The future of tokenized fundraising hangs in the balance.
Initial coin offerings, the tokenized fundraising craze flushing worldwide blockchain projects with fresh funds, are now officially illegal in China. Bloomberg reported the People’s Bank of China posted a statement on its website Monday demanding all Chinese ICO activity stop immediately. Anyone who has already used ICOs to raise money from Chinese buyers will reportedly be required to make refunds.
Tech startups have often used customized, Ethereum-based tokens to raise funds since the ICO trend spread this summer. Sometimes, investors can buy these niche tokens with bitcoins. However, most of the ICO market is Ethereum-centric.
Any future ICO endeavours in China will be harshly punished, a threat which caused a sudden dip in global bitcoin prices even though most ICO tokens have little to do with bitcoin.
According to the Beijing media outlet Caixin, Chinese regulators associated ICOs with online scams. “For now it will be a total ban… it’s a very different approach from the United States, Singapore or Canada, which also regulates ICOs but they don’ t ban them, “ Tamar Menteshashvili, a blockchain-focused PhD candidate at Jiao Tong University in Shanghai, told the International Business Times. „They say some of them fall within the securities law.” Menteshashvili also works as a consultant for Chinese cryptocurrency projects and government blockchain initiatives in European countries like Georgia. She thinks this ICO ban will follow the pattern of Chinese bitcoin regulation.
China previously banned bitcoin by barring Chinese financial institutions from associating with bitcoin companies in 2013, and then shutting down cryptocurrency exchanges in 2014.
