Ethereum, Bitcoin Crash After China Declares Initial Coin Offerings Illegal

Tyler Durden's picture

Ethereum and bitcoin are crashing this morning, after China confirmed its recent threat of an ICO crackdown (reported here last Monday) when the central bank said on Monday that initial coin offerings are illegal and disrupt financial markets, according to statement on China’s central bank website. The PBOC also asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the controversial if surging market for digital token sales.

The crackdown was announced in a statement on the PBOC's website in which the central bank said that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that organizations or individuals that completed initial coin offerings should return the money raised, in move "to protect investors’ rights and properly handle risks," though it didn’t specify how the money would be paid back to investors.

Taking the recent SEC crackdown on Initial Coin Offerings several steps further, the PBOC also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings, and are also also banned from offering pricing and information services on coins. Most importantly was the PBOC's determination that "digital token can’t be used as currency on the market" and its warning that "China will strictly punish over sustained offerings and law violations in completed ones."

The central bank’s Monday directive made no mention of cryptocurrencies such as ether or bitcoin. Bitcoin tumbled over 8%, the most since July on a closing basis, to $4,480. Ethereum was down more than 11% Monday, to just above $310, after trading nearly $400 last week.

“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,” Jehan Chu, managing partner at Kenetic Capital in Hong Kong, which invests in and advises on token sales, told Bloomberg. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.”

As described previously, ICOs are controversial digital token sales that have seen unchecked growth over the past year, raising $1.6 billion and surpassed traditional venture capital raising pathways. They have been deemed a threat to China’s financial market stability as authorities struggle to tame financing channels that sprawl beyond the traditional banking system. Widely seen as a way to sidestep venture capital funds and investment banks, they have also increasingly captured the attention of central banks that see in the fledgling trend a threat to their reign.

While hardly the world's biggest coin offering market, China accounts for about a quarter of the blockchain based capital raising activity YTD: there were at least 43 ICO platforms in China as of July 18, according to a report by the National Committee of Experts on the Internet Financial Security Technology. Sixty-five ICO projects had been completed, the committee said, raising 2.6 billion yuan ($398 million).

Incidentally, just as we speculated in late July, when the SEC announced its own crackdown on initial coin offerings, a move we deemed would be beneficial in the long run for weeding out the various criminal and ponzi schemes that have proliferated in the unregulated market, so today's move by China is seen by some as favorable for blockchain dynamics:

“This is a positive move given the rapid proliferation of low quality and possibly fraudulent coin sales promising the moon,” said Emad Mostaque, London-based co-chief investment officer at Capricorn Fund Managers Ltd. “There is tremendous value in the model but we need to see more separation of high quality, ethical offerings versus those seeking to circumvent securities law for a quick buck.”

Indeed, the SEC signaled greater scrutiny of the sector when it warned that ICOs may be considered securities, though it stopped short of suggesting a broader clampdown. The regulator reaffirmed its focus on protecting investors, however, and said issuers must register the deals with the government unless they have a valid excuse. The vast amount of money amassed in a short span of time has also attracted cyber criminals, with an estimated 10 percent of money intended for ICOs looted away by scams such as phishing this year, according to Chainalysis, a New York-based firm that analyzes transactions and provides anti-money laundering software.

China will likely eventually allow token sales, according to Chu of Kenetic Capital, however only on approved platforms, and may even vet projects individually. “I think they will allow the sale of tokens in a format which they deem safe and more measured,” he said.

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Finally, for the uninitiated, here is the definitive presentation on cryptos, ICOs and tokens courtesy of Autonomous

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pc_babe's picture

What the Government giveth .. it takethawy

Vageling's picture

Wut? You mean what the governmint can't control and wasn't giveth by them... They taketh away, you mean. 

NoDecaf's picture

Bad news headlines for cryptos coming in faster than new ICOs.
Tmosley you've got alot of work to do.

LindseyNarratesWordress's picture

I fucking LOVE, LOVE, LOVE!!!, being proven to be correct.

 

So, once again...

 

I TOLD YOU, SO.

 

Lindsey

Squid-puppets a-go-go's picture

this price action is mouth-breather stylin'.  Wait til tomorrow when the market figures out that banning ICO's means that the interested equity HAS TO GO to supporting the existing established cryptos

bamawatson's picture

You know it is all a dream. "Bee-Coin", a silk and velvet disguise https://vid.me/HGRJ

BaBaBouy's picture

There Goes my ShitCoinz Idea ...

BaBaBouy's picture

The Chinese Gubmint wants their people to own GOLD & SILVER, not Cryptos...

tmosley's picture

Yeah, because they control the exchage. Singular.

