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Bitcoin's Price Plummets After Chinese Bank Crackdown

China's central bank has banned third-party payment companies from doing business with Bitcoin exchanges, dropping the digital currency's value by nearly 40 percent.

The price of Bitcoin fell to its lowest levels in recent months during the early morning on Wednesday as a result of China's regulation of the digital currency.

According to reports, People's Bank of China met with the country's top 10 third-party payment companies and told them to cease doing business with Bitcoin exchanges. After the news broke, Bitcoin's value fell nearly 40 percent to just under $500. The cryptocurrency had hit a high of more than $1,200 in late November.

This is the second crackdown by China's central bank, which ruled two weeks ago that Bitcoin is not a real currency and prohibited local financial institutions from processing Bitcoin transactions.

The regulations have effectively prevented banks and third-party payment companies from accepting new deposits of Bitcoin in local exchanges and clearing transactions.

Under the regulations, Bitcoin users in China will still be able to withdraw their money from Chinese exchanges, but they cannot buy new Bitcoins. Bloomberg reports that the People's Bank of China is forcing third-party companies to cease offering Bitcoin clearing services by the Chinese New Year, which begins Jan. 31.

"The writing's on the wall," Bobby Lee, the CEO of BTC China, the country's largest Bitcoin exchange, tells CoinDesk. "Going forward, from this day, third-party payment companies will most likely sever their ties with Bitcoin exchanges."

In related news, another cryptocurrency, Litecoin, mirrored Bitcoin's tumble, dropping to a low of $13 Wednesday from nearly 30 two days earlier, according to Coindesk.

What do you think this means for the future of the cryptocurrency? Let us know in the comments below.

Last updated: Dec 18, 2013

WILL YAKOWICZ | Staff Writer | Reporter,

Will Yakowicz is a staff writer for Inc. magazine. He has covered business, crime, and local politics for The Brooklyn Paper and was the editor of Park Slope Patch. He has also reported on the West Bank and Moscow for Tablet Magazine. He lives in Brooklyn, New York.

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