Last Friday, cryptocurrency markets looked as if they would lock in the recent gains and maybe continue the upward climb. And then just within an hour or so, the markets had turned to this:
The news about the planned restriction on ICOs by the People's Bank of China caused a slump mid-week, but most of the market recovered. But the jittery mood remained, and an unverified story that China would once again ban cryptocurrency exchanges delivered another blow to the markets.
The influx of Asian funds into the cryptocurrency markets has been one of the strongest growth factors, as Chinese exchanges offered a quick switch from cash to Bitcoin, Ethereum, Litecoin and other coins and tokens.
While big exchange Huobi was operating, with some selling and immediate buying, the newer Binance exchange changed its rules on trading Chinese ICO tokens.
Binance is a blockchain-based exchange with a proprietary token. In a business announcement, the exchange stated it would disallow Chinese IP addresses and only allow token withdrawal. Binance continues its operations, but will turn to Western tokens, the announcement stated.
One of the tokens affected is LoopRing (LRP), an August 31st ICO. Binance would allow token withdrawals, while the LoopRing team is looking for ways to refund the ICO backers. The TRON (TRX) token was also refunded. Binance was active in distributing several tokens before the ban, but has stopped offering the service, cancelling the PAMA ICO.
At the same time, Binance prepares to list coins and tokens supported by the community.
The Chinese ICO market saw 65 ICOs in 2017, raising nearly $400 million, according to government data cited by news agency Xinhua. The total ICO market has raised nearly $1.5 billion.
The People's Bank of China is otherwise inclined to accept blockchain innovation, but is more concerned about the illegal raising of funds. But when it comes to digital currencies, PBoC has been excited for more than a year:
"Research by the People's Bank of China suggests that the best way to take advantage of these innovations is for central banks to take the lead, both in supervising private digital currencies and in developing digital legal tender of their own. At the PBOC, this effort is underway,"
wrote Fan Yifei, the central bank's vice governor in a column for Bloomberg.
The cryptocurrency market has suffered its deepest losses after similar scandals in the past, the most notable one the Mt. Gox theft of funds.
So far, the Korean exchanges and ICO markets have not seen the same effects. Trading and interest remained robust for Ripple (XRP), despite the buying option scandal. The blockchain startup R3 is planning to sue Ripple for fulfill an option contract to buy 5 billion XRP at $0.0085, while XRP trades at $0.21.