China’s Central Bank declared illegal to raise money through ICO

ICOs allow start-ups to raise investment by selling new cryptocurrencies, which are similar to bitcoin, in return for cash. However, the People's Bank of China says this practice, which has become popular around the world as well as in China, constitutes illegal fundraising.

The document defined initial coin offerings (ICOs) as an unauthorized fundraising tool that may involve financial scams, the Caixin report noted. The committee provided a list of 60 major ICO platforms for local financial regulatory bodies to inspect.

Seven government administrations including the People's Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission and China Insurance Regulatory Commission issued a joint statement where they reiterated that ICOs are unauthorized illegal fund raising activity.

Organizations and individuals that have completed fundraising through ICOs should make relevant arrangement to return funds, in order to protect the interests of investors and properly deal with risks.

The statement added that enhanced management is needed on digital coin fundraising platforms.

The prices of bitcoin and ethereum, two of the largest cryptocurrencies, slumped after the announcement.

Zennon Kapron, Director of the Shanghai-based financial technology consultancy Kapronasia, said he suspected regulators were putting the brakes on ICOs in order to better understand the phenomenon but could ease off in the future.

The move by China is not the first time the country's regulators have attempted to crack down on the cryptocurrency space. In January and February, the central bank warned several digital currency exchanges they would be shut down if they violated anti-money laundering rules.

Start-ups around the world have raised more than a billion dollars this year in coin sales. In China, ICOs have raised at least 2.62 billion yuan (about $400 million), Reuters reported, citing local media.