The cryptocurrency market has seen a steep fall over the past couple of days, with most digital coins posting major losses. The decline was prompted by China’s decision to outlaw initial coin offerings – a fundraising mechanism for blockchain startups whose popularity has surged this year, especially in the People’s Republic.
But yesterday several of China’s financial regulators released a joint statement, explaining why they were banning ICOs in the country. Industry website CoinDesk quoted a translation of the statement:
"ICO financing refers to the activity of an entity raising virtual currencies, such as bitcoin or ethereum, through illegally selling and distributing tokens. In essence, it is a kind of non-approved illegal open fund raising behavior, suspected of illegal sale tokens, illegal securities issuance and illegal fund-raising, financial fraud, pyramid schemes and other criminal activities."
It was further clarified that the ban comes into effect immediately and that companies which have already completed ICOs must refund their investors. The news of China’s ban came as South Korea’s Financial Services Commission pledged to strengthen its “levels of punishment” for companies looking to raise funds through ICOs.
This is bad news for Ethereum, which is the most popular platform for ICOs. The value of the second-largest cryptocurrency on the market has fallen significantly after the announcement. Earlier in today’s trading the Ethereum price reached $268.28, its lowest level in nearly a month, but it has since recouped some of the losses.
In today’s trading, the Ethereum price stood at $294.35, as of 10:41 BST. According to data from Coinmarketcap, the digital currency has fallen 4.5% over the past 24 hours. Its total market capitalisation currently stands at $27.8 billion.
For further information on how to buy and trade Ethereum, see our comprehensive Ethereum guide.