Initial coin offerings are banned in China by the People’s Bank of China

4 September 2017

Initial coin offerings will be banned in China with immediate effect of the decree issued by the People’s Bank of China, as it deems them illegal and posing a significant threat to the national finance system. ICOs are usually used by startups to quickly raise funds going round the conventional investment instruments and intermediaries.

The ICOs are based on blockchain technologies and cryptocurrencies and allow entrepreneurs to quickly get access to the funds in turn offering to their investors the digital certificates proving the ownership of special tokens sold at such ICOs.

As it is the case with the stocks the price of digital tokens are growing proportionate to the growth in popularity and success of the startup company. ICOs allow startups to collect money without dealing with investment bankers, venture capital firms and other intermediary organizations.

In China alone the number of initial coin offerings has grown to 65 and these have brought about $400 million invested by 105,000 backers.

The shift from the conventional investment instruments to ICOs has raised concerns of the Chinese government and made the central bank to express its conclusive position declaring ICOs as illegal and disturbing the financial order and to impose a ban on these practices. The People’s Bank of China along with other regulators noted that any funds raised through ICOs should be returned by any individuals and companies.

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