he People’s Bank of China (PBOC), alongside six ministries, released a document on September 4 banning ICOs (initial coin offerings) nationwide.
According to PBOC, China’s central bank, ICOs are generally used in China as a financing tool to raise virtual currencies like Bitcoin by selling cryptocurrencies, similar to crowdfunding. PBOC has now defined such financing as “illegal,” saying that the token money an ICO sponsor issues is not permitted by China’s financial supervision departments, meaning it cannot to be circulated in the market, including in exchange for Bitcoin, the leading cryptocurrency, which the PBOC has acknowledged as a virtual commodity that could be held and sold by individuals.
According to media reports, PBOC’s ban on ICOs aims to protect investors and control related financial risk – it is reported that most of the current ICO projects have allegedly involved fraud or pyramid sales and attracted a huge number of ordinary individual investors who have no idea about the risk of such “investments.” In its document, PBOC requires ICO sponsors to refund what they have taken and forbids any exchange between token money and fiat money.
Following the PBOC’s document, the value of Bitcoin, according to Chinese financial magazine Caijing, has plunged to 26,000 yuan (US$4,000) by 6pm September 4, 3,000 yuan (US$461) less than the previous day.