By Adam Rose
BEIJING (Reuters) - A Chinese bitcoin exchange platform announced on Wednesday that it had stopped taking Chinese yuan deposits, sending the price of the virtual currency down sharply as China broadened its crackdown on domestic bitcoin trading.
Shanghai-based BTC China, the world's largest bitcoin exchange by volume, posted a notice about the new regulations on its website, two weeks after Beijing banned financial institutions from trading in bitcoin, due to the risks involved.
"Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim," BTC China said in the notice.
The platform could no longer handle new deposits because its third-party payment provider had abruptly cut off service, said Chief Executive Bobby Lee.
"It was disconnected against our will," said Lee, adding that BTC China had switched to the provider on Sunday as a precautionary measure.
On Tuesday, the Chinese Business News reported that the government had asked third-party payment services to stop handling bitcoin transactions.
It was not immediately clear whether other exchange platforms were affected.
The yuan-bitcoin exchange rate on BT China has dropped 46 percent from Monday, and 60 percent since a peak on December 1. The exchange rate on rival platform FXBTC.com has fallen 70 percent from its November 30 peak.
Over the past two months, the value of bitcoin relative to the dollar has skyrocketed some 800 percent as speculators have piled into the currency, according to bitcoinity.org.
Bitcoin market operators say Chinese nationals are major market participants and hold an outsize share of the total number of bitcoins in circulation.
The government this month issued a statement banning financial institutions from trading in bitcoin, but did not ban individual trading.
The statement, on the website of the People's Bank of China (PBOC), said the government would act to prevent money laundering risks from bitcoin, which is not backed by a government or central bank.
The PBOC may have cause to be concerned about bitcoin, which is anonymous, untraceable, and can be carried on memory sticks or transmitted electronically, because it represents a potential hole in the country's capital controls.
However, analysts point out that, given the tiny value of the total bitcoin in circulation relative to other currencies, it is unlikely to have much impact on the wider economy.
(Editing by Jeremy Laurence)