On September 4th, China’s central bank has banned all ICO in the country. The authorities have called Initial Coin Offering “illegal fundraising”.
An official statement has been released by the People’s Bank of China (PBoC). The institution serves as China’s financial regulator and central bank. According to the note, ICO has disrupted the economic and financial order in the country.
All kind of token issuing activity is supposed to stop as soon as the statement was published. Companies and individuals who have completed their financing via ICO must repatriate all funds while protecting the interests and handling the ricks.
The announcement has been published on the central bank’s official website, backed by other regulators that were part of an investigative committee on ICO. In addition, 60 biggest ICOs will be inspected by authorities and regulators.
The ban wasn’t completely unexpected: Chinese authorities have discussed the regulation of ICO during a meeting on August 18th, including the possibility of an outright ban.
According to an official report, over CYN 2.616 billion (equals $400 million) has been invested in ICO in 2016.
Negative market sentiment
Affected by the ban, Bitcoin price has dropped 20%, less than three days after last week’s record high. On Saturday, for the first time in history, Bitcoin price has surged above $5,000. ICO ban in China has triggered panic sell, pushing the price towards $4,000, until it hit a two-week low. Such trading figures weren’t seen since August 22nd.
Bitcoin wasn’t the only digital currency that has seen a decline in price. Following the news about China’s ICO ban, cryptocurrency markets responded rapidly, initiating huge sell-offs. Ethereum was down 15% over the weekend, other cryptocoins involved in ICOs also lost value. Chinese cryptocurrencies were affected the most. For example, NEO dropped as much as 30%.
At press time, Bitcoin price is starting to recover, currently trading at $4,420.25, according to CoinMarketCap.
The widespread market retreat has whipped out $35 billion off last week’s cryptocurrency market cap all-time high of $179 billion.
Even more bans?
Chinese government is aiming to further regulate the cryptocurrency markets. According to sources close to financial decision makers, it appears that the ICO ban was just the tip of the iceberg.
China isn’t the only country that is planning to increase regulation. South Korea has also acknowledged its intention to regulate the crypto industry, including possible ICO ban.