Bitcoin was tumbling on Monday this week since the Chinese lawmakers unanimously outlawed ICO (Initial Cryptocurrency Offering), a new fundraising method that has been spreading like a wildfire on the Internet.
China’s central bank, on Sep 4, said that initial coin offerings were considered illegal and required all related fundraising activity to be stopped immediately. From now on, capital raising transactions which interconnect with bitcoins, airs, and other crypto-currencies are completely banned in the People’s Republic Of China (PRC), and organizations & individuals who have already raised money must return the funds to investors.
There are 43 platforms that offer ICO in China, according to an announcement by the National Committee of Experts on the Internet Financial Security Technology, being requested to close by the Chinese Central bank. In mid-July, it also managed to hold 65 ICO projects raising 2.6 billion yuan ($398 million).
“This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions -- the short story is we all know regulations are coming,” said Jehan Chu, managing partner at Kenetic Capital Ltd. in Hong Kong. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.”
Over the last year, Initial Cryptocurrency Offerings have become a big business raising $1.6 billion. Traders and investors can buy new blockchain-based assets which are similar to Bitcoins but invented for specialized purposes without being checked (for example, an offering earlier this year so-called “Basic Attention Token” was used to sell ads via the privacy-focused Brave Web browser). China considers them as a threat to its financial market stability since this country’s government struggles to narrow financial channels which are beyond its control.
Right after the banning order, Bitcoin prices which had exceeded $5,000 per unit on Saturday last week quickly dropped by 13.8 percent, the most since July, to $4,326.75. The Ethereum cryptocurrency also declined more than 25 percent on Monday, from $383.49 to $290.27, according to data from Coindesk.
"The domino effect can spread to the entire market up to the shares of video card manufacturers participating in the mining," warned Kuptsekevich, an analyst from FxPro.