Chinese regulators threw cold water onto the red-hot Cryptocurrency market, after banning initial coin offerings (ICOs) from the country. The ban prevents any individual or organization from using digital currencies or “tokens” to help raise funds.
Prior to the ICO ban, the Chinese cryptocurrency market was surging in popularity. As of July, the state news agency Xinhua announced there had been 65 ICOs, which had raised 2.61 yuan ($394.6 million) from 105,000 investors across the country.
China is not the only country making headlines on Monday, September 4, 2017 for ICO regulations. The South Korean government announced they will increase the severity of punishment for ICO fundraising. In addition, the regulators said they would increase regulations on Bitcoin as well.
FSC Secretary-General and cryptocurrency task force chairman, Kim Yong-beom told the Korean media, “at this point, digital currencies cannot be considered money and currency not financial products.” While there is no official ban on ICOs in South Korea, regulators are scrambling to understand the emerging technology.
News of the regulatory crackdown sparked a sell off in the global cryptocurrency markets. After an already tough weekend, digital currency prices were shoved further lower. According to CoinMarketCap.com, the total cryptocurrency market of 866 currencies saw their total value decline from $180 billion on Saturday to $160 billion on Monday morning.
Ethereum has been on of the largest decliners, which was initially down over 20% on Monday morning. Bitcoin prices are down over 8%, as of afternoon trading on Monday.
Senior analysts at eToro, Mati Greenspan, explained the impact of the regulatory decisions with Business Insider: “I don’t anticipate that it will affect the price of Bitcoin all that much — the story is completely different. It could have an impact on the price of Ethereum, it depend on how far they go with it. China’s a major part of the ICO market and with the US also strengthening their rules, it could have an effect.”
Considering that the total cryptocurrency market grew by 80% in August alone, it is not shocking to see some profit taking and a pullback. The market has had such a meteoric surge throughout 2017 that it gave global regulators no choice but to take action. While China has chosen to outright ban ICOs, U.S. and South Korean regulators will hopefully one day understand the process and how to properly regulate the fundraising activity. For now, investors wait to see how the new Chinese ICO ban will affect Bitcoin and Ethereum prices.
