After prices of the most widely distributed virtual currencies hit their all-time highs, a decision by the Asian giant's authorities plunged its prices. Some fell to 40%.
What is the main fear of central banks?
Uncertainty seized global investors who bet on the so-called "virtual currencies."
And not for less, since in many of them suffered a real collapse after the Central Bank of China hit a hard blow.
Specifically, he made it known that the initial currency offerings (ICO) are illegal and even demanded that all fund-raising activities be halted immediately.
Thus, the entity launched the strongest regulatory challenge in the booming virtual currencies market and erased one of the most active markets developed by companies in that country to obtain financing.
How were companies made of money?
In the Initial Coin Offerings (ICO), the company offers tokens and its investors pay with digital currencies such as Bitcoin or Ether.
What is a token? It is a value unit created by an organization to govern its business model and empower customers to interact with their products.
In addition, it facilitates the distribution and distribution of benefits among its shareholders.
This process has marked differences with a traditional financing round. Also, with a Public Sale Operation (OPV).
The measure taken by the Central Bank of China did not go unnoticed among investors in the world. Still less, among those who follow closely the evolution of the cryptocurrencies.
It punishes one of the most avid markets for this type of asset and exposes the fear of this entity (and other central banks) to the risks that bring virtual currencies to the global financial system.
"Digital tokens cannot be used as currency in the market," said the authorities in China.
For the time being, the growth of the Initial Coin Offerings promoted by several companies to be financed has been exponential. In just one month (July 2017) 43 ICO were accounted for only in that country.
That is not all, the Chinese government is now investigating some 60 Crypt-Coin exchange markets and also two of the big platforms to buy tokens, which have suspended their services.
Although the measure is directed at new issues, it caused a fear in the crypto world.
Some of the cryptocurrencies lost its value like
- The Neo collapsed by 50%
- IOTA lost its value by 40%
- The Ether sank almost 20%
- Litecoin, 18%
- BitcoinCash was precipitated by 17%
- Bitcoin plunged 20%, after touching the $ 5,000 per unit.
The collapse in the price of the largest online currency by market capitalization caused a loss close to $ 30 billion if the accumulated of all digital assets is taken.
The latter decided that to go to the market in the form of an ICO, interested parties should request prior authorization and comply with the same requirements as those required for a share issue or corporate bonds of any company.
Another issue that gives markets a share of suspense (and fear) is "retroactivity".
Following the decision was taken by the People's Bank of China, individuals and organizations that raised funds through the ICOs should take steps to return the funds.
This requirement was clearly reflected in the statement issued by the Asian entity jointly with securities regulators, banks and other government departments.
"Regulators worldwide are struggling and trying to figure out what the risks are and how to reduce them,"
