Raising Money through ICOs will be illegal in China

Raising Money through ICOs will be illegal in China. Initial Coin Offerings have become a very popular way of crowdfunding in the recent period. However, this is a very unregulated method which some have used for illegal actions and because of that, many countries have opted to regulate this area of the digital currency market. However, so far, it seems that China will be introducing the toughest regulations for this line of business.

Recent reports from China indicate that the government has banned this method of raising money altogether. Those reports indicate that the committee that has been regulating the digital currency market, as well as the entire Internet financial sector in the country, has sent out notices that say that the companies who raise money through ICOs will not be allowed to operate anymore.

This committee has characterized this method as an illegal fundraising method stating that these kinds of actions are often financials frauds that can hurt customers a lot. The committee has gone even a step further and they published a list of 60 ICOs platforms that will be inspected by the financial regulatory authorities. However, government authorities are not the only who want for those companies to be inspected.

Namely, China Security Regulatory Commission, China Insurance Regulatory Commission, China Banking Regulatory Commission, and People’s Bank of China have also called for regulating this method of fundraising. Besides that, they also emphasized that according to the laws of the country, fundraising through Initial Coin Offerings is an illegal activity and that it needs to be stopped. They have also stated that banks should entirely stop doing business with companies and individuals who are involved in the business through ICOs.

Those companies who have already collected certain funds through ICOs are required to return the entire amount of those funds in order to protect the investors and their interests and to avoid any unnecessary risk that might come with this kind of business. Besides that, previously mentioned institutions have also called for the Chinese government to strengthen the control of all digital currency platforms that are used for fundraising and not only ICOs.

This will be a huge blow for many start-ups in China as they have raised money for their business with this method. For example, only in China, Initial Coin Offerings have raised more than 2.62 billion Yuan, which is around $400 million when converted. As a result of this decision, several ICOs have stopped their operation already stating that they have been unwillingly shut down. However, it seems that shutting down ICOs is not enough for the Chinese government as they have also terminated the conference on blockchain technology that was being held during the weekend in China.

As mentioned before, China is not the only country who has attempted to regulate this field as Singapore and the United States have announced the implementation of similar measures. All experts agree that this field needs to be regulated in order to prevent illegal activities but they are also warning that the authorities need to understand the digital currency market before introducing any regulations. Regulations passed without understanding the market might cause the collapse of the entire market which would bring a lot of problems for a huge number of people.

WRitten by Vedran Ostojic