Are all virtual currencies in danger as China cracks down on Bitcoin?

The founder of virtual currency Peercoin, Sunny King has warned the he does not rule out the possibility of governments banning virtual currencies. His comments follow Chinese authorities' recent crackdown on the use of Bitcoin by financial institutions.

Speaking to CNBC on Friday, King said:

I wouldn't eliminate possibilities that they [China's authorities] issue a ban on cryptocurrencies, nor the USA.

These things are always possible, even if you don't think it's likely.

Despite China's recent moves to restrict the use of alternative currencies there has been cause for optimism amongst the users of alternative money. Along with Bitcoin's skyrocketing value last month's US Senate hearing gave a cautious welcome to the use of digital currencies.

In addition to surging popularity, virtual currencies are gaining plaudits from mainstream financial institutions. On Thursday Bank of America Merrill Lynch (BoAML) released a research note concluding that virtual currency Bitcoin had significant potential for growth, and may reach the investment status of silver.

Many have yet to be convinced that the rapid rise of currencies such as Bitcoin is anything more than a short term bubble. Former head of the Federal Reserve Alan Greenspan said on Thursday: “There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.”

Peercoin is currently ranked as the number three cryptocurrency by and is estimated to have a market value of over $100m (£60m).

Peercoin was developed by software developer Sunny King who was inspired by Bitcoin. Peercoin shares many aspects of its cryptocurrency rivals but differs significantly in that there is no limit on the number of coins that can be produced. Peercoin is designed to attain an annual inflation rate of one per cent. The currency was released in August 2012.