BUSINESS

Bitcoin's value tumbles after China moves to limit its use

Chinese authorities on Thursday instructed the country's banks and other financial institutions not to accept bitcoin, an unregulated digital currency that has soared in value amid widespread speculation, state media reported.

China's central bank and four other state agencies warned that the use of the currency is risky and that it opened up opportunities for money laundering. State media reported that the currency does not have legal status and should not be circulated.

Beijing authorities, however, did not outright ban the currency. Individuals can continue using the currency at their own risk, the central bank said.

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Bitcoin has soared in value this year as speculators from China and the U.S. have snapped up the digital currency. Demand has been strong in China where Baidu, a popular online search engine, accepts bitcoin as payment for services. 

News of the Chinese restrictions, however, caused the value of bitcoin to fall on the Mt. Gox  online exchange from a high of $1,240 on Wednesday night to $870 early Thursday. It's since recovered somewhat, trading at just about $1,000. 

In the U.S., officials have urged greater oversight of bitcoin after the Federal Bureau of Investigation shut down Silk Road, an illicit online marketplace for drugs and other services where bitcoin was the preferred form of payment.

Virgin Galactic, which aims to send tourists to space, announced last month that it would accept bitcoin as payment for travel.

The University of Nicosia in the island nation of Cyprus said recently it would accept the virtual currency bitcoin as payment for tuition and other school fees. The school also said it would offer a master's degree in digital currency next spring designed to increase understanding of "the technical underpinnings of digital currency."

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