoin exchange platform announced on Wednesday that it had stopped taking Chinese yuan deposits, sending the price of the virtual currency down sharply as China broadened its crackdown on domestic bitcoin trading.
Shanghai-based BTC China, the world’s largest bitcoin exchange by volume, posted a notice about the new regulations on its website, two weeks after Beijing banned financial institutions from trading in bitcoin due to the risks involved.
“Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim,” the BTC China notice said.
It was not immediately clear whether other exchange platforms were affected.
The yuan-bitcoin exchange rate on BT China has dropped 46 per cent from Monday, and 60 per cent since a peak on Dec. 1. The exchange rate on rival platform FXBTC.com has fallen 70 per cent from its Nov. 30 peak.
Over the past two months, bitcoins have seen their value relative to the dollar skyrocket some 800 per cent as speculators have piled into the currency, according to bitcoinity.org.
Bitcoin market operators say Chinese nationals are major participants in the market and hold an outsized share of the total number of bitcoins in circulation.
On Tuesday, the Chinese Business News reported that the government had asked third-party payment services to stop handling bitcoin transactions.
Earlier this month, the government issued a statement banning financial institutions from trading in bitcoin due to the risks involved. It did not ban individual trading. The statement, which appeared on the website of the People’s Bank of China (PBOC), said that the government would act to prevent money laundering risks from bitcoin, which is not backed by a government or central bank.
The PBOC may have cause to be concerned about bitcoins, which are anonymous, untraceable, and can be carried on memory sticks or transmitted electronically, because they represent a potential hole in the country’s capital controls.
However, analysts point out that, given the tiny value of the total bitcoins in circulation relative to other currencies, it is unlikely to have much impact on the wider economy.
All eyes on the Fed The Globe’s Kevin Carmichael writes: The Federal Reserve’s decision on whether to scale back its monthly asset purchases Wednesday could come down to inflation – or more to the point, the lack of it.
Officials at the U.S. central bank opted against curbing their $85-billion-a-month (U.S.) program of quantitative easing this fall for three reasons: they were wary that stronger economic data was too good to be true, they were afraid politicians would continue to budget by crisis, and they were troubled that inflation was stuck well below the Fed’s target of 2 per cent.
Two of those concerns have abated. For the most part, economic indicators have continued a trend of better-than-expected readings. The latest came Tuesday, when a gauge of home builders’ confidence matched its highest level in eight years in December. The Fed’s policy committee will likely be raising its economic outlook, as recent measures of hiring, retail sales and industrial production show the U.S. economy is gaining momentum.
Read the full story here: World markets cautious as focus shifts to Fed’s ’close call’
From Wednesday’s The Globe and Mail: