GO
Loading...

Bitcoin stumbles on fears of China clampdown

Bitcoin showed further volatility Thursday as reports of a clampdown on the virtual currency by China's central bank sent investors rushing for the doors.

Trading at around $585 at the start of Thursday, its price sank to around $513 by 2 p.m. London time, according to industry website Coindesk, which tracks the price against several major exchanges. This 10 percent-plus drop was attributed to a report by Chinese news site Caixin, which said the People's Bank of China (PBOC) had renewed its crackdown on the currency.

"(The PBoC is) requiring banks and payment companies to close all the accounts opened by the operators of websites that trade in the virtual currency by April 15," it said on Thursday.

(Read more: IRS says bitcoin is property rather than currency)

Caixin stated that it had seen the new ruling in a document the central bank's headquarters had recently sent to regional offices. It added that the PBoC had targeted 15 trading websites and the banks that fail to close their accounts would be punished.

Getty Images

These restrictions for domestics banks would effectively make the bitcoin trading websites in the country redundant unless they moved their operations abroad and dealt with foreign banks. Bobby Lee, the CEO of BTC China, one of the largest bitcoin exchanges on the globe, told Bloomberg that he hadn't seen any confirmation of the new ruling.

Last week, Chinese microblogging site Sina Weibo reported a story along similar lines, saying that the PBoC was moving to halt all bitcoin transactions in the country by April 15. The article was later amended when the central bank itself took to its Weibo account to state that the report was untrue.

Bitcoin is a "virtual" currency that allows users to exchange online credits for goods and services. While there is no central bank that issues them, bitcoins can be created online by using a computer to complete difficult tasks, a process known as mining. Thursday's price slump has similarities with events back in December when local media reports suggested the country's central bank was ready to take a stricter stance on the cryptocurrency.

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

On December 18, the cryptocurrency's price tanked around 35 percent as Chinese news website Yicai.com said the PBoC had ordered third-party payment providers to stop using the virtual currency.

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

The report said that these third-party payment agencies - which provide clearing services for bitcoin exchanges - had been ordered to stop any "custody, trading and other services" related to the virtual currency.

This came after an initial price fall in early December which coincided with a statement released on the website of China's central bank which warned of the risks that the crypto currency posed. It warned that Chinese financial institutions should not trade the digital currency, adding that while it does not yet pose a threat to China's financial system, it carried risks.

Symbol
Price
 
Change
%Change
Bitcoin/USD
---

Featured