In a new ruling published on Monday, the People’s Bank of China (PBoC) declared ICOs and similar cryptocurrency-based fundraising tools to be illegal within the country. The PBOC’s statement also demanded that all current ICOs on China-based exchanges be halted immediately, and that funds from previous ICO rounds be returned. The ruling follows an extended investigation by Chinese financial authorities into the country’s exploding ICO scene. According to some estimates, Chinese investors have spent more than 2.6 billion yuan ($400 million) on ICOs this year.Although the PBoC’s decision is hardly a welcome one within the ICO community, it’s also not surprising. The central bank has a long history of hostility towards cryptocurrency, issuing sternly worded “bans” only to revise or overturn such decisions after further study. In 2013, for instance, the PBoC issued a similarly harsh ruling about bitcoin exchanges within the country, only to contradict that statement with new guidance a few of months later. These seemingly conflicting rulings soon became the basis for the well-known “China bans bitcoin” meme.
As a result, there is some skepticism about the purpose of this ruling within the ICO community at large. Speaking with Bloomberg, Jehan Chu of Hong Kong-based investment firm Kenetic Capital Ltd. speculated that the PBoc’s move was an attempt to take a “firmer action” on ICO investments, rather than serve as a permanent ban. Chu believes that the PBoC’s real goal is to move crypto-investment away from the country’s many unregulated ICO exchanges — at least 43 such platforms are currently active in China — and onto state-approved ones.
“I think they will allow the sale of tokens in a format which they deem safe and more measured,” Chu said. “This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions — the short story is we all know regulations are coming.”
The PBoC’s ruling had a dramatic impact on cryptocurrency prices, with BTC falling by over 7% and ETH dropping by more than 16% since the announcement. The PBoC’s statement follows a recent warning from the U.S. Securities and Exchange Commission about ICO-based scams. In contrast to the PBoC’s ruling, the SEC views ICOs as a fully legal fundraising mechanism for U.S. investors.