China bans ICOs and closes cryptocurrency exchanges

Two pages, an entire sector wiped off the map in one day. In this eleventh article from Folles Histoires Crypto, we stay on the subject of the latest opus of this series, fundraising in cryptocurrencies: we told how a sale of tokens spread over 42 days had raised 18 million dollars to finance Ethereum. Three years later, this same mechanism, which has become the dominant method of financing crypto, was cut off with the stroke of a pen by Beijing.

People's Bank of China declares ICO outlawed

On September 4, 2017, the People's Bank of China published, along with six other regulators, a two-page press release declaring all fundraising by ICO illegal in the territory. The tone leaves no room for doubt: the text compares these levies to pyramid schemes and financial fraud. Project leaders must reimburse their investors. Banks are no longer allowed to touch it, and a list of 60 platforms immediately goes to local regulators for inspection.

The signal was already there. Five days earlier, the Yunbi exchange had suspended trading of several tokens on its own. According to CNBC, which reported the press release the same day, at least 2.62 billion yuan, approximately $400 million, have been raised in China through this means since January. Chinese operators are panicking: some delete their sites within hours, others try to reimburse their investors in the middle of the night.

Bitcoin and Ethereum plunge, Chinese exchanges close

The market takes the hit within the hour. The price of Bitcoin fell by 5% to $4,376, Ethereum fell by more than 12%, again according to CNBC. NEO and Hshare, two Chinese tokens, each lost more than $300 million in capitalization at once, reports Forbes. BTCC and OKCoin continued to have their clients trade ether for a while, as if the text only targeted new projects. The illusion does not last.

The rest is brutal. BTCC and ViaBTC announced their closure the following week, ordered by the authorities to publish a timetable before September 15 at midnight. Huobi and OKCoin resisted a little longer, before in turn committing to ceasing all trading in yuan before October 31. Bitcoin, which was close to $5,000 at the end of August, fell below $3,500 two weeks later. More than 30% gone, ether included.

China closes the door, until 2021

The authorities don't stop there. On September 30, BTCC definitively ceased its activities for its Chinese clients, six years after its creation in Shanghai. Five months later, in February 2018, Beijing also blocked access to foreign exchanges, the last exit route that local traders still used. Many operators have already packed up for Hong Kong or Tokyo.