Twitter followed the lead of Google and Facebook, which earlier this year cracked down on digital currency ads to protect users from being duped.
"We are committed to ensuring the safety of the Twitter community," Twitter said in a statement.
"As such, we have added a new policy for Twitter Ads relating to cryptocurrency."
Under the new policy, the advertisement of ICOs, or initial currency offerings, and token sales will be prohibited at the global one-to-many messaging platform.
Some startups have used ICOs to raise billions of dollars in a highly volatile, unregulated market.
Twitter said: "We know that this type of content is often associated with deception and fraud, both organic and paid, and are proactively implementing a number of signals to prevent these types of accounts from engaging with others in a deceptive manner."
The value of bitcoin dropped eight percent to US$7,929 (RM30,724.75) after the Twitter ad ban was announced, according to market data from Bloomberg.
The new policy leaves open the door for ads for cryptocurrency exchanges or secure "wallet" services offered by public companies listed on some major exchanges.
Twitter plans to modify its ad policy as the digital currency market evolves and its ability to distinguish dubious marketing messages improves.
The British Government early this year called for global regulation of controversial virtual currency bitcoin, adding that the G20 would address the topic this month.
Bitcoin is independent of governments and banks and uses blockchain technology, where encrypted digital coins are created by supercomputers.
The virtual currency is not regulated by any central bank but is instead overseen by a community of users who try to guard against counterfeiting.
Virtual currency exchanges have seen tremendous volatility, and have sparked concerns they can be used to launder money for criminal networks.
The value of Litecoin also tanked on March 26, after the Singapore-based nonprofit Litecoin foundation put out word that payments processor LitePay ceased operations.
LitePay had asked the foundation for more funding, but was "unable to provide a satisfactory picture" of what it did with the money it had already been given, according to a release.
"We are greatly disheartened that this saga has ended in this way and we apologise for not doing enough due diligence that could have uncovered some of these issues earlier," Litecoin foundation said in the release.
"We are currently working hard to tighten our due diligence practices and ensure that this does not happen again."
Litecoin was down about 10% to US$144.05 (RM558.20) as of mid-day. — AFP Relaxnews