Bitcoin trades more than 6.5 percent lower near $10,394 as of 12:12 p.m., ET, according to CoinDesk's bitcoin price index.
Ethereum, ripple, stellar and other cryptocurrencies also sell off.
Benjamin Roberts, co-founder and CEO of Citizen Hex, an ethereum-focused start-up, attributes the declines to uncertainty around bitcoin's ability to improve transaction efficiency and the future development of ethereum.
Digital currency bitcoin fell Tuesday as the 20 largest digital currencies by market capitalization all declined, according to CoinMarketCap.
Bitcoin traded more than 6.5 percent lower near $10,394 as of 12:12 p.m., ET, according to CoinDesk's bitcoin price index, which tracks prices from digital currency exchanges Bitstamp, Coinbase, itBit and Bitfinex.
Ethereum, the second-largest digital currency by market cap, traded about 4.8 percent lower near $1,126, according to CoinMarketCap. The third-largest cryptocurrency, ripple, fell about 7.5 percent to near $1.22, the website showed.
Total market cap of cryptocurrencies, excluding bitcoin, over the last seven days
Stellar, down from sixth place to eighth place by market cap, was among the greatest decliners, trading 11 percent lower around 52 cents, according to CoinMarketCap.
There was no significant driver behind the widespread drop late Tuesday morning. South Korea's Financial Service Commission did confirm to CNBC that new measures, such as bans on anonymous trading accounts, had been implemented. The U.S. Securities and Exchange Commission also announced Tuesday it obtained a court order to freeze the assets of an initial coin offering claiming to have raised $600 million.
U.S. Treasury Secretary Steven Mnuchin said Tuesday in an address to the Senate Banking, Housing and Urban Affairs Committee the Treasury wants to make sure cryptocurrencies are not used by money launders. "I also want to make sure that consumers understand the issues around cryptocurrencies," Mnuchin said.
Benjamin Roberts, co-founder and CEO of Citizen Hex, an ethereum-focused start-up backed by three Canadian venture funds, attributed the sell-off to uncertainty around bitcoin's ability to improve transaction efficiency and the future development of ethereum. While both are based on blockchain technology, ethereum allows developers to build applications on top of it.
Roberts expects ethereum will become the dominant cryptocurrency this year. "We'll continue to see volatility measured in dollars until eth has significantly topped the bitcoin platform in terms of market cap," he said.
Bitcoin has a market cap of about $176 billion and is down about 25 percent this month, while ethereum is up about 49 percent. It has a market cap of about $109 billion, according to CoinMarketCap.
