China Forbids Its Banks From Dealing In Bitcoins

China has officially ruled that its financial institutions should not deal in Bitcoins, which is a blow to the currency's legitimacy.

China's central bank has ruled that financial institutions in the country cannot handle transactions in Bitcoins, specifically stating that no pricing can be made in the cryptocurrency, no buying or selling of Bitcoins is permitted, and they cannot insure products linked to Bitcoins.

The value of the digital currency dipped after the ruling, reversing some of its incredible recent growth.

While the ruling that the currency doesn't have the same legal meaning as "real" money affects institutions, the Chinese authorities haven't forbidden the general population from trading in the coins, although it emphasizes that any risk associated with the currency is assumed on an individual basis. This is possibly a move driven by the fact the world's biggest Bitcoin exchange is a China-based company, BTC China. This company has recently been lobbying for official recognition in China. Official recognition of Bitcoin at a state level could put a some control of the country's financial status out of official reach—an situation that runs contrary to China's iron grip on the state.

[Image: Flickr user BTC Keychain]

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