It was another day of carnage on the cryptocurrency markets in Asia time. Bitcoin tumbled to $4,410 USD on Coinbase and almost every other digital asset is also in the red — many by percentage double figures. Is China’s latest crackdown on blockchain activity to blame… yet again?
Also read: China Cracks Down on ICO Activity as Blockchain Conferences Cancel
As Bitsonline reported yesterday, there have been rumblings in China of a fresh government ban on ICO (initial coin offering) activity. They now appear to be official. The regulatory ripples have passed through the wider cryptocurrency industry as well, with some upcoming Bitcoin and/or non-ICO events canceled.
The government also appears to be asking for all ICO-raised investments to be returned — even those already completed. Almost every cryptocurrency saw significant value losses in response, an event that echoed other major negative central bank policy switch in the past.
It’s not only China that has expressed concern at ICO risks. The U.S. Securities and Exchange Commission (SEC) published its own official warning in July — though did not attempt to halt the practice.
The People’s Bank of China had issued an official notice calling for a halt to all ICO activity, effective immediately. The ban notice comes out of the central bank’s research, indicating too much money is flooding into these unofficial financing channels. It increases risk and circumvents the traditional, regulated financial system.
Specifically, the PBOC is calling for a stop to the following activities:
Andrew McCarthy, CSO of LakeBanker (which is currently running an international ICO) told Bitsonline the Chinese government is placing safety as its number one priority, over innovation.
When regulators worldwide were more permissive towards financial innovation, he said, bad actors moved in. Fake projects, pump-and-dumps, and market manipulators made it dangerous for average investors. In China, losses could even result in social unrest and protests.
“We’ll not be surprised that the overall regulations turned to very conservative,” he said. “In the short term it may hurt the overall market. In the long run, it’s not necessarily a bad thing to get rid of the bad guys.”
As mainstream media like Bloomberg picked up on the news, cryptocurrency markets turned redder than the Chinese flag. CoinMarketCap shows tokens like NEO down by over 39 percent, as well as litecoin (16.66 percent) Ethereum (14.54 percent) and Ethereum Classic (18.44 percent).
Just days after looking set to blow past $5,000, Bitcoin is now wallowing again in the $4,400s. In trading-related chat groups, some urged their colleagues to hold bitcoin and teased others who dumped.
Notably, the currencies with the smallest losses were Bitcoin (6.1 percent) and Bitcoin Cash (5.58 percent). While that’s still a major drop, it may indicate the market differentiates between “established” cryptocurrencies and more modern, token-oriented assets like Ethereum. Litecoin may be older but it’s heavily traded in China, which could explain its larger fall.
China has had its reservations about Bitcoin in the last, but has never moved to ban either the currency or its use. It has at times imposed limits on what services exchanges may offer.
What’s your take on the crypto-carnage? Let’s hear your thoughts.
Images via Cryptowat.ch, Telegram