Bitcoin price slumps as Facebook bans cryptocurrency adverts

Bitcoin's price fell by more than 10 per cent after Facebook's announcement. Photo / 123RF

Bitcoin's price slumped on Tuesday night as Facebook announced it would ban adverts promoting cryptocurrencies and US authorities launched a probe into a large online exchange.

Facebook announced a new policy prohibiting adverts that relate to cryptocurrencies or initial coin offerings (ICOs) from the 2 billion-user social network, saying they are "frequently associated with misleading or deceptive promotional practices".

Adverts for cryptocurrency-related investments have leapt in recent months as bitcoin prices have skyrocketed, but many are feared to be scams, according to the Daily Telegraph.

Meanwhile, it emerged that the Commodity Futures Trading Commission (CFTC) has subpoenaed Bitfinex, a popular US website for buying and selling bitcoin, and Tether, a cryptocurrency linked to the dollar that is often used for buying biitcoin.

Bitcoin's price fell by more than 10 per cent to trade as low as US$9,810 ($13,365)), its lowest for two months and less than half the price it peaked at in December.

The growing threat of regulation has weighed heavily on demand for cryptocurrencies in recent weeks following the extraordinary bitcoin boom of 2017.

"Misleading or deceptive ads have no place on Facebook," the company said on Tuesday night.

"We've created a new policy that prohibits ads that promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings and cryptocurrency.

"There are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith."

Facebook's ban comes despite its chief executive Mark Zuckerberg recently espousing the potential benefits of cryptocurrencies.

At the start of the year he said that trends such as cryptocurrency "take power from centralised systems and put it back into people's hands" and that he would be studying how they might be used in Facebook.

On Tuesday night, Bloomberg reported that the CFTC had subpoenaed Bitfinex and Tether in December.

The latter claims that its cryptocurrency, widely used as a dollar substitute on bitcoin-buying websites, is backed up by real dollars in reserve, although sceptics say it has not provided any evidence to back this up.

Bitcoin and other cryptocurrencies are facing growing scrutiny amid fears investors are putting money in without being aware of the risks and that the boom is being exploited by scammers and criminals.