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The Bitcoin Weekly: December 22nd, 2013

December 22, 2013 at 2:45 by Akshay Datar

Another eventful week in the world of Bitcoin has come to an end. Here, you can find all the news to keep you updated on the Bitcoin story, as it unfolds.

The Chinese government was in the news again, and not for the right reasons. Last week, it had decided to prohibit banks and financial institutions from dealing in Bitcoins or performing any Bitcoin related transactions. This statement was received mildly by the Bitcoin community, understandably, as banks or financial companies in China didn’t deal in Bitcoins anyway, nor did they plan to do so in the near future.

This week, the Chinese government went further in clarifying this statement — it banned banks and payment service providers from servicing Renminbi transactions to and from Bitcoin exchanges in China. Transfers to exchanges were stopped immediately, while withdrawals from exchanges are allowed until January 31st 2014, to allow investors in Bitcoin time to withdraw their money from these exchanges.

The ban on Bitcoin-related transactions enforced by the government effectively amounts to a ban on organised large-scale bitcoin usage in China, as merchant payment service providers are also prohibited to deal in Bitcoin. Ownership and exchange of Bitcoin is still legal in China, only the conversion of Yuan into Bitcoin is illegal. Some sources say the Chinese government is not fundamentally anti-bitcoin, but wants to take a step back and assess the system and its implications before taking a firm decision on it; though the validity of this information is disputed.

This caused a panic selloff in the main Chinese Bitcoin exchange BTC China, which quickly spread to exchanges around the word, resulting in a drop to a minimum price of $382 at the European exchange Bitstamp, before returning to the $600 level by saturday. In an effort to reduce the excess volatility, BTC China reintroduced trading fees to their platform, starting from Wednesday. The CEO of BTC China also released a statement placating customers and announcing the introduction of a new Bitcoin wallet service. This is quite obviously an attempt at diversifying the service offerings of BTC China, in the face of government opposition to the exchange of Bitcoin.

In other news, the FBI made a new round of arrests related to illicit online activities: this time cracking down on the owners and administrators of Silk Road 2.0, the second version of the original darknet website by the same name which was successfully shut down by the FBI in October. The FBI made three arrests so far in this matter, but has indicated that more arrests are planned. Other similar websites such as BMR and Sheep were are also unavailable and possibly taking precautionary measures against a similar happening.

The FBI managed to find the promoters of this website within 2 months of it opening — this points towards an increased capability of the US law enforcement system to tackle hidden online illegal activity. This is a good sign for Bitcoin, as it proves that Bitcoin-based operations are possible to regulate and enforce laws on. In fact, it is quite possible that the permanent transaction record at the core of Bitcoin — the Blockchain — was used for tracking the funds of those involved in these illegal activities.

In the end, keeping the weekly tradition, let’s look at some new Bitcoin start-ups. The first is Bex.io — a Canadian company which recently received $500,000 in seed funding. It’s self-proclaimed mission is to spread and encourage Bitcoin usage by creating and implementing compliant and easy to use merchant and exchange solutions for the Canadian market.

The second is itbit.com, a new Singaporean bitcoin exchange which unveiled itself only last week. It has significant financial backing by Singaporean and Indian funds and has been very successful in using its financial partners to create liquidity on its platform — something crucial for an exchange. It claims to have a very scalable and robust exchange platform but faces competition from other established exchanges in the region, notably the Hong Kong exchange Bitfinex.

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