Virtual currencies pose a real threat

The China Banking Association together with the National Internet Finance Association of China issued a notice on Tuesday forbidding financial companies and payment-service providers from running virtual currency-related businesses. The notice said virtual currencies have no real value support and their prices can be easily manipulated, creating bubbles and false assets leading to business failures.

A virtual currency has many advantages including decentralization and distributed accounting. However, some venture capitalists have hyped up its value to make profits.

A virtual currency is not a legal negotiable instrument, that is, a real currency, even if huge amounts of funds are invested in it. It has no real value support, and should venture capitalists hype up its price and exit, other investors, especially the small ones, will be badly hit. It is necessary to strictly regulate virtual currencies to prevent them from being used as a tool for capital speculation.