Bitcoin tumbles as PBOC declares initial coin offerings illegal
Bitcoin tumbled the most since July after China’s central bank said initial coin offerings are illegal and asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales.
The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalising legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds, though it didn’t specify how the money would be paid back to investors.
It also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings.
“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 in Hong Kong, which invests in and advises on token sales. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.”
Bitcoin tumbled as much as 11.4 percent, the most since July, to $4,326.75. The ethereum cryptocurrency was down more than 16 per cent Monday, according to data from Coindesk.
ICOs are digital token sales that have seen unchecked growth over the past year, raising $1.6 billion. They have been deemed a threat to China’s financial market stability as authorities struggle to tame financing channels that sprawl beyond the traditional banking system.