Bitcoin tokens in Sandy, Utah. / Rick Bowmer, AP
As Bitcoin grabs headlines and soars to stratospheric prices, two major financial powers, China's central bank and Bank of America, reached opposite conclusions about whether the popular cybercurrency has a legitimate place in world commerce.
China's central bank on Thursday banned the country's financial institutions from trading in Bitcoin, saying the virtual money is too volatile, too risky and legally suspect. Meanwhile, Bank of America Merrill Lynch, in its first research report on Bitcoin, said the currency has potential to become a "serious competitor" to money-transfer providers.
While the traditional economic powerhouses may be uncertain of Bitcoin's viability, a legion of Bitcoin devotees have driven the price from less than a dollar two years ago to more than $1,000 today. A growing number of companies, including an online travel agency, a Subway sandwich shop and a university in Cyprus, accept Bitcoin, which can be purchased through exchanges with dollars, euros, yen and other national currencies.
Next week, more than 400 people will gather in Las Vegas for a Bitcoin convention organized by Media Bistro and billed as a look into the currency's future.
When Media Bistro held its first Bitcoin trade show in July, it attracted 140 people and three exhibitors, Mediabistro CEO Alan Meckler says. Mediabistro is organizing similar gatherings in Berlin in February and Hong Kong in June.
"There are those who think it's a bubble and has no future, but for every one of those there are two who are bullish," Meckler says.
The Bank of America report, hearings before Congress and an offhand remark about Bitcoin's long-term potential by Federal Reserve Chairman Ben Bernanke have given the cybercurrency legitimacy, he says.
Bank of America's research report gave a mixed outlook for Bitcoin. On the plus side, it noted that Bitcoin can help users avoid high taxes, regulations and government seizures of assets. But the report also noted that the currency's value remains uncertain. The report placed the maximum value at $1,300 per Bitcoin. On Thursday, one Bitcoin fetched a low of $870 to a high of $1,240 on the Mt. Gox Bitcoin exchange.
Bitcoin's value could stabilize as more people use it, says David Wolman, author of The End of Money: Counterfeiters, Preachers, Techies, Dreamers - and the Coming Cashless Society. Now speculators and investors are causing price fluctuations. Still, he says, it's too early to determine whether Bitcoin can survive.
"The notion that Bitcoin is ephemeral, fringe, is garbage. The proof of that is not just in its growth but in the serious way that serious institutions are examining its potential and its pitfalls," Wolman says.
That Bank of America "assigned the brainpower to look into something like this is thought provoking," he says.
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