China’s ICO Ban Has Its Domestic Companies Scrambling

Crime, FinTech, ICO News, News, Regulation | September 6, 2017 By:

Chinese companies that raised funds through initial coin offerings (ICO) are reeling in the wake of a ban on ICOs by a consortium of government agencies.

Reports indicate the Chinese government is looking at 60 major platforms that deal in ICO fundraising, and are heavily investigating all companies that have planned or executed an ICO.

The dire situation comes after a consortium of China financial agencies, including People’s Bank of China (PBoC), the country’s central bank, banned individuals and organizations from raising funds through initial coin offerings (ICO). The central bank said that ICOs are illegal and have asked all related fund-raising activity to be halted immediately.

The People’s Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission and China Insurance Regulatory Commission issued a joint statement on Monday where they reiterated that ICOs are unauthorized illegal fund raising activity. The cryptocurrency markets took a major downward hit upon the news, with many plunging 10 percent or more and some losing as much as half their value.

While some industry executives predicted that China would eventually decide on some form of regulation that will renew ICO possibilities, for the moment Chinese companies are at a major disadvantage to their western counterparts.

CNBC talked to Sasha Ivanov, CEO of Waves, a platform that facilitiates coin offerings for other companies, most recently helping Burger King Russia create the WhopperCoin.

Ivanov claims bad actors in the sector created the problems. “There’s no secret that a lot of the initial coin offerings, with ads on Facebook promising huge discounts and returns, are nothing but a scam,” said Ivanov. “The Chinese government could cope with those companies working in a shadow zone of the law, but they have finally lost patience, as more and more companies tried to raise millions for nothing.”

For now, some companies are particularly in trouble. One component of the Chinese crackdown was a requirement that companies that have raised funds through the mechanism have to give it back to investors.

Online lending platform Blackmoon Crypto is one of those affected, according to CNBC. It recently raised more than $9 million in an ICO pre-sale. It will have to refund Chinese citizens who took part in the pre-sale, and will ban domestic participation in its planned Sept. 12 token offering. However, it still plans on moving forward outside of China.