Cryp­tocur­rency panic, chaos as China bans ICOS

The East African - - BUSINESS - Reuters


CHINA’S MOVE last week to ban ini­tial coin of­fer­ings (ICO) has caused chaos among star­tups look­ing to raise money through the novel fund-rais­ing scheme, prompt­ing halts, about­turns and re-thinks.

China is crack­ing down on fundrais­ing through launches of to­ken-based dig­i­tal cur­ren­cies, tar­get­ing ICOS in a mar­ket that has bal­looned this year in what has been a bo­nanza for dig­i­tal cur­rency en­trepreneurs.

“One of the rea­sons reg­u­la­tors stepped in was that the ICO fever ex­tended be­yond the tra­di­tional crypto com­mu­nity. The tim­ing was an at­tempt to pre-empt this be­fore it goes into a much broader mass mar­ket in China,” said a partner at a ven­ture cap­i­tal fund in Shang­hai, who did not want to be named be­cause of the is­sue’s sen­si­tiv­ity.

In­vestors in China con­trib­uted up to 2.6 bil­lion yuan ($394 mil­lion) worth of cryp­tocur­ren­cies through ICOS in Jan­uary-june, ac­cord­ing to a state-run me­dia re­port cit­ing Na­tional Com­mit­tee of Ex­perts on In­ter­net Fi­nan­cial Se­cu­rity Tech­nol­ogy data.

While sev­eral start-ups said the ex­u­ber­ance had got out of con­trol and they had ex­pected Bei­jing to act, they said last week’s move pan­icked in­vestors and caused con­fu­sion.

Mi Hui­jin, for ex­am­ple, said he had just got off a train to Shang­hai after clos­ing a deal for his Sing­pay blockchain start-up when he switched on his phone to a flood of mes­sages about the ban. He sum­moned the host of a pop­u­lar live-stream chan­nel to the rail­way sta­tion to calm his fol­low­ers in a 40-minute broad­cast.

“Everyone shouldn’t panic. If you’ve noth­ing to be guilty of what’s there to be scared of?” he told the roughly 800,000 view­ers. “After re­view­ing the reg­u­la­tions, I feel it’s a good thing.”

Not everyone was con­vinced. While some com­ments be­low his video asked if Sing­pay would of­fer re­funds, oth­ers warned that some users had re­ported the start-up to po­lice.

China’s po­si­tion — which dif­fers from reg­u­la­tors else­where, who say ICOS may be se­cu­ri­ties and thus sub­ject to reg­u­la­tion — re­mains open to in­ter­pre­ta­tion.

Hu Bin, deputy di­rec­tor of the fi­nance in­sti­tute at the China Academy of So­cial Sci­ences, an in­sti­tu­tion di­rectly un­der the State Coun­cil, or Cab­i­net, has said this is a “stop on ICOS, not a ban. What are we stop­ping? Il­le­gal ICOS.”

Hu said China recog­nised there is real de­mand for ICOS, but wants to pre­vent them be­ing used for spec­u­la­tion.

“It’s en­tirely proper for the Chi­nese gov­ern­ment to seek pro­tec­tion for con­sumers and pre­vent fraud, (but) con­fin­ing cap­i­tal rais­ing to a spe­cific es­tab­lished sec­tor of fi­nance ... is to ig­nore the enor­mous so­ci­etal value that blockchain tech­nol­ogy can present,” said Alex Bes­sonov of Bit­clave, a Sil­i­con Val­ley-based blockchain com­pany.

Newspapers in English

Newspapers from Kenya

© PressReader. All rights reserved.