海角大神

At the Garage Caf茅, a dimly lit magnet for young programmers and entrepreneurs in Beijing鈥檚 hi-tech Zhongguancun district, one topic dominates the low hum of conversation: Bitcoin.

The crypto-currency鈥檚 value has soared more than fivefold over the past month, driven in large part by hectic speculative trading on Chinese exchanges.

鈥淢ost of our customers talk Bitcoin, and some of them trade as much as ten million RMB鈥檚 worth ($1.6 million) at a time,鈥� says Xu Tianhai, who manages the Garage.

Now they are holding their breath, in the wake of a Chinese Central Bank notice听Thursday听that banned financial institutions from trading in Bitcoin and forbade its use as a currency. The value of Bitcoin on Chinese exchanges fell after the announcement, and one expert said he thought it could drop by half in the next few weeks.

The Chinese have seized the limelight in recent months as the world鈥檚 leading Bitcoin traders and 鈥渕iners.鈥�

BTC China, the biggest Chinese Bitcoin exchange, has grown to become the largest in the world, handling an estimated 30 percent of global Bitcoin transactions over the past month. In November, China accounted for one third of worldwide downloads of Bitcoin electronic wallets, needed to trade or spend the virtual currency.

Specialized mining companies, which create the e-currency through a complex computing process, have assembled huge banks of computers in China dedicated to solving the algorithms that bring Bitcoins into existence.

But hardly anywhere in China beyond the Garage Caf茅 accepts Bitcoins as payment for anything and the Central Bank鈥檚 statement is likely to dampen any interest among vendors that might have been budding, analysts say.

Trading undeterred听

The government鈥檚 intervention did not slow trading, which was unusually heavy听on Friday, according to听fiatleak.com, a website that tracks worldwide exchanges.

Bitcoin has exploded in China among investors and speculators, not least because they have very few alternative places to put their savings.

Chinese banks offer minimal interest rates; the Shanghai stock market is in the doldrums 鈥� at half its 2007 peak level 鈥� and real estate, a traditional savings vehicle, is now so expensive in China as to be beyond the reach of most people.

鈥淏itcoin is accessible, and its returns are higher than anything else,鈥� says Zennon Kapron, founder of the Kapronasia financial consulting firm.

Volatility tolerance

The mouthwatering profits are undoubtedly attractive 鈥� Bitcoin has risen eightfold against the US dollar since the beginning of the year 鈥� and though its value has spiked and plummeted several times, that vertiginous volatility is not as off putting in China as it might be elsewhere.

Desperate investors here have experience with a bizarre range of commodities whose value has risen and fallen fast, including mung beans, pu鈥檈r tea, and garlic.

鈥淐hinese people are very fond of gambling, and Bitcoin attracts them because it is like a gamble,鈥� says Liu Xiao, an analyst who has studied virtual currencies for Anbound, a Beijing-based consultancy.

鈥淎 lot of people are crowding into the market and then getting out when they have made a profit,鈥� adds Chandler Guo, the young heir to a meatpacking fortune who says he invested more than one million RMB ($165,000) in Bitcoin earlier this year. 鈥淥ne day in Bitcoin is like one month in the real world.鈥澨�

Although no reliable figures exist, it is thought that a lot of Chinese speculators are short-term traders, buying Bitcoins and quickly selling them for traditional currencies on Bitcoin exchanges. Others, however, with faith in the longer-term prospects of Bitcoin are holding on to their investments in hopes of even larger gains in the future.

鈥淏uyers are not mature or reasonable,鈥� says Li Lin, founder and CEO of Huobi, a leading Chinese Bitcoin exchange. 鈥淭hey may lack confidence and panic, or be too optimistic about Bitcoin鈥檚 future.鈥�

Government regulation听

The Central Bank did not stop people from trading Bitcoins in its announcement Thursday.听鈥淥rdinary people are free to participate if they are prepared to shoulder the risk,鈥� it said. But its first steps to regulate the market illustrate its concerns.

Prominent among them is a fear that Bitcoin users could use the seamless and frictionless international transfer system among online trading platforms, and the anonymity of all trades, to evade China鈥檚 strict exchange controls and move money abroad secretly.

The new regulations oblige exchanges to apply for a government license, and require them to identify all users by their real names and ID card numbers. They must also 鈥渋mmediately report鈥�any suspicious transaction of virtual goods and cooperate with the Central Bank鈥檚 investigation into money laundering,鈥� the notice says. This will infuriate libertarian Bitcoin ideologues for whom anonymity is a key aspect of the e-currency, but could be a step toward broader acceptability for governments.

鈥淎s the largest economy in the world with capital controls, this is obviously something they would want to look at,鈥� says Mr. Kapron. 鈥淚t will be interesting to see how they regulate and manage that.鈥�

But the government announcement did not appear to significantly dampen Chinese enthusiasm; trading听on Thursday, the day the statement appeared on the Central Bank website, was nearly twice as heavy as normal on the BTC China exchange, and by听Friday听afternoon Bitcoin鈥檚 RMB value had almost bounced back to its earlier levels, around 6,100 ($1,000.)听

And enthusiasts believe that China has a special role to play in the Bitcoin world, not only because of its trading and mining weight, but also because of its technology.

'Most innovative' Bitcoin technology in China?

鈥淭he most innovative technology in Bitcoin mining is happening in China,鈥� says Li Xiaolai, one of China鈥檚 biggest Bitcoin investors, who has also sunk his money into exchanges, mining companies, web applications, and other corners of the Bitcoin ecosystem.

鈥淲e have always been copycats, but this is the first time China can lead the world,鈥� Mr. Li says, pointing to advanced Chinese designs for the ASIC chips that power mining machines. 鈥淭hat is much more interesting than the price going up.鈥�

If Bitcoin prospers, 鈥渋t is quite possible that China will be the dominant world player,鈥� predicts Mr. Liu. For the time being, though, amidst the confusion over its future, expert opinions vary as widely as the e-currency鈥檚 wild price swings.

鈥淚 know it will grow into a very big market in China,鈥� says Mr. Li, the exchange owner, confidently. 鈥淏ut I cannot say exactly how big; it鈥檚 beyond my imagination.鈥�

Liu is more doubtful. 鈥淭his is a bubble and it will burst,鈥� he forecasts. 鈥淭he question is when.鈥�

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