The Day China Banned ICOs with a Statement - The Crazy Crypto Stories

Two pages, an entire sector wiped off the map in one day. In this eleventh article of The Crazy Crypto Stories, we continue with the topic of the latest installment of this series, fundraising in cryptocurrencies: we recounted how a token sale spread over 42 days raised 18 million dollars to finance Ethereum. Three years later, this same mechanism, which has become the dominant funding method in crypto, is abruptly cut off by Beijing with a stroke of the pen.

The People's Bank of China Declares ICOs Illegal

On September 4, 2017, the People's Bank of China, along with six other regulators, published a two-page statement declaring all fundraising through ICOs illegal on its territory. The tone leaves no room for doubt: the text compares these fundraising efforts to pyramid schemes and financial fraud. Project holders must refund their investors. Banks are no longer allowed to touch them, and a list of 60 platforms is immediately sent to local regulators for inspection.

The signal was already there. Five days earlier, the exchange Yunbi had voluntarily suspended trading of several tokens. According to CNBC, which reported the statement on the same day, at least 2.62 billion yuan, about 400 million dollars, had been raised in China through this method since January. Chinese operators panic: some delete their sites within hours, while others attempt to refund their investors in the middle of the night.

Bitcoin and Ethereum Plunge

The market takes the hit within the hour. The price of Bitcoin drops by 5% to 4,376 dollars, while Ethereum falls by more than 12%, according to CNBC. NEO and Hshare, two Chinese tokens, each lose over 300 million dollars in market capitalization in one go, reports Forbes. BTCC and OKCoin continue for a while to allow their clients to trade ether, as if the text only targeted new projects. The illusion does not last long.

The aftermath is brutal. BTCC and ViaBTC announce their closure the following week, ordered by the authorities to publish a timeline before midnight on September 15. Huobi and OKCoin hold out a little longer before also committing to cease all trading in yuan before October 31. Bitcoin, which was nearing 5,000 dollars at the end of August, falls below 3,500 dollars two weeks later. More than 30% wiped out, ether included.

China Closes the Door Until 2021

The authorities do not stop there. On September 30, BTCC permanently ceases its activities for its Chinese clients, six years after its creation in Shanghai. Five months later, in February 2018, Beijing also blocks access to foreign exchanges, the last exit door that local traders were still using. Many operators have already packed up and moved to Hong Kong or Tokyo.

The file will not really close until 2021: the People's Bank of China then declares all cryptocurrency transactions illegal on its territory, including mining. Chinese miners, who still account for 46% of the global hash rate at the beginning of 2021, migrate en masse to Kazakhstan, the United States, and Russia. Nine years after this first statement, China has never reopened the door.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.