Watch Out, Bitcoin Investors: The IRS Wants Its Share of Your Profits

Here's why it's incredibly difficult to ban Bitcoin and other cryptocurrencies

These fears are shared by China, whose government is also reportedly planning ways to shut down cryptocurrency exchanges.

Paris: Bitcoin, the best known of hundreds of "virtual" coins, slumped on Tuesday to a six-week low below $12,000 as analysts blamed a rush by various jurisdictions to regulate the sector. This made it the fourth most widely used currency for trading bitcoin, after the United States dollar, the yen and the euro. Ethereum was trading at $1,090, down more than 18 percent in the last 24 hours; while ripple fell by nearly 26 percent to $1.37 per token. South Korea's prime minister Lee Nak-yon later said that a shutdown of cryptocurrency exchanges was impossible without approval from the National Assembly.

While Bitcoin is down 42 percent from its December peak, Ethereum is still on an upward trajectory since the start of the year.

For the first time in over a month Bitcoin dropped below the $11,500 level after momentarily soaring up past the $20,000 level only a weeks ago.

South Korea's finance minister has said a crackdown on the trading of cryptocurrencies is still a "live option", sending the price of Bitcoin and hundreds of other virtual currencies into meltdown. The financial services commission said in September that it would ban a controversial crowdfunding practice in the cryptocurrency space which is called as initial coin offerings (ICO). This won't be breaking news to you if you are invested, but today has seen the entire crypto market fall by double-digit percentages. It had a market cap of $1.69 billion.

Other popular cryptocurrencies ethereum and ripple also posted double-digit losses. They will still allow the public to conduct relatively small peer to peer exchanges.

According to an unnamed source, Chinese authorities plan to block domestic access to Chinese and global cryptocurrency platforms that allow centralized trading. This means individuals will still be able to trade with each other - just not through a centralized system. The Chinese authorities argue that cryptocurrencies such as bitcoin are attractive especially to illegal activities such as money laundering and fraud.