After climbing back to $500 last Thursday, the Bitcoin price started to tumble on news that the People's Bank of China had privately told banks and payment companies to cease all interaction with digital currency companies such as Bitcoin exchanges.
That dropped the Bitcoin price about $50, or 10%, on Friday.
Earlier today (Monday), the largest Chinese Bitcoin exchange, BTC China, announced it would voluntarily close its accounts with one of the Asian nation's largest banks, the China Merchant's Bank. That pushed the CoinDesk Bitcoin Price Index down as low as $421.08, although as the day progressed the Bitcoin price recovered to about $440.
Some insight into what the PBOC is thinking came from a statement last week by Alipay, a company that operates a PayPal-like service in China, explaining why it would no longer conduct any transactions associated with Bitcoin.
Alipay said it needed to cease Bitcoin transactions "to protect the property rights of the general public, support the renminbi's [yuan] place as the legal fiat currency, [and] prevent money laundering risks."
It's unlikely Alipay, or nay of the Chinese banks, came up with that rationale on their own. That sounds like a central bank talking.
What's unclear – and so very maddening about all this – is why the PBOC won't just come out and announce its policy on Bitcoin once and for all. At this point, the uncertainty over what the PBOC may or may not do is feeding Bitcoin price volatility more than a settled, public policy would.
At least then, the Bitcoin community would know the true limits of the digital currency in China and could adapt accordingly.
Instead, everyone has had to resort to the equivalent of reading tea leaves…