Digital currencies Bitcoin and Ethereum have slipped after the Chinese government banned Initial Coin Offerings, a tool that sees equities offerings bid in cryptocurrencies instead of fiat currencies, a share funding mechanism.
The Peoples' Bank of China's joint announcement with six other agencies doesn't translate smoothly, but the gist is clear: token-based Initial Coin Offerings (ICOs) that see rights to cryptocurrency issued in return for scrip are regarded as a threat to financial order and stability.
The bank's move comes on the heels of an August 30 report (in Chinese here) by the National Internet Finance Association of China (NIFA), which Technode explains described ICOs as “disrupting the socioeconomic order and creating a greater risk”.
The NIFA report also raises concerns about fraud and unlicensed trading in the sector, along with “illegal securities, illegal fund-raising and other acts”.
Paris Hilton inflates crypto bubble some more, backs Initial Coin OfferingREAD MORE
The group is also concerned that organisations taking part in ICOs aren't meeting the disclosure requirements associated with stock market listings.
Financial institutions have been warned not to take part in ICO operations, and the order encourages individuals who've taken part in ICOs to seek refunds.
Bitcoin and Ethereum slipped five and 12 per cent respectively as a result of the crackdown, CNBC says.
Organisations joining the Peoples' Bank of China in the regulatory joint statement included the China Securities Regulatory Commission, China Banking Regulatory Commission and China Insurance Regulatory Commission. ®