Earlier this week Chinese regulators banned businesses from raising funds using initial coin offerings (ICOs), the latest blockchain-related investing craze. This in turn has impacted the Bitcoin market.
So far, ICOs have raised $1.6 billion in 2017 alone with 65 launches in China totaling some 2.6 billion yuan or $398 million.
Bitcoin price drops following report that China is going to shut down local exchanges
Posted yesterday by Romain Dillet (@romaindillet)
Another day, another crash and another Chinese ban. This time, as Reuters spotted, a single report from financial news site Caixin is saying that the Chinese government is considering banning cryptocurrency exchanges in China.
In particular, the report is saying that Chinese citizens won’t be able to use exchanges to buy bitcoins, ethers and more using Chinese yuan, and vice versa.
Cryptocurrencies aren’t banned per se, just exchanges. But do bitcoins have value in China if you can’t exchange them? That’s the main question and the reason why cryptocurrencies are crashing.
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But the question is why china banned ICOs
1. Many ICOs are scams
It doesn't take a financial whiz to understand that many ICOs operate like classic pump and dump scams or pyramid schemes. Get people to throw money behind an asset or opportunity they don't understand all that well; hope the price of the mostly worthless junk inflates; cash out. There are too many hucksters out there simply looking to make a quick buck.
2. China wants its own coin
We've heard rumors that China is looking to mint its own national cryptocurrency. If the country succeeds it will have greater control over that platform than the present options (Bitcoin). Regulators may be clearing the way for this this eventual debut.
3. China is a hotbed for the action (scams and all)
hina is an epicenter for cryptocurrency mania. In the first half of the year, China-based ICOs raised about $400 million through 65 offerings with more than 100,000 investors, according to a report from the National Internet Finance Association of China. That puts the country in a particularly precarious position if and when the crypto boom comes crashing down.
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