BEIJING (Reuters) - China is poised to further tighten rules on virtual currencies after regulators on Monday banned virtual coin fundraising schemes, Chinese financial news outlet Yicai reported citing sources.

Cryptocurrencies are seen on a website that tracks the value of initial coin offerings (ICO) in this illustration photo taken September 5, 2017. REUTERS/Thomas White/Illustration

China banned and deemed illegal the practice of raising funds through launches of token-based digital currencies, targeting so-called initial coin offerings (ICO) in a market that has exploded since the start of the year.

Yicai’s report late Monday cited a source close to decision-makers as saying the announcement on the ban was just the start of further follow-up regulations of virtual currencies.

In total, $2.32 billion has been raised through ICOs globally, with $2.16 billion of that being raised since the start of 2017, according to cryptocurrency analysis website Cryptocompare.

The rapid ascent of ICOs prompted the U.S. Securities and Exchange Commission (SEC) to warn in July that some ICOs should be regulated like other securities. Singapore and Canada followed with similar warnings.

Bitcoin rival Ethereum, which token-issuers usually ask to be paid in and which has seen dramatic growth this year, fell sharply on the news. It was down almost 20 percent on Monday and fell a further 5 percent on Tuesday, according to trade publication Coindesk.

Bitcoin was also down another 4.6 percent on Tuesday after falling 8 percent on Monday.

Major virtual currency trading platforms BTCC and Huobi had no comment on the ICO ban when contacted by Reuters.

Chinese ICO platform ICOINFO (www.ico.info) said in a notice on Tuesday that it has stopped all ICO services and is working with groups that issued virtual tokens on its platform to return funds to investors.

ICOINFO said several projects had already returned funds to investors’ accounts and that users would be able to begin withdrawing funds from the platform at 10:00 am local time Tuesday.

Another Chinese exchange, Binance, said in a statement on its website that it is “working around the clock on a solution that will fully satisfy the new regulations in China”.

However, it was looking at “preserving and enhancing features that are valuable to our western community, which accounts for more than 81 percent of our user base,” the statement said.

Some members of a chat group on the social networking platform WeChat set up for an ICO last week complained about the strict regulation, and wondered when they would get their funds back.

Some users commenting on the website QQ.com welcomed the regulation, saying it would help the Bitcoin ecosystem in the long-run.

“Regulation of ICOs is the best thing that could have happened to Bitcoin. From now on there won’t be any reckless issuance of virtual currencies” wrote one user, who saw a bright future for the currency.

“For the past eight years, each time Bitcoin has declined in value has been a great buying opportunity.”