Bitcoin Drops 50% Overnight As China’s Biggest BTC Exchange Stops Deposits In Chinese Yuan

China’s biggest Bitcoin exchange, BTCChina, has stopped accepting deposits in Chinese yuan. The shutdown has sent the currency into a downward spin, stripping it of half its value overnight. It is trading at $572 on Mt.Gox, down from a high of about $1,200 last week.

Chart via Bitcoincharts

BTCChina posted a note on Weibo stating stating that it “had to temporarily stop the yuan deposit feature” and that other transactions will be permitted.

The full text reads (translated):

Dear BTC China users: due to reasons we all understand, Bitcoin China (BTC China) had to temporarily stop the yuan deposit feature while bitcoin deposits, and bitcoins withdrawals to cash and RMB are still available on our home page. We will provide other ways to recharge as soon as possible. This is an inconvenience to you and we express deep regret at BTC China. 2013. 12. 18

According to the company, the People’s Bank of China has spoken to a number of Chinese payment processors and has asked them to cease trading with Bitcoin exchanges by January 1. This preemptive move has shut down BTCChina’s most lucrative source of income and put a damper on Chinese popular excitement over the currency. In the run up to this fall, Bitcoin was hailed as a great investment in China, thus raising demand.

The PBoC previously said that “Bitcoins are virtual goods that have no legal status or monetary equivalent and should not be used as currency” and enacted a partial ban on December 5.

In 2009 China stopped another digital currency, QQ, in its tracks after a swell of popularity drove the government to ban its use in buying real-world items.