Chinese soldiers on Tiananmen Square. Image: Songquan Deng/Shutterstock
Block on blockchain-based crowdfunding as the future of a virtual currency industry hangs in the balance.
China is instigating something of a crackdown on virtual currencies, beginning with the ceasing of initial coin offers (ICOs).
A working committee involving China’s central bank, the People’s Bank of China, as well as the China Banking Regulatory Commission and China Insurance Regulatory Commission, has banned ICO funding.
It said in a statement that all organisations and individuals are banned from raising funds through ICO activities, and that financial firms such as banks are to refrain from any unauthorised fundraising activity.
Organisations and individuals that have already raised money through ICOs are being obliged to return funds.
More money for fintech start-ups raised through ICOs than VC
ICOs are something of a recent phenomenon, whereby new currencies are created and crowdfunded by