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Cryptocurrencies are continuing to fall after China's shock ICO ban
February 24 2018, 05:48 | Clarence Walton
Above People waiting in queue at arrival immigration of Singapore's Changi airport Image Credit joyfull Shutterstock
A working committee involving China's central bank, the People's Bank of China as well as the China Banking Regulatory Commission and China Insurance Regulatory Commission has banned ICO funding.
While Initial Coin Offerings (ICOs) have become increasingly popular in recent months, with some $1.8 billion raised for new altcoins, they could now be under threat from one of the world's largest economies. Just like shares, virtual tokens are expected to gain value as the company grows. Once the tokens have been issued they can be traded against other cryptocurrencies such as bitcoin, the first successful digital-only currency.
However, China has had enough of dealings not under the censorship-heavy country's control.
"Illegal financial business activities include: fund-raising targeting not specific objects without legal approval, or other activities that the People's Bank of China identified as illegal".
While some industry executives predicted that China would eventually decide on some form of regulation that will renew ICO possibilities, for the moment Chinese companies are at a major disadvantage to their western counterparts.
This is how China views the events, at least.
"As digital tokens involved in ICOs are transacted or held on an anonymous basis, by their nature they pose inherent and significant money laundering and terrorist financing risks", the Hong Kong regulator says in its statement.
The organizer of the ICO project, who recently went on a six-city roadshow, said the project had been suspended. As part of this, China also ordered all ICOs to return funds to investors, creating instability around how much both Bitcoin and Etherum is worth when smaller ICO tokens are reconverted back.
"This is certainly the Chinese state laying down the law and threatening all and sundry".
A new Chinese ban on the use of digital currencies for fundraising sent the value of bitcoin and its rivals plunging on Tuesday. In addition, all completed ICOs must liquidate and refund investors, according to the rule. The Financial Timesreports that there was Rmb5bn ($766 million) was raised in July and august alone.
Earlier in the year, the US SEC also issued a warning to investors to about potential scams under the banner of ICOs.