For Bitcoin, a Setback in China and an Endorsement on Wall Street China has thrown some cold water on Bitcoin, the popular virtual currency that has gained many adherents in the country. The Chinese government on Thursday moved to restrict banks from using Bitcoin in transactions, declaring that it was not a true currency at all, The New York Times reports. A notice issued by the People's Bank of China and four other ministries and agencies said the step was needed to "protect the status of the renminbi as the statutory currency, prevent risks of money laundering and protect financial stability." The price of Bitcoin, which has surged in recent months and is characterized by bouts of volatility, dropped on the news. After reaching a high of $1,240, the price fell to around $1,085 on Thursday, at one point touching a low of $870, according to the Mt.Gox exchange. The notice in China said Bitcoin was "not a currency in the real meaning of the word" but rather a "virtual commodity that does not share the same legal status of a currency. At the same time, China said that investors were free to speculate on Bitcoin at their own risk. The announcement had outsize significance for Bitcoin fans because China has quickly become one of the hottest markets for the virtual currency. Chinese transactions in Bitcoin far outstripped activity in euros in November, even at the height of the American and European trading days, according to an analysis by a site called Fiatleak. A year ago, China was barely involved in Bitcoin at all. This map helps illustrate the craze. The venture capital firm Lightspeed Venture Partners was even betting that Beijing would endorse Bitcoin, noted The Financial Times's Alphaville blog. Bitcoin fever was particularly intense in the city of Wenzhou. But while hopes of a Chinese seal of approval have been dashed, Bitcoin is gaining some institutional respect in the United States. In a move that appears to be unique among Wall Street firms, Bank of America Merrill Lynch has begun to cover Bitcoin, saying in a research report on Thursday that it could be useful in e-commerce and money transfers. "We believe Bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers," said the report by Bank of America currency strategists led by David Woo. As a medium of exchange, Bitcoin has clear potential for growth, in our view. The report, which offered a primer on Bitcoin and described how it is "mined," said that a "fair value analysis" of the currency suggested a maximum value of $1,300. At the same time, however, Bitcoin has "considerable shortcomings which we believe will ultimately hinder it from ascending to international currency status," the report said. Bitcoin's role as a store of value can compromise its viability as a medium of exchange. Its high volatility, a result of speculative activities, is hindering its general acceptance as a means of payments for online commerce," according to the report. The Bank of America report comes on the heels of positive comments by United States government officials. Ben S. Bernanke, the Federal Reserve chairman, told Congress last month that currencies like Bitcoin "may hold long-term promise," helping send the price higher. Still, some monetary policy experts are skeptical. Unlike conventional currencies, Bitcoin is not backed by a central bank or government. Nout Wellink, the former president of the Dutch Central Bank, recently told students at the University of Amsterdam that the Bitcoin craze was reminiscent of the mania over tulips that hit Amsterdam in the early 17th century, according to The Guardian. Alan Greenspan, the former Fed chairman, was blunt in his assessment. "It's a bubble," he told Bloomberg TV on Wednesday. It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven't been able to do it. Maybe somebody else can.