Bitcoin holders are waking up to a bit of a shock this morning. The price of the virtual currency plummeted overnight on Mt. Gox from a high of $1,240 down to a low of $870 before recovering somewhat in recent hours.

The drop reflects more than normal volatility. On Thursday, China's central bank announced that it is banning financial institutions from using Bitcoin. Citing the risks posed by currency speculators and criminals, the People's Bank of China warned that Bitcoin could wind up hurting ordinary Chinese, though the government has yet to ban individuals from using them.

Financial analysts are welcoming the move. So is the CEO of a major Chinese Bitcoin exchange, BTC China, who told Bloomberg that he was "happy" to see Beijing take its first steps toward regulation.

In a statement, the People's Bank of China said that while Bitcoin doesn't currently pose a danger to the country's financial system, it is "highly concerned about Bitcoin trends."

It's not a little ironic that the announcement led to just the sort of volatility the bank was warning against.

Interest in Bitcoin has been surging in China. BTC China recently raised $5 million in venture funding as its trading volume swept past Mt. Gox and others. Even China Telecom is getting in on the craze. The state-owned wireless provider has launched a handset promotion in Jiangsu province that will allow customers to reserve a Samsung device for 0.1 bitcoins ahead of its Christmas release, and the carrier has also reportedly begun accepting bill payments in the virtual currency.