The People’s Bank of China (PBoC) banned initial coin offerings (ICOs) declaring them illegal, and asked all related fundraising activity to be halted immediately.

The People’s Bank of China had completed investigations into ICOs, and now it will strictly punish such fundraising-related activities in the future. From this moment it will also castigate legal violations in already completed ICOs.

According to the Bank, along with the securities and other government agencies, any individuals or organisations that have completed ICO fundraising should make arrangements to return the funds. How the money are to be paid back to investors wasn’t specified though.

ICOs, which are generally deployed by startups for fundraising and can also be used for “smart” contracts, have seen unprecedented growth over the past year, raising $1.6 billion globally, with China accounting for around $400 million (through 43 to 65 ICO platforms according to different sources).

Widely seen as a way to sidestep venture capital funds and investment banks, ICOs may also serve as a breeding ground for frauds, which often include market manipulation or “pump-and-dump” schemes carried out by publicly traded companies that claim to develop and launch some new technologies. The large amount of money collected so quickly has also attracted cyber criminals. According to Chainalysis around 10 percent of money intended for ICOs looted away by scams such as phishing this year.

In such a way it’s not surprising that China’s Central Bank has ruled that ICOs disturb financial order and shall be banned.

Apart from conducting ICOs, digital token financing and trading platforms no longer have the right to do conversions of coins with fiat currencies. Correspondingly, digital tokens can’t be used as currency on the market and banks are forbidden to take part in, or contribute to initial coin offerings’ activities.

China’s move, which follows the U.S. Securities and Exchange Commission (SEC) investor alert, affected the crypto market rather profoundly.

Bitcoin lost 5 percent of its price after reaching the all-time high of $4795 during the weekend. The ethereum cryptocurrency is down more than 10 percent at press time, according to data from CoinMarketCap. The Chinese counterpart of Ethereum – NEO experienced the roughest drop losing more than 34 percent of its price. The OmiseGo’s token OMG lost 16.5 percent. For the record, on August 31, OmiseGo surpassed the market cap of $1B despite of having no final product.

Preconditioned by the cryptocurrency’s price drop, cryptocurrency market capitalization has lost almost $30 billion of its total value and now makes $150 billion after setting the record of $179.7 billion on Saturday, September 2.

However, some experts believe that this is not the end. They think that China will eventually allow ICOs, but only on approved platforms and in safe formats. Maybe Chinese authorities will be checking the projects individually. One more positive sign is that a number of central banks, including the PBoC, continue to explore the viability of issuing their own digital currencies even in a current situation.

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