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Bitcoin and Ethereum slump as China gets tough on cryptocurrencies

The People’s Bank of China has said that initial coin offerings are illegal and raise the suspicion of fraud

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The combined market value of cryptocurrencies has fallen by more than US$20bn to US$160bn over the past 48 hours or so

After hitting record highs over the weekend, Bitcoin and a host of other cryptocurrencies slumped on Monday after China’s central bank said all ‘initial coin offerings’ are illegal and that any such activity should be blocked immediately.

In a strongly-worded statement, the People’s Bank of China said that these offerings are “essentially a form of non-approved illegal public financing behaviour”.

The PBOC added that ICOs raised suspicions of “illegal selling of notes and bills, illegal securities issuance, illegal deposit-taking, financial fraud, illegal direct marketing and related criminal activity”.

The news sent the price of Bitcoin tumbling to US$4,408, meaning the digital currency has fallen more than 12% since it reached fresh highs of almost US$5,000 over the weekend.

Ethereum – the new darling for cryptocurrency investors – crashed even harder; down 15.7% for the day so far to US$296.57 and off by a third since Friday.

ICO’s are used by start-ups as a way of raising money at the beginning of their journey. Investors pay in fiat or virtual currency in exchange for coins that can be used as a form of currency in their own right in the future.

Investors who take part in these ICOs hope that the business they are backing is successful which will push up the value of the coins that can be spent through their platform or marketplace.

Cryptocurrencies have enjoyed a blistering start to 2017 with Bitcoin more than quadrupling in value in a matter of months.

On top of the news from China, there were also reports that South Korea was looking to bring in stricter regulations surrounding cryptocurrencies.

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