Experts: Cryptocurrency will suffer, for better future

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Experts say cryptocurrency is a risky investment, and investors should know what they are buying before putting money in. That’s after the prices of the major cryptocurrencies suffered a double digit loss over the weekend on a sudden policy shift.

China’s financial regulators just banned Initial Coin Offering (ICO) as illegal fund raising, and demanded individuals and organizations that have completed ICO fundraisings to return the money to the investors.

“Ninety percent of the ICOs were involved with scams and frauds,” said Deng Jianpeng, law professor from Minzu University of China.

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That’s because, as Deng added, people can easily exchange bitcoin and other cryptocurrencies to RMB or other real currencies, so cryptocurrency is treated like a kind of asset that is actually nowhere to be found.

Huobi.com, China’s largest cryptocurrency trading platform, shows that bitcoin in China is now trading below 25,000 yuan, down from Saturday’s highest 32,000, and the lowest in three weeks.

Other cryptocurrencies such as Ethereum, VeChain and Litecoin, also lost 20 to 50 percent of their value in just one day.

In the US, bitcoin also plunged as much as 15 percent, barely staying at the 4,000 and 1,000 dollar levels. Some say that’s directly related to the cracking down by Chinese authority.

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Economist Sun Zhaodong, the author of RMB: The Internationalization of China’s Currency, suggested that individual investors should research the products and set a clear target before entering the market, in a way to lower risk.

However, Deng also noted that the prices of major cryptocurrencies are very likely to rebound in the long run, as they have already become circulative and are acknowledged globally.

Xu Mingxing, CEO of China’s leading bitcoin exchange OKCoin, is also optimistic about the future of cryptocurrency.

“This new ban targets ICO – the fund raising part, but not cryptocurrency itself. It will squeeze bubbles out and create an even healthier environment for cryptocurrency to evolve,” Xu told China National Radio.

Experts are calling for law makers to draft a complete legislation on cryptocurrency regulations in the near future, and that could include changing virtual assets into statutory personal property.

China is one of the most active countries in the global ICO market. Data from the Ministry of Industry and Information Technology shows, there were 65 ICOs in China in the first half of this year. They raised more than 2.6 billion yuan (397.2 million US dollars) and more than 100,000 people participated.

(Gao Songya also contributed to the story)