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BitBlotter: Chinese Banks Ban Bitcoin; First Bitcoin Debit Card WIll Launch Soon


Bitcoin continues to trade below the $500 level.

Whether you're a Bitcoin fanatic or just beginning to familiarize yourself with the emerging space, BitBlotter gives you a weekly snapshot of all things digital currency.

It's been a moderately eventful week for Bitcoin, with restrictions mounting in China and legal proceedings moving forward in the US. On the innovation front, a Bitcoin debit card could potentially pave the way for more widespread consumer adoption. Meanwhile, information about Bitcoin became more readily available to the average consumer.

In China, two national banks and a major online payments processor banned Bitcoin. The Bank of China, China Construction Bank, and Tenpay have released identical statements forbidding customers from buying, selling, and withdrawing virtual currencies using their accounts, with penalty of have their accounts closed if they don't comply. Meanwhile, at the end of last week, China's largest Bitcoin exchange, BTC China, halted deposits to clients' accounts at China Merchants Bank Co. According to BTC China's blog, the move was intended to protect the security of its clients' funds after China Merchants Bank banned the use of its accounts for Bitcoin transactions days earlier. China Merchants Bank's ban followed criticism from the People's Bank of China for still providing services to BTC China.

Silicon Valley-based Xapo is launching a Bitcoin debit card. The company made a name for itself in March after raising $20 million from investors such as Benchmark Capital and Fortress Investment Group (NYSE:FIG) for its bitcoin storage vault service. Now Xapo has introduced a Bitcoin debit card. Available within two months, the card will let Xapo account holders spend their bitcoins at millions of retailers that accept debit cards but still don't accept bitcoins as a form of payment. Earlier reports that Xapo would launch its debit card on the MasterCard (NYSE:MA) network were dispelled by both companies. Xapo has clarified that it's working with an unnamed bank to launch a debit card, and while it might not be using MasterCard, it will need to launch its card on an existing network, such as Visa (NYSE:V) or Discover (NYSE:DFS).

Speaking of MasterCard, it's the first company to officially lobby for Bitcoin. According to federal lobbying disclosure records, the lobbying firm Peck Madigan Jones has five lobbyists focusing on "Bitcoin and mobile payments" (among various other issues) on the behalf of MasterCard, reports The Hill. MasterCard is reportedly seeking a clearer understanding of policy issues related to digital currencies. Any further intentions of MasterCard on Capitol Hill are currently unknown.

FinCEN weighed in on digital currency cloud mining and escrow services. The financial crimes regulator has determined that cloud mining services aren't considered money transmitters and don't have to register for licenses with FinCEN. Cloud mining is a process by which customers rent a percentage of a mining company's computer power and are paid out in proportion to their stake when the company successfully mines new bitcoins. FinCEN also said escrow services, which hold bitcoins until predetermined conditions are met by buyers and sellers, don't classify as money transmitter services.

Yelp (NYSE:YELP) is now allowing merchants to say they accept bitcoins. A new flag on the site allows businesses to add the tag "Accepts Bitcoin." While there are websites keeping track of brick-and-mortar stores that allow customers to use bitcoins as a form of payment --, for instance -- Yelp could offer a more comprehensive picture of Bitcoin's permeation among retailers, restaurants, and other businesses. In another sign of recognition, Bloomberg announced it would begin publishing financial data and news about Bitcoin.

A project at MIT will distribute $100 worth of bitcoins to every undergraduate student. The two students behind the project, Dan Elitzer and Jeremy Rubin, hope to create an ecosystem for digital currencies at MIT and have managed to raise $500,000 worth of bitcoins in support of their project. They plan on distributing these bitcoins to MIT's 4,528 enrolled undergraduate students this fall.

The US Attorneys' Office is now liquidating $3 million worth of bitcoins. The sum was seized during the arrest of 22-year-old Dutch citizen Cornelis Jan Slomp, who's accused of being one of the now-defunct Silk Road network's largest drug dealers. In January, the Manhattan US Attorney's Office was given permission to sell $25 million worth of bitcoins seized in a more notable Silk Road case involving the illegal marketplace's alleged founder, Ross Ulbricht. In related Bitcoin legal news, Charlie Shrem, founder of the now-defunct Bitcoin exchange BitInstant, pleaded not guilty in a Manhattan court on Friday to charges that he attempted to launder $1 million tied to Silk Road with Bitcoin.

Dark Wallet will make money laundering even easier. The Bitcoin application was designed by two politically radical programmers, Cody Wilson and Amir Taaki, the former of whom is notable for creating the first-ever 3-D-printed gun. The two raised $50,000 in funding in an Indiegogo campaign that launched last October, and Wilson has described the intentions of Dark Wallet as money-laundering software. By mixing and encrypting transactions together, Dark Wallet has the ability to facilitate untraceable flows of money online. The first version of the platform was released last Thursday.

Bitcoin has continued to trade below the $500 level on Bitstamp. There was a sell-off at the end of last week following news out of China -- which has historically been a major price-mover for Bitcoin. The price has been rising into this week, although it's held within the $430 to $450 range.


Follow me on Twitter: @brokawbrokaw
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