UPDATE (28th March, 10:00 GMT): Sources in China have reported since this article appeared that the 'rumors' contained in the Caixin story appear to be true, though bitcoin exchanges still have received no official notice from the People's Bank. The bitcoin price has continued to drop, now sitting just above $500.
Less than a week after a fake Chinese news report sent bitcoin and litecoin prices plummeting on some exchanges, another similar rumour hit the Internet on Thursday.
The bitcoin price, already on a downward trend, dropped to a low of $561.61 on CoinDesk's BPI and below the $550 mark on Chinese exchanges.
The latest report gave all the usual reasons a government might want to restrict digital currencies: money laundering, crime, price volatility and investor risk. Given that the People's Bank of China had previously warned banks to stay away from bitcoin transactions, the fake news seemed plausible, but this was the first report of an outright prohibition.
Cracks started to appear in the story when China's exchanges claimed they hadn't heard the news and tried to verify it with the PBOC itself, finding no information.
"We didn't get any official announcement," said Star Xu, CEO of major exchange OKCoin.
"We haven't seen any concrete evidence of any of this yet," said Bobby Lee, CEO of BTCChina, saying the story seemed to be just a rumour, but that he'd stay tuned for any updates.
OKCoin later posted on its Weibo account (a 'human' translation via Reddit):
The leaders of Huobi and BTCTrade also both reportedly denied receiving any official announcement from the People's Bank.
Could it be true?
There is a twist in the tale, though: the reporter who wrote the story for Caixin, generally regarded as a reputable news magazine, said he is sticking by his story, and has posted on various social media sites about its verity.
Last week's hoax not only saw bitcoin prices fall, it caused a 'flash crash' that dropped the litecoin price to 1 RMB on Huobi, which had only begun trading the currency two days earlier.
Prices recovered soon after and Huobi compensated those who lost money, but the exchange was then hit by a day-long DDoS attack just two days later.
The poster of last week's hoax remains unknown, and there was no named source in today's news reports.
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