Following a series of major security breaches of digital currency exchanges during their Initial Coin Offerings, China has banned the use of virtual currencies such as Bitcoins for investments in fundraising activities.
A joint communication by the People’s Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission, and China Insurance Regulatory Commission said, “As of the date of this announcement, all types of [digital] currency issuance financing activities shall cease immediately,” The statement also said that cryptocurrencies “do not have legal status equivalent to money,”. Organizations and individuals who completed their financing would have to make arrangements to return funds used to buy tokens.
The announcement had a big impact on the market value of various cryptocurrency vendors as various reports suggest a drop in the valuation of the digital currencies. A blog post from cybersecurity firm ESET said, “Whether the move by China can be viewed as a way to remove any possible hacking threats, or if it’s simply a way for them to slow the growth of these cryptocurrency exchanges so they can put stricter regulations in place, remains to be seen,”
There have been some major cyber breaches related to these cryptocurrencies in the recent past that have affected virtual currency exchanges, their users, and their investors. One such incident occurred during the month of August, where hackers stole around $500,000 in Ethereum from cryptocurrency trading platform provider Enigma. The incident left many professionals skeptical about the cybersecurity concerns related to cybersecurity.