Cryptocurrencies suffering meltdown following China’s ban on ICOs
5 September 2017 |
Popular cryptocurrencies like Bitcoin and Etherium saw steep falls in their values on Monday after China announced a ban on all Initial Coin Offerings.
The United States and South Korea have also taken strict measures to limit the use of cryptocurrencies via initial coin offerings.
While Etherium lost 20% of its market value on Monday following China's announcement, Bitcoin fell from an intra-day high of 4,684 to close at 4,111. It further fell by another 2.5% on Tuesday as the industry struggled to recover from the China shock.
On Monday, China's central bank announced a ban on "all illegal fund-raising, financial fraud, pyramid schemes and other criminal activities" that are being perpetrated using initial coin offerings (ICOs). The bank was supported by various government agencies including the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission.
Back in July, the US Securities Exchange Commission (SEC) announced that ICOs would sometimes be considered as securities and would hence come under the purview of laws and regulations on securities.
'Whether a particular investment transaction involves the offer or sale of a security — regardless of the terminology or technology used — will depend on the facts and circumstances, including the economic realities of the transaction,' the Commission said.
'The Securities and Exchange Commission issued an investigative report today cautioning market participants that offers and sales of digital assets by 'virtual' organizations are subject to the requirements of the federal securities laws,' it added.
Such strong measures imposed by the world's two largest economies, combined with a series of measures being implemented by other major economies, may sound the death knell for cryptocurrencies. According to Business Korea, the South Korean government has tightened regulations and increased the penalties for firms that are raising money through ICOs.
While it is almost impossible for firms to raise ICOs in China and risky in other countries, what makes it even more difficult for them is the fact that hackers are finally getting around to hacking into cryptocurrency exchange servers and stealing huge amounts in digital coins by conducting cyber-attacks.
In July, a hacker stole $7.4 million in cryptocurrency by hacking into trading platform CoinDash's website when an ICO was in process. The hacker attacked as soon as the ICO was announced and replaced the link where investors could send their funds with a new one. This way, he pocketed the entire money that investors sent to Coindash before the trader raised an alarm.
A cyber-attack on South Korea's largest etherium cryptocurrency exchange in July also resulted in a loss of over $1 million in digital coins. The hackers also compromised details of 30,000 customers and proceeded to dry up customers' Bithumb accounts using stolen passwords.
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