Bitcoin safe despite Alibaba ban: BTC China

The head of one of the world's largest bitcoin exchanges told CNBC that the ban on the virtual currency by Chinese e-commerce giant Alibaba won't affect his business.

Chinese e-commerce group Alibaba said Tuesday it would note accept bitcoins on its online marketplace, Taobao. It also banned the sale of the equipment, merchandise and software used to mine the virtual currency.

"We've found other methods to allow our customers to deposit money into our exchanges to buy and sell bitcoins so our business is unaffected by the recent Taobao decision today," Bobby Lee, chief executive of bitcoin exchange BTC China, told CNBC.

Alibaba's actions are seen as a response to the People's Bank of China (PBoC) warning against the use of Bitcoin last month as it looks to IPO this year and attempts to rid its marketplace site of fake goods.

In mid-December, the price of bitcoin plummeted by 50 percent since record highs of $1,200 in late November after reports that the PBoC had ordered third-party payment providers -- which provide clearing services for bitcoin exchanges -- to stop any "custody, trading and other services" related to the virtual currency.

(Read more: Bitcoin price halves as China clampdown escalates).

At the moment the the currency was trading at $920 on major exchange Mt Gox and $856 on CoinDesk's index, which measures a basket of prices around the world.

Having launched in June 2011, BTC China is the longest-standing bitcoin trading platform in China and was until recently the largest world's largest bitcoin exchange, according to Bitcoinity.org, though it has since slipped to fifth place. Lee said that the decision to charges trading fees, unlike some other exchanges, was a prudent one designed to ultimately protect the currency and would not damage his business.

(Read more: Bitcoin crashes 20% on China clampdown fears)

"Through our knowledge what the PBoC is worried about is the high volatility of bitcoin prices, indeed, when we were the first bitcoin bitcoin exchange to eliminate trading fees in September we saw volumes spike up and what essentially happens when there is no trading commission is a free-for-all and that causes a lot of volatility in the prices."

"That's why we decided to take a more prudent approach to have trading commissions to moderate the market and bring less volatility to bitcoin prices in China and the world."

(Read more: Buyer beware: Bitcoin's fate could rest with China)

Lee said he did not think bitcoin was a bubble asset "any more than any other asset class including real estate, stocks, currencies."

"It's just another asset class and it's been clearly defined in China as a new digital commodity, a digital asset class and people are allowed to buy and sell it however there is a warning," he added.

"Even I would warn people that if you buy and sell bitcoin it is a volatile phenomenon so don't put all your eggs in one basket. Whatever we do, speculators will be the market so by having some commissions it adds some friction to the market and that's healthier for bitcoin in China."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt