(Yicai Global) Sept. 5 -- The People's Bank of China and six other national ministries and commissions have banned initial coin offerings (ICOs) and declared that they are illegal, the bank said online yesterday.

An ICO is defined as an activity in which a financing entity raises virtual currencies such as bitcoin and Ethereum from investors by illegally offering digital tokens and putting them into circulation, the statement said. An ICO is a form of unauthorized public financing that may involve illegal fundraising, financial scams, pyramid schemes or the illicit offering of coins, token money or securities.

All coin offerings must be stopped immediately after the promulgation of the statement, and organizations and individuals who have already completed ICOs should refund investors, protect their interests and deal with relevant risks appropriately, the PBOC said. Financial authorities will investigate organizations and individuals refusing to end their ICO operations as well as illegal activities involved in past ICO deals, the statement said.

As of the announcement date, authorities prohibit so-called coin financing trading platforms from operating any businesses involving the conversion of the legal currency into tokens or virtual currencies and vice versa, from trading tokens or virtual currencies as a central counterparty or otherwise, and from providing pricing or intermediary information services for any tokens or virtual currencies. Financial authorities will inform telecommunications regulators of illegal coin financing and trading platforms so they can shut down their websites and mobile applications. Cybersecurity authorities will remove such mobile apps from online stores, and business administration departments will revoke their business licenses.

Regulators have banned financial and non-banking payment institutions from directly or indirectly offering account activation, registration, trading, clearing or settlement products or services for coin financing and virtual currencies, and from underwriting insurance businesses related to tokens or virtual currencies or covering them with their insurance products. Financial institutions and non-banking payment organizations are required to report any information about illegal coin offering activities to the authorities, the statement said.

The other six national departments are the Office of the Central Leading Group for Cyberspace Affairs, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission.

Bitcoin was trading at USD4,067.24 (CNY26,520.00) as of 4.05 p.m. yesterday, down 7.01 percent. The intraday high was CNY28,737.99, and the intraday low was CNY25,950.01.

To a certain extent, ICOs are similar to initial public offerings. However, digital assets, as opposed to shares, are issued through ICOs. With ICOs, groups can distribute cryptocurrencies directly to backers as a source of crowdfunding that evades the strict supervision IPOs are subject to.