China bans ICOs, USA issues warnings on them
ICOs might be an excellent fundraising option but it's facing intense heat from various governments. Recently, US Securities and Exchange Commission issued warnings about its risks and now China is tightening its rein. A notice has been issued, by the committee backed by China's central bank, placing an immediate ban on ICOs because it has "seriously disrupted the economic and financial order." Here's more.
How does an ICO work?
Initial backers seeking to invest in a company of their choice, are given project-specific crypto-coins in exchange of other crypto-currencies like Bitcoins or legal tenders. These crypto-coins, popularly called tokens, are similar to shareholding in a company. In case, the project fails to garner enough funds, the ICO procedure is considered unsuccessful and the firms take back the tokens and refund the subsequent amount.
Financial scams and pyramid schemes
As per Chinese Financial news site Caixin, this committee has prepared a list of 60 exchanges, which will be investigated and, in the meantime, an ICO freeze will be in place. The committee has alleged that some ICOs are nothing but financial scams and pyramid schemes and, therefore, all of them should be properly monitored and proper precautions should be taken to prevent frauds.
Few have already shut down shop
China has one of the most active bitcoin communities in the world and, therefore, has played a significant role in the ICO boom. It's still not clear which firms have been included in the investigation list. However, two biggest ICO platforms of China, ICOage and ICO.info, have already suspended their services and stopped taking new projects. Both have said that the decision was voluntary.
All eyes are on this one
In USA, SEC is yet to make a firm decision regarding ICOs. All eyes will now be on China to see what kind of norms it imposes to govern ICOs and if it starts monitoring and regulating all types of ICOs or not. It will also be interesting to see the effect that this ban has on the ICO market and crypto-currencies, in general.
