The value of Bitcoin plunged 20% after online drug marketplace Silk Road was shut down by the FBI.
The website saw millions of bitcoins pass through it in exchange for drugs and black market products over the last two years, according to the US agency.
The agency also arrested Ross William Ulbricht, who is believed to be the Dread Pirate Roberts, the person behind the ‘sprawling black-market bazaar’.
Bitcoin-based companies have come under scrutiny from New York’s Department of Financial Services, with its Superintendent claiming the digital currency remains a "virtual Wild West" for criminals because it is as anonymous as cash.
FBI agent Chris Tarbell said: "Bitcoins are also known to be used with cybercriminals for money-laundering purposes, given the ease with which they can be used to move money anonymously."
Reports reveal that there are about 11.7m bitcoins in rotation, with an additional 25 created every 10 minutes, while the Silk Road sitecarried out around 9.5m transactions over its two-year life via the currency.
