Consumer and financial watchdogs have long warned investors off digital currencies such as bitcoin

Bitcoin traders in Britain are being investigated by American justice officials as part of an inquiry into criminal price manipulation in digital currency markets.

The US Department of Justice is examining trading in Britain, America and other countries amid concern that individuals or groups are illegally moving digital currency prices to the detriment of other investors, sources said.

Cryptocurrencies such as bitcoin exist only as strings of computer code and have no physical form. Most were launched with the goal of becoming decentralised currencies over which regulators could exert no control. Their popularity exploded last year, with the price of bitcoin rising from $960 in January to a peak of almost $20,000 in December.

Consumer and financial watchdogs have long warned investors off digital currencies