Blockchain reaction

As digital currencies gain in popularity, Russia and China are moving to scale back on trading.

Russia and China have just dealt severe blows to the Blockchain universe, reports Forbes. At the same time, that universe seems to be going through an explosive Big Bang phase of growth, reports the International Business Times.

In early September, the Bank of Russia declared that cryptocurrencies and their derivatives, such as options contracts on bitcoin, would not be traded in Russia anytime soon. On the same day, Chinese regulators banned all blockchain-based startup financing, a process usually called initial coin offerings (ICOs).

The Bank of Russia claimed that because crypto-currencies are issued by anonymous entities, citizens and legal entities can be involved in illegal activities, such as money laundering and terrorist financing.

Without throwing out cryptocurrencies altogether, Chinese authorities banned all ICOs, which, up to that point, had been growing by leaps and bounds. The Chinese called ICOs an “illegal public finance” mechanism for issuing securities and laundering money.

On the day of the Russian and Chinese announcements, bitcoin prices fell, but quickly picked up two days later, continuing on a path of manic growth that can be seen in a CoinDesk study, The State of Blockchain Report. Over a one-year period, returns on bitcoin reached 150.6%, and 445% on all digital assets, leaping far ahead of returns of any other asset class such as global real estate (3.2%), gold (7.7%), US equities (9.2%) and global equities (14.7%).

Some returns on key issuances recall techno-bubble exuberance: Augur’s value jumped by 4,583%, Golem’s by 4,700% and ICONOMI’s by 2,862%. In China alone, there were more than 65 ICOs in the first half of 2017. Fortune spoke of a “craze” in which many projects “consist of little more than a white paper and some marketing spiel about disrupting various industries with a new kind of Internet money.”