Chinese Government Outlaws Banks From Doing Business with Bitcoins
One of the problems with Bitcoin is that the currency is highly volatile. After skyrocking in value to over $1,000 per Bitcoin in recent weeks, the virtual currency dipped 20 percent following China's announcement, and some predict it could be cut in half.
Another issue governments have with Bitcoin is that due to its anonymous, untraceable nature, it can more easily be used for illegal transactions and/or money laundering. It's already happened to some extent. The FBI in October shut down an illegal online drug marketplace called Silk Road that dealt exclusively with Bitcoin currency.
As for China's ban on the currency, individuals are free to use them at their own risk, as it's not a legally recognized currency in the country.