China's central bank launched spot checks on leading Bitcoin exchanges in Beijing and Shanghai on Wednesday, January 11, pulling the price of the cryptocurrency down over 12 percent against the U.S. dollar.
Bitcoin is a type of digital currency, with which users do peer-to-peer transactions without any intermediary.
The People's Bank of China said its probe of Bitcoin exchanges, BTCC, Huobi and OKCoin was to look into possible violations, including market manipulation, money laundering and unauthorized financing. The Bank did not say if any such violations had been found.
The move comes as Chinese authorities step up efforts to monitor capital outflows and relieve pressure on the yuan.
The yuan lost more than 6.5 percent against the dollar last year, posting its worst performance since 1994, while Bitcoin prices soared to near-record highs.
That performance and the relative anonymity the digital currency affords has prompted some to believe Bitcoin has become an attractive option for tech-savvy Chinese to hedge against the yuan and skirt around rules limiting how much foreign exchange individuals can complete each year.
Following the checks, the price of Bitcoin fell as much as 12.5 percent to a three-week low of $800 on the Europe-based Bitstamp exchange.
On China's Huobi exchange, the price slid more than 16 percent to 5,313 yuan ($766), putting the yuan/Bitcoin rate at a discount to the rate on dollar-based exchanges.
