China’s ICO ban causes chaos

SHANGHAI/BEIJING: China’s move last week to ban initial coin offerings (ICO) has caused chaos among start-ups looking to raise money through the novel fundraising scheme, prompting halts, about-turns 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.

The boom has fuelled a jump in the value of cryptocurrencies, but raised fears of a potential bubble.

“This is not unlike the dotcom bubble of 2000,” said a partner at a venture capital fund.

“There are a lot of companies raising a lot of money for not very good ideas, and these will eventually be weeded out. But even from the big dotcom bust, you still have gems.”

“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 broader mass market in China,” said the partner.

Investors in China contributed up to 2.6 billion yuan (RM1.65 billion) 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.