A slew of ICO platforms in China have suspended operations following the central bank’s announcement of a ban on cryptocurrency financial activity and a crackdown on virtual currency transactions.
On the afternoon of 4 September the People’s Bank of China issued the “Public Notice Concerning the Prevention of Cryptocurrency Issuance Financial Risk” (关于防范代币发行融资风险的公告) in conjunction with six other central government departments, prohibiting any individuals or organisations from engaging in ICO’s.
The public announcement released by PBOC yesterday calls for the immediate suspension of all cryptocurrency financial activities, as well as for individuals and organisations that have raised funds via cryptocurrency issuance to make arrangements for repayments to investors.
It also states that “so-called cryptocurrency financing and transaction platforms” are prohibited from engaging in transactions involving virtual currency, the conversion of virtual currencies into fiat money, and the provision of services including pricing and information intermediation in relation to virtual currencies.
The release of the public notice closely follows the issuance of the“Notification Concerning the Undertaking of Clean-up and Rectification Work for Coin Issuance Finance” by China’s Internet Financial Risk Special Rectification Work Leadership Team Office over the weekend, which declared ICO’s to be an illicit form of financial activity.
The legislation has already had grave ramifications for the Chinese virtual currency sector, with National Business Daily reporting that a total of seven out of 43 ICO platforms in China had announced the suspension of ICO operations as of 20:00 4 September, including the sector’s three market leaders.
The “2017 First Half Domestic ICO Development Report” released by China’s National Committee of Experts on Internet Financial Security Technology indicated that China’s three biggest ICO platforms in terms of financing amounts were ICOAGE, ICOINFO and ICO365, with industry shares of 30.7%, 22.9% and 10.6% respectively.
All three platforms had suspended ICO operations prior to 4 September, with ICOINFO taking the lead on 30 August, followed by ICOAGE on the afternoon of 3 September.
China’s ICO sector has seen flourishing growth in the several years since cryptocurrencies were first used for crowdfunding purposes.
According to the “2017 First Half Domestic ICO Development Situation Report” China saw a total of 65 ICO’s in the first half of 2017 that raised a total of 2.616 billion yuan, with a secondary market whose transaction volumes exceeded 100 billion yuan.
The surging growth in crypocurrency trading and finance has raised hackles amongst Chinese regulators, particularly given concerns that fraudulent activity such as pyramid selling has been a key driver of growth.