OPINION

Bitcoin Beginning to Gain Traction

From the start of November, the online virtual currency bitcoin has constantly appreciated. On November 18, its exchange rate to the U.S. dollar hit a record high of $569 per bitcoin. On the same day, in what became the cause of the rapid appreciation, the U.S. Senate Committee on Homeland Security and Governmental Affairs held a hearing on the risks of virtual currencies such as bitcoin, throwing the currency into the limelight.

Electronic money such as bitcoin performs the functions of payment and circulation in the form of data, card and electronic bills. In China, margins for security futures products and excess reserves paid by a third party take on the features of primary electronic money. Only when all kinds of virtual currencies come into being, however, will the central bank's right to issue paper money be challenged.

Bitcoin, despite being an advanced and relatively refined form of virtual money, more closely represents an investment than a currency and it cannot substantially affect the monetary system.

In other words, it has not yet fully conformed to the definition of money. In the broad sense, currency is a commodity for exchange, circulation, value measure, payment and value storage. However, bitcoin is mainly used in exchange and investment. It still plays a limited role in payment, the most important function of currency. In addition, bitcoin is mainly exchanged on the Internet and rarely used offline.

The explosion of Internet technology has given birth to virtual currencies, which have exerted a significant influence on the refinement and circulation of virtual currency. Nonetheless, in the foreseeable future, bitcoin is not strong enough to topple the modern currency system. The central bank still has the sole right to issue paper money and electronic currency in China. Without the backing of an issuing body and state credit, a new currency can't be sustained.

The emergence of virtual currencies is a reflection of grass-root service innovation, which can better meet the money demand in an Internet era. However, if virtual currencies begin to be popularized, and systematic risks are accumulated, supervision departments will have to intervene.

Although it will likely take a long time before bitcoin replaces physical currency, its growing role will pose a challenge to the traditional monetary and financial system. Currently, governments across the world are trying to make sure that the trading of bitcoin doesn't violate laws and regulations on money transactions, and prevent it from being employed for illegal purposes such as money laundering and drug trade.

In the United States, some have suggested that virtual currencies like bitcoin be included into the existing monetary supervision mechanism. Consequently, authorities' supervision would have a profound impact on the prospects for virtual currencies.

This is an edited excerpt of an article by Yang Tao, a financial commentator, published in People's Daily 

THE MARKETS

More T-bonds

China's Ministry of Finance announced on November 20 that it is to float another 28 billion yuan ($4.57 billion) in book-entry Treasury bonds (T-bonds) as part of an issuance effort that began in August.

The new bonds will be priced at 96.15 yuan ($15.78) for each bill with a face value of 100 yuan ($16.42).

The ministry issued its 18th batch of book-entry T-bonds worth 30 billion yuan ($4.92 billion) in August. A further 28 billion yuan ($4.6 billion) was added to the issuance in October.

The interest rate for the bonds is fixed at 4.08 percent annually. Interest will be paid every half year. The bonds will expire on August 22, 2023.

Banking in New Zealand

The Industrial and Commercial Bank of China (ICBC), the country's largest bank, has become the 23rd bank registered to operate in New Zealand, according to an announcement by the Reserve Bank of New Zealand (RBNZ) on November 19.

ICBC New Zealand Ltd. is a fully owned subsidiary of ICBC Ltd., and they have already reserved the website domain, icbcnz.com.

ICBC New Zealand counts former RBNZ Governor Don Brash among its directors, the BusinessDesk news service reported.

ICBC previously conducted its New Zealand business through its branch in Sydney, Australia.

NUMBERS

$8.42 bln

Foreign direct investment (FDI) China received in October, a 1.24-percent year-on-year increase. FDI from January to October totaled $97.03 billion

$69.5 bln

China's total outward FDI from January to October, a 20-percent year-on-year increase

227%

The growth rate of China's investment in the United States from January to October

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