In what might be a major regulatory shot across the initial coin offering (ICO) bow, China has put in place an immediate ban on funding of those offerings.
TechCrunch reported that the nation’s central bank on Monday said ICOs have “disrupted the economic and financial order.” The order comes as the controversial fundraising activities have drawn attention, and no small share of scams.
The industry itself, said CNBC, is worth hundreds of millions of dollars. The order, as noted by Chinese-language financial news site Caixin, was handed down by a committee studying Internet-based financial risk, which offered up a list of 60 exchanges that will be inspected and reported on. The freeze remains in place until then.
Further, seven government administrations said jointly that the ICO exists as an unauthorized fundraising effort that may in fact be tied up in scams. The roster of government entities issuing that statement included the People’s Bank of China and the China Banking Regulatory Commission, among others. The statement also warned that financial institutions should not be involved with ICO trading activity. Individual investors and firms that have in fact completed ICOs and raised funds should get ready to give those funds up, per the statement, as CNBC noted.
The ban takes effect as ICOs have raised more than $1 billion globally this year alone, with $400 million coming from China. As has been widely noted, startups have been able to raise significant amounts of money against a lightly regulated landscape.
CNBC noted that at least a few ICO platforms have frozen activity – among them ICOINFO, which said it was doing so voluntarily.
The official move also comes after the country’s National Internet Finance Association said those embracing ICOs should be cautious about fraud.
China’s move echo some cautionary language from other countries. For example, Singapore’s central bank said last month that, “ICOs are vulnerable to money laundering and terrorist financing risks due to the anonymous nature of the transactions, and the ease with which large sums of monies may be raised in a short period of time.”