Pretty pathetic how you oldbugs are dancing in the streets because of a government crackdown (that will only move said activity into the shadows--you can't stop the issuance of these tokens), while praying for the visible hand of the same government to pet you and feed you a treat.

This will be a temporary setback. New, anonymous platforms will now be developed to handle this sort of thing, again placing the activity beyond the reach of any government.

BaBaBouy's picture

3 Physical Ozs. For 1 Digital Tulip, get it while You Can ...

tmosley's picture

I would be more worried about holding dollars and other fiat until after they crack down on the exchanges. Will be much harder to get access to a non-hyperinflationary fungible currency. Will have to buy things for crypto owners on Amazon at ever increasing discounts.

Post-Truth Society's picture

Cryptos are indeed a great innovation for drug dealers, terrorists, and pedos.  You are in good company.

tmosley's picture

Now THAT is what I call butthurt.

Manthong's picture

 

awshit…

I stuck my  tulip bulbs in the ground and it is not spring yet.

... but the bag of dimes still weighs about 90 ounces,

 

nope-1004's picture

BTC's price is pure speculation.  Sure it has value but the tmosleys of the world piling in recently causing price to outpace any other asset in history, other than tulips, is of course ignored.  We have "market cap" numbers.  How about "velocity"?  Does that stat exist for BTC?  If so, are the price gains of the last year due to velocity increases (inflation), as it truly is replacing the USD?  Or are the gains pure price speculation and greed?

To me this is reminiscient of the Au and Ag hysteria of a few years ago, obviously minus the gains.  But, to say that something WILL replace the USD "because it's better and I know because I've done my research but you're ignorant" is not reason enough.  May as well trott out the cartoon bears to push bitcoin, lmao.

It has the attention of central bankers.  It will be attacked, you gotta know that because it is a threat.  Question is:  Are you going to take on the worlds central banks with your 75 Billion of collective market cap?  GOV throws that at the middle east every month!

Be ready, that's all I can say.

class of 68's picture

Hey Nope,

good comment. Not many 8 year vets here. I'm getting there. As a very long holder of physical, I have traditional other investments. bond arbitrage mostly. I still like to play a bit. Was a big option seller on the cme  way out of the money on the S&P  dimes, 15 cents etc. works almost always (until it doesn't) Lately haven't been selling much, but I do enjoy picking out short term moves. I've watched Bitcoin and laugfhed at Fonestar but I eventually did get in few months ago. Bitcoin ethereum monero. Short term plays. Sold them all Thursday at 7:40. I could see topping action, had no idea of the china announcemnts but proved good timing. I'm out now with a very nice profit in 3 months. 

I treated these as a trade, never fall in love. Even now I'm looking on Bitfinex these coins do trend. I'm not back in today but the fall to 4100 and you could see the support come in. now trading at 4220. Similarly litecoin sold off to 62, bottomed and the bids came in now trading 67. that all said I thing (in the future) there may be some utility in the top 4 or 5 cryptos. More than 100 others will go to zero. 

 

These can be traded like Au and Ag on the Comex. but they move quick. No margin trading that I can see, but some of the exchanges are scary. 

 

best 

rwz

Jay's picture

The dollar is a speculation also.

nope-1004's picture

Backed by a military, expropriating foreign lands and plundering the worlds' resources.  The US is Alexander the Great V2.  If you threaten the tide, you'll be picked off, plain and simple.  The ONLY way things will change is if other nations band together against the US.

'Till then, the dollar reigns - not bitcoin, not gold, not silver, not tulips.

Gen. Ripper's picture

The real paradox is ZH is chock full of both wannabe money changers and Jew haters - yet neither attack one another.

Eager Beaver's picture

They were RIGHT, RIGHT, RIGHT tmosley, we were WRONG, WRONG, WRONG! Whatever am I going to do with all of these tulip shit coins? I should never have bought cryptos, it was a HUGE mistake! Now what are we going to do? Run for the hills, the aliens are coming! The ILLUMINATI are on to us! Grab your Berkey water filter! Grab the Alex Jones(TM) vitamins! Get the gold & silver! Don't forget all the guns and the ammo!! We need to get out of here before they come for us!! They ARE coming for us! To the bunker mate, RUUUUUN!!!! AAAAAAHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!

BadLibertarian's picture

Berkey water filters, lol. Dying laughing. I gave those about a five minute eval before I bought a distiller. Hard to believe they sell any.

The Cooler King's picture

I just have a well on my land... Where I'm ENJOYING MY POVERTY on a daily basis :-)

BadLibertarian's picture

I live in frack-land, so I don't trust any surface run-off 'round here.

Herd Redirection Committee's picture

If 'the government' (actually the banksters running gov) can suppress precious metal prices for 7+ years, what made you guys think cryptos were untouchable?

Suppression of price means you are getting a discount, but it also means you are not likely to see a significant return, esp. in the short run.  And yet, you guys said price suppression means don't invest in precious metals!

What happened in cryptos is pretty much exactly what would have happened in silver and gold, if the prices weren't suppressed.  Once it is up 50% it would have got everyone's attention, and then the hot money would have started coming in, doubling it.  Cryptos served as a pressure relief valve, on the prices of PMs.

tmosley's picture

Wait a month or two and then tell us how governments can suppress the price of crypto.

Herd Redirection Committee's picture

I am telling you right now that crypto 'hoarders' will be accused of facilitating money laundering.  I don't really want to give the government ideas so I will leave it at that.

MANvsMACHINE's picture

If the Chinese government was serious about shutting down cryptos altogether, they would have banned everything and forced the exchanges to shut down. Could that be on the horizon? Sure, but the fact that they didn't do it now while they are banning ICOs may be saying something.

I love physical gold and silver but making bank on cryptos to exchange into physical PMs at a later date is a smart move. The crypto train has not been stopped yet.

OldPost's picture

Can't believe all these smart fellers refuse to see through the smoke......

Load up...Litecoin will be triple digits in 2 weeks..

Sabibaby's picture

BUY ALL THE THINGS!!!  DASH,LTC,BTC,ETH,XMR

The Cooler King's picture

mosley ~ I agree with you here...

 

I DON'T THINK THEY CAN, & I've never tried to establish that as a thesis... (the only caveat to that would be if it actually IS the NSA or whatever, who are "Satoshi" ~ but I'll admit that that's 100% speculation on EITHER side)...

 

but OTOH ~ this is 'precisely' the mechanism whereby, I believe the PRICE OF CRYPTO can be 'influenced' (note that I said INFLUENCED not SUPPRESSED)...

 

So far, the PRICE MOVEMENTS on bitcoin have followed CLASSIC TECHNICAL PATTERNS... FFS ~ even Goldman Sachs look like geniuses for calling price targets accurately...

 

I don't think you're as stupid as most of the 15 year olds on here (& I don't think you're 15)..

 

To be honest, only time will tell... I've taken the time to spit out some TECHNICAL targets within these threads... & how & when those might either be achieved, or obliterated...

 

As a casual observer ~ I'd say that BOTH $1200 & $50000 are still achievable...

 

 

any_mouse's picture

Since Google, Facebook, Amazon, and many other SV tech projects are financed by CIA/NSA/et al., I think the probability of crypto coins NOT being financed by the same Deep State actors, and the moneychangers, is lower than the probability that they are a project of the same actors.

Remember that both Assange and Snowden condemned Trump for firing Comey, because Comey was searching for "Truth".

Assange became a hero/martyr when a random Swedish female and the Swedish Justice system went after Assange on a rather sketchy rape charge.

Musk plays on the name of Tesla and government subsidies. Yes, so do a lot of corporations, financiers, etc. Those people are not being made into cult figures. Maybe Uncle Warren.

Eager Beaver's picture

As usual you're the voice of reason. Those are valid questions. But, we have to look at this from a more honest perspective.

First, how has the government (yes, actually the banks) suppressed precious metals for 7+ years? By dumping bullion and bars? Or through their paper trickery? Seems to me, they're using futures and ETF's to buy and sell to themselves, and within their little network, without ever having to touch physical or spend any real cash.

Are cryptos untouchable by whales? Hell no. And, the biggest whales are going to be banks and governments. But this time, they're actually going to have to pony up some real dough, and buy some real coin. Are they really going to buy massive amounts of cyrpto at these tops and sell it off for billions in losses, just to show us whose boss? At least, until we have a crypto futures market, some crypto ETFs, and until we can see proof that manipulation of these paper derivatives will actually move a physical market that has far more potentional participants than the metals markets, it's all speculation. Can it happen? Sure. Will it happen if they can manage it? Bank on it!

It seems to me a pretty risky bet on their part to assume that they can crash a market, and keep it permantly suppressed for 7+ weeks, let alone 7+ years. Also, I personally never said price suppression means don't invest in PM's. I am invested in PM's, long, long ago I started stacking, and even with the suppression, I am still ahead on a dollar basis. On an inflation-adjusted basis? Still ahead, but ugh.  I've maintained that there are no gains to be had from precious metals as long as it's supressed, and when they stop suppressing, it means that something big is going to happen, and we're all very likely to have bigger problems than arguing over this stupid shit.

What kind of world will we be living in when gold is $10K / oz. and Bitcoin is $100,000K / coin? Not a nice world, I'll bet. Probably a world that doesn't have enough food, water, and electricity to making spending those coins on consumerist luxuries worthwhile. We'll be scrambling for scraps off the Hunger Games table, and you'll probably find that copper jacketed lead trumps gold, silver, and Bitcoin, combined. I don't want to live in that world. So, I'm using the resources and time avilable to me now, to position myself to weather that.

Use the tools available to you in the moment. Why is that so hard for everyone to understand? We know the (((answer))) to that.

SILVERGEDDON's picture

Well, the Canadians are correct - beavers were meant to get fucked. 

Government has the printing press.

I think they can buy the entire crypto coin universe for about a hundred bucks worth of ink.

Or, a couple of clicks of the FED computer transfer money bot.

Go back to measuring how much overlord dick you are taking in, because you really do suck at intelligent reasoning.   

Eager Beaver's picture

Ah, you mean like they've been doing to your little silver ass all these years? I just thought I'd step in and give you a little relief, since you seem to be so butthurt. Tag me when you're ready to come back in.

Raffie's picture

LOL... you took time to put valuable info in front of the troglodytes and Edgelords. 

They are not worth your time. 

While I like my stacks very much I understand cryptos are great as well and making me good money.

Many will break their arms jacking off today, only to get pissed off in the near future when the cryptos do what they do best, make new highs and pick up more speed.

No mention of all the laws to protect cryptos in many countries and states as well as offering no tax on using cryptos?

How long will it take for them to realize this is for only ICO's and not cryptos. The dip total knee jerking. 

 

Eager Beaver's picture

Indeed, said much more concisely than I could have. Pearls before swine, for the most part, but Herd Redirection Committee is always worth the time and effort of a meaningful discussion. Most of these poor trapped fools fail to understand that there are other countries in this world, besides the US, China, Russia, and North Korea. They tragically believe their CONstitution somehow grants them God-like protections, and they are actually free. Today, they make these wonderful devices, I think they call them Aerofloats, or Planoairs, or something, you can ride in them to other countries, and enjoy freedoms these slaves only dream about in their dystopic wonderings. Anyway, here's where we separate the boys from the men, and the fools from their money. Keep your courage, balls of steel, men, balls of steel.

chubbyjjfong's picture

I think the key here is market cap. Its tiny, which suggests to me that it is not really a threat at all. Anything les than 100 billion is chicken feed when the central banksters print that in a week. Why would the CB overlordes be worried about chicken feed? In addition, cryptos have momentum and with such a small market cap, that would suggest that there is huge upside potential. I just dont undersand why one would not dip the feet in. For little cost you can at least expose yourself to crypto's. Put in what you can afford to lose and see what happens, why in the fuck wouldn't you?

ExplodingEntropy's picture

Because it actually costs money to manip crypto, they cant print it

Manthong's picture

Well, that was a hoot ……

So should  I buy a thousands  of a Satoshi now and plan to get rich?

Eager Beaver's picture

No, you should put all of your money in a 1% savings account, or a 401K, or an IRA, maybe buy some .gov bonds, invest in some stocks, get yourself some Yen, while they're cheap, hell, buy some metals even, I hear copper is a good bet right now. Honestly, do whatever you feel called to do, I don't give advice, just jeering and sneers and gnawing of ankles. Leave the Satoshis for me, please, I'll take the fall for all of you, and then you can make fun of me later. It'll be fun.

Raffie's picture

The army of Elmer FUD's are out today for sure. LOL...

fiftybagger's picture

Are you paid by the post or by the lie?

Raffie's picture

Yep, crytpos are the first ever to be used for anything bad.

Thx for pointing that out. 

City_Of_Champyinz's picture

At least you see what is coming, governments are either going to shut down these hundreds of coins magically generated out of thin air or they are going to take them over.  Only a matter of time.

tmosley's picture

Your problem is that you think the government is more powerful than the market.

They can only control certain key bottlenecks. Crypto need not have such vulnerabilities. 

Eager Beaver's picture

I love how these idiots have ALL the bases covered to ensure that they're pathetic little egos always feel justified in committing their acts of passive violence.

<-- You crypto-nerds are going to be sorry, the government is going to take them all, they're for druggies and prostitutes, cryptos are bad!

<-- You crypto-nerds are feeding into the New World Order, it's all a plot by bankers to bring in a one world currency, cryptos are bad!

Consuelo's picture

 

Unfortunately bro, the government is more powerful.    And that is proving the mental mountain which is too high to climb - or recognize for what it is.   I am definitely with you on the freedom aspect.   I simply do not see how the 'cat & mouse' game of constantly switching or moving about with yet another crypto is going to provide a stable form of transacting.    You're talking about a permanent 'black market'.

Then again, true freedom was/is really never free under a form of governance which we now have, so perhaps the black market in transacting is what the future of 'freedom' actually is.

Frustrating...

tmosley's picture

All you need to do to destroy them is refrain from participating in their system. 10% should be more than adequate.