LONDON – The price of digital currency Ethereum is tumbling on Monday after China and South Korea both announced crackdowns on one of the key use cases of the decentralized blockchain.
Ethereum is down over 15% against the dollar at 3.15 p.m. BST (10.15 a.m. ET):
- Markets Insider
The price collapse follows a crackdown on so-called “Initial Coin Offerings” (ICOs) in Asia. ICOs are where startups raise money by issuing new digital currencies or tokens that can be traded online.
China announced a ban on ICOs on Monday, declaring them illegal, and South Korea pledged to “strengthen levels of punishment” for those looking to raise money through ICOs. Both countries follow the US, which ruled in July that ICOs must adhere to strict securities laws.
All of this is bad news for Ethereum. Ethereum’s blockchain is the most popular platform to use when hosting an ICO – its blockchain allows people to write “smart contracts” that will release new tokens to investors when a certain amount of Ether, the digital currency that powers Ethereum, is received. This Ether can then be converted into dollars or other fiat currencies.
Despite its steep price fall on Monday, Ethereum still remains up over 2,000% over the last year, after a neck-breaking price rise at the start of 2017 fuelled partly by a boom in ICOs. Startups raised over $1.5 billion through ICOs in the first half of the year.
Elsewhere, bitcoin is also down on Monday afternoon, hit by weak sentiment across the cryptocurrency sector. Bitcoin is down over 5% against the dollar to $4,361.25 at 3.30 p.m. BST (10.30 a.m. ET).
The value of the entire cryptocurrency space has fallen by over $30 billion since its peak of $179.5 billion on Saturday, with a broader market pullback ahead of Monday’s crackdown news.