China's crackdown on Bitcoin has begun in earnest, according to Bill Bishop, the editor of the Sinocism newsletter and a New York Times contributor.

Bishop is confirming this evening an earlier report from Coindesk.com's Emily Spaven that the People's Bank of China has issued a new ban on third-party payment processors from doing business with Bitcoin exchanges.

It's a sign, he Tweeted, that China is "now cracking down harder" not just on Bitcoin but most other digital currencies, including Litecoin. "PBOC does not like it, does not want it to become another speculative bubble here. Tough to fight the PBOC," Bishop wrote.

Bitcoin prices on the yuan-traded BTC China exchange are down 34% on the news, and prices on the USD-traded Mt. Gox exchange were flirting with $700 all night. Mt. Gox prices were off 19% on the day.

The latest ban is a a separate regulation from the People's Bank of China's Dec. 5 ruling barring formal financial institutions from processing Bitcoin. Rui Ma, a China-based angel investor, commented that if the crackdown continues, Chinese may only be able to purchase Bitcoins via miners or other traders.

Hardcore Bitcoin evangelists maintain that these are all expected bumps in the road. But restricting commerce in China would be a huge blow — it was Chinese demand, after all, that helped Bitcoin prices more than triple in the past few months.

Click here to view Bishop's Twitter account »