Bitcoin falls on 3rd-party pullback

Bitcoin prices slumped some 26 percent on Tuesday following media reports that third-party payment companies have been banned from doing business with the virtual currency exchanges.

By 3 pm Tuesday, the price of bitcoins had dropped to 3,800 yuan, which was 46 percent lower than its all-time high, posted Dec 1.[Special coverage]

The National Business Daily reported Tuesday that leaders from third-party payment companies confirmed that the central bank, the People's Bank of China, had ordered the companies not to do business with bitcoin exchanges in China, meaning that holders of the virtual currency would lack a channel to exchange their bitcoins for such currencies as the Chinese yuan or US dollar.

Alipay, the payment unit of Alibaba Group Holding Ltd, confirmed to China Daily on Tuesday that it has not supported and will not support bitcoin-based transactions.

"We will not introduce or back bitcoin transactions on our official platform. But we can exercise no control on the types of transactions being made person-to-person. So we kindly remind all of our users to look into payment security," Su Hui, public relations officer of Alipay, told China Daily on Tuesday.

Tencent Holdings Ltd told China Daily on Tuesday that Tenpay, the company's integrated payment platform, has ended any form of cooperation with companies or organizations that engage in bitcoin exchanges.

Zhao Song, a bitcoin holder in Shanghai, said that owners of the virtual currency can still withdraw their money from bitcoin exchanges in China.

"But as major third-party payment channels are blocked, it is hard to deposit new funds into my account on these exchanges," said Zhao.

Under such circumstances, traders of bitcoins cannot purchase any more coins if their funds are running out.

On Dec 5, the PBOC banned banks in China from engaging in financial transactions in Bitcoin but left it up to individuals to decide for themselves.

"Now the only space for supporting the digital currency may be shut down," said Zhao.

A source with a major bitcoin exchange platform in China said the blocking of third-party payment channels has affected bitcoins' trading volume.

But investors should not panic because they can still sell their holdings and withdraw the currency, the source said.