An initial coin offering is an unregulated way in which companies or individuals can raise funds in order to start up a project. ICO’s are becoming increasingly popular in the cryptocurrency world and 2017 has seen a huge rise in the number of ICO’s launched. This has lead to huge amounts of money being pumped into the cryptocurrency markets and has seen huge returns for investors (in some cases).
There are the obvious risks with the issuing of tokens which the SEC issued a warning over recently, however China looked to have gone one step further and placed a blanket ban on all forms of fundraising using a token issue. Following an announcement from China’s central bank an immediate ban has been placed on any such form of fundraising as it is said to have “seriously disrupted the economic and financial order”
While this all seems extremely drastic given that individuals who choose to invest in ICO’s do so in the knowledge that they may lose some or all of their investment and therefore should be able to make their own choice whether or not to take this risk. It has been argued that governments are not happy with the control being taken away from them and rather than the central banks making profits from providing the funding for these projects it is instead going to the private investors. All well and good when the volume is low, but the rate at which ICO’s are taking over is seriously jeopardising the monopoly they hold.
While this is one of many theories, if it were true it would make sense for governments to regulate or ban ICO’s as it could seriously disrupt the current banking infrastructure.
Another theory could be simple market manipulation, Long-time crypto watchers will recall 2013, when China banned exchanges from allowing people to buy into bitcoin and other crypto coins using the local yuan currency. The result was a huge price drop, but support for yuan deposits did return and the price if bitcoin has soared to new highs — most recently $5,000 on some exchanges.[Source – TechCrunch.com]
CoinDesk have released a full translation of regulator remarks – Click here
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