Bitcoin in free fall on report China may shut digital currency exchanges

Bitcoin fell sharply on Friday after a report from a Chinese news outlet said Beijing was planning to shut down local cryptocurrency exchanges, although analysts said this was just a temporary setback.

Sources close to a cross regulators committee that oversees online finance activities told Chinese financial publication Caixin that authorities plan to shut key bitcoin exchanges in China.

The report could not be immediately verified. But two sources in direct contact with officials at three Chinese bitcoin exchanges – Beijing-based OKCoin, Shanghai-based BTC China, and Beijing-based Huobi – said the platforms told them that they have not heard anything from the Chinese government.

The news follows China’s move earlier this week to ban so-called “initial coin offerings,” or the practise of creating and selling digital currencies or tokens to investors to finance start-up projects.

Greg Dwyer, business development manager at cryptocurrency trading platform BitMEX, said there was confusion over whether China would close bitcoin exchanges following the ICO ban.

“If this turns out to be true, then this sell-off is substantiated, and we could see further downside over the weekend, as it could mean the large bitcoin/Chinese yuan exchanges will need to halt trading,” he added.