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The ban came in a notice issued by the People's Bank of China, financial watchdogs and the nation's IT ministry.
Bitcoins were a "virtual good", had no legal status and should not be used as a currency, it said.
The decision comes after bitcoins' rapid rise in value was called a "bubble" by Alan Greenspan, former US Federal Reserve chairman.
The ban was imposed because bitcoins were not backed by any nation or central authority, said the notice.
It added that it was planning to step up its efforts to curb the use of bitcoins to launder cash.
Now with most other bubbles, from tulips to shares of stock, we have means of identifying the intrinisic value.
The term "tulip mania" is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).
How does one go about even identifying the intrinsic value of bitcoins? What's to stop them from going up to a million dollars each? Why have they had the runup they have? If you bought at $5 and sold at $250 you would have thought you were doing pretty good before this dip:
Whether or not bit coins will be widespread in this markets is up for debate. Personally, I see it very plausible. Not to mention by use of governments in any type of operation that is "off the books" whether or not they publicly condemn them.
reply to post by boncho
True that it has good points, but it's a double edged sword. All those pluses to improve launderability of money making bitcoins more valuable to some are liabilities for its long term prospects, as TPTB obviously don't want money laundering going on, especially countries that seem to be going broke from spending more than they take in...they want the additional taxes which are evaded with money laundering, plus they would cite other reasons too.
So it will be interesting to see how this plays out long term.