Bitcoin has been on fire lately — causing several bitcoin-haters to tone down their skepticism — but the digital currency’s run was cooled off big-time this week. The latest reason? Chinese search giant Baidu (BIDU) placed a ban on bitcoin for its music service users.
NewsBTC was just one of several news outlets that reported the Baidu announcement. The roughly translated BIDU release reads:
“Dear acceleration music users: Due to the recent fluctuations in the price of Bitcoin larger unable to protect the interests of users, in response to the risk of state-controlled bitcoin spirit Baidu music accelerate decision to suspend with immediate effect from accepting bitcoin buy accelerate music services.”
The bitcoin value topped $1,200 in late November, but has taken a beating this week. In fact, the news from Baidu was just the latest overseas ban placed on bitcoin.
Bitcoin Value Depends on China
Baidu and bitcoin first grabbed headlines in late October. BIDU announced that the company’s Jiasule unit, which provides online security services, had started accepting the currency as an approved form of payment. As InvestorPlace Editor Jeff Reeves wrote at the time:
“The Baidu move is telling, because the command-and-control nature of China means [bitcoin] likely would not have gotten approval as payment without concurrent approval from Chinese officials.”
Unfortunately, Chinese officials and Baidu have changed their tune since then. Just before BIDU banned the music service payments, China’s central bank brought the hammer down on bitcoin as well. As USA Today reported:
“The People’s Bank of China said in a statement on its website that Bitcoin isn’t a currency with ‘real meaning’ and that its legal status was different from other currencies … [and] that while China’s financial system is not currently at risk from Bitcoin trading, the digital currency does carry unacceptable risks, including fostering a trading environment of excessive speculation and the threat of criminal exploitation.”
That news sent sent the bitcoin value falling below $1,000, while the BIDU news then sent bitcoin value even lower — below $900. Plus, Baidu and the Chinese banks are far from the only skeptics. According to Business Insider, there is also speculation China Telecom has stopped accepting Bitcoin.
Meanwhile, the Bank of France has a more passive aggressive strategy against bitcoin, simply extending warning about currency not backed by a government. From the Christian Science Monitor:
“‘Even if Bitcoin is not currently a credible investment vehicle and therefore do not pose a significant risk to financial stability, they represent a financial risk for those who hold them,’ the bank said in a statement.”
But Chinese crackdowns like the news from BIDU are the most worrisome for bitcoin value. That’s because, according to a recent report, China accounts for the majority of bitcoin trading.
Looking at the glass half-full, though, Bank of America (BAC) at least has some nicer things to say about potential bitcoin value that Baidu and the People’s Bank of China did. In summary, Bank of America believes that bitcoin could become a “serious competitor” to traditional money transfer providers.
More on Bitcoin
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.