Bitcoin has had a very tumultuous summer. As the valuation of the cryptocurrency climbed, experts opined about the potential “bitcoin bubble.” Bitcoin’s value, however, stumbled a bit over the past few weeks as Chinese regulators took steps to regulate the currency and its exchanges.
Let’s take a closer look at what exactly happened in China have decided to ban the cryptocurrencies to begin with it:
China’s latest crackdown was specifically designed to target initial coin offerings (ICOs), according to Fran Strajnar, founder and CEO of Brave New Coin, a blockchain and digital currency market data company. ICOs have been used by startups to raise funds via selling tokens (or virtual currency such as bitcoin) to their early investors, similarly to the way that a company would sell shares during an initial public offering.
However, in the past, there have been fraudulent ICOs that targeted investors. Unlike IPOs, ICOs are unregulated, making recovery of lost funds difficult.
Earlier this month, the People’s Bank of China stated that ICOs are illegal and as a result crypto exchanges must stop any trading of ICO tokens. The bank also said that any startups that raised funds via ICOs were required to issue refunds.
“Thus we have seen major projects 'delisted' from exchanges and via private communications I can tell you there was quite a panic as multi-million dollar projects scrambled to essentially refund their crowd-sourced financing under the threat of penalties,” said Strajnar. According to her, figuring out how to issue refunds “was a logistical nightmare.”
Weeks after the bank made its announcement, The Wall Street Journal reported that the three “largest domestic exchanges — BTCC, Huobi and OKCoin — all said they would halt trading services in the coming weeks.”
So while the People’s Bank of China did not actually ban bitcoin, it made trading it extremely difficult.
SOURCE::
https://www.marketplace.org/2017/09/22/tech/why-are-countries-so-afraid-bitcoin
