Chinese regulators have outlawed companies from raising capital via initial coin offerings, a type of crowdfunding for blockchain projects in which shares of a company are issued in the form of cryptocurrency or tokens. The announcement also mandated that all companies conducting active ICOs return the funds they've raised to investors, which, coupled with the ban, caused the price of digital currencies to plummet.
Ether traded down more than 20% following the news, while bitcoin dropped to $4,037.50 on Tuesday after reaching an all-time high of $5,000 just days earlier, per Coindesk.
The ban will likely have a lasting impact on the ICO market, as Chinese exchanges have historically comprised a large portion of digital-currency trading; companies in China had reportedly conducted 65 ICOs so far this year, raising RMB 2.62 billion (about $395 million). The crypto market is a volatile one fraught by its susceptibility to government crackdowns. In July, the SEC warned sellers in the US that tokens may be subject to federal securities laws, a finding that also rattled the market.