Note: This article was originally published in Crypt Bytes Tech.
Regulators in China have banned all initial public coin offerings pending a review and the possible introduction of regulations to control the booming market. News that China was considering banning ICOs emerged last week when it was reported that China’s Securities and Futures Commission, the China Banking Regulatory Commission and other regulators had met and were considering a ban on all ICOs until concerns about risks were addressed.
In a separate report, Asia Times claimed early Monday in China that along with the immediate ban of all ICOs in the country, China’s Remediation Office of Risks in Internet Finance has ordered that all ICOs in the country be investigated by local regulatory authorities.
Few hours back many leading Cryptocurrency and mainstream financial publication broke the news that China is banning all ICOs and is also directing existing individuals and companies who raised funds using ICO to make arrangements return the funds and such a decision was taken to reasonably protect the interests of investors and properly handle the risks.
This puts the future of may ICOs, tokens and Cryptocurrencies like Redpulse, NEO, LakeBanker, Bytom, Hsare, Binanace in limbo. All the cryptocurrencies along with Bitcoin & Ethereum are showing decline over the news and have been in red over the weekend but the biggest looser are the Chinese cyrptocurrences. With this development billions of dollars are moving out of the crypto markets which may be attributed to latest news from China. This was bound to happen as PBOC and the Chinese regulators were giving negative opinion about ICOs and a crack down was expected by many analysts.
News that China was considering banning ICOs emerged last week when it was reported that China’s Securities and Futures Commission, the China Banking Regulatory Commission and other regulators had met and were considering a ban on all ICOs until concerns about risks were addressed.
The decision to ban ICOs came into force over the weekend. A top-level ICO conference scheduled to be held in Beijing was canceled and major ICO trading platforms were informed by regulators that all ICOs are now officially banned because they were involved in illegal money raising.
Among those confirmed as complying with the ban is bitcoin exchange BTCChina,which according to local media only launched support for ICOs last week. Another ICO exchange, called ICOINFO, ceased trading.
First on August 30 National Internet Finance Association of China (NIFA) issued a warning statement about the dangers of initial coin offerings (ICOs). NIFA is a self-regulatory organization established by the People’s Bank of China (PBoC), and in its statement
Which translates to below statement:
The People’s Bank of China Central Office of the Ministry of Industry and Information Technology Ministry of Industry and Commerce, Banking Regulatory Commission, China Insurance Regulatory Commission on Sept 4 issued a joint circular on the prevention of the risk of tokens issued financing.The circular was terse, hard and direct and and declared ICOs illegal and directed companies and institutions against issuing virtual currencies.
The circular can be translated as below:
The issuance of tokens, including the first tokens (ICO) financing activities currently hapenning in large numbers involving speculation are suspected of engaging in illegal financial activities are seriously disrupting the economic and financial order.
In accordance with the Chinese laws such activites & institutions are “illegal financial institutions and illegal financial business activities,” and other laws and regulations, the relevant matters are as follows:
Financing through the token sale is illegal, solicitation to investors to raise Bitcoin, currency and other so-called “virtual currency” is essentially a non-approved illegal open financing behavior. Such schemes are suspected of illegal sale of Tokens, illegal securities issuance and illegal fund-raising amounting to financial fraud, pyramid schemes and other criminal activities. Anyone involved in such activities can face criminal action.
To summarize it means that all kinds of fundraising involving ICO are now illegal in China and the current, past and future ICO have been directed to repay the funds raised to the investors. Also the trading of tokens against currency is banned which means exchanges which have been exchanging fiat with BTC or other altcoins or tokens will now be barred or banned from doing so. Also all organization and companies have been warned not to engage in ICO or token sale and involve in “virtual currencies”. Even it bans Banks and other financial institutions in opening or supporting transactions via tokens or “virtual currencies” which puts to question the whole idea of Chinese support to Blockchain technology and puts a big question mark to many Chinese cryptocurrencies and blockchain platforms like Neo, Bytom, Binance, HCash and many others.
In July, the state news agency Xinhua cited data from a government organization that monitors online financial activity to report that there had been 65 ICO s so far during the year.
Chinas Remediation Office of Risks in Internet Finance has ordered that all ICOs in the country be investigated by local regulatory authorities.It has asked local regulators to inspect 60 major platforms. Chinese regulators are about to start a campaign related to the country’s initial coin offerings (ICO), authorities said they have banned new projects that raise cash or other virtual currencies through cryptocurrencies. A list of 60 major ICO platforms were provided for local financial regulatory bodies to inspect and report on, according to Caixin.
For Bitcoin, rough patch has been present for a few days now and it seems we are going to see a lower Bitcoin price in the coming hours. As one would expect, this negative Bitcoin price momentum is also affecting all other cryptocurrencies in the market right now. One of the major reasons is the recent crackdown of Chinese regulators on virtual currencies and ICOs which also seems to be affecting Bitcoin price owing to the negative market sentiment.
On BTCC China, one of the country’s biggest digital currency exchanges, price charts showed ethereum down by about 8 percent after the news and bitcoin off some 5 percent.
Most of the chinese cryptocurrencies were in deep red with some loosing their value in double digits with some investors raising concern that many of these currencies will be liquidated.
Specifically the Chinese Crypto currencies have lost value in double digits:
One of the biggest looses has been NEO and few investors are now raising questions to the founders as to how they plan to address this issue as NEO had just recently rechristened as the first Blockchain platform of China.
But like earlier reddit posts from investors on clarifications from Neo team, either they have been ridiculed or serious FUDed. Even some of the posts on Neo Reddit forum can be found where they explain why this is a great time to invest in NEO and why there is nothing to worry about the latest circular.
After the Chinese government set out guidelines on ICOs and money capital raising, NEO-based decentralized platform Red Pulse has decided to blacklist Chinese citizens from its upcoming ICO. As a measure of ensuring that Chinese citizens will not be taking part in the ICO, they will have a pre-registration KYC, that will require passport information. Anyone who fills out the form, and whose passport information is okay, will have a chance to participate in the ICO.
This means that Chinese citizens will now join the increasingly growing blacklist. United States Citizens and Singaporeans make up the rest of the list following regulations from the SEC and MAS.
While in many forums investors and the ICO founders are acknowledging that this was long time coming and that despite the initial ban on Bitcoin, still Bitcoin trading has fostered and after initially banning Bitcoin China chose to regulate it. But it should be a cautionary note to all other investors given that lot of investors internationally have been interested in trading in Chinese Crypto currencies and in Chinese exchanges. The regulatory ban in China still persists on Crypto currencies and they are on tenterhook and which can anytime face crackdown from Chinese Government. Also while many Chinese founders and ICO teams may say not to worry or they are working with Chinese government but no one knows what is the reality and they should take the current news and the past crackdown and double speak from Chinese regulators like PBOC on Crypto currencies with a pinch of salt and should be very wary of doing long term investment in Chinese exchanges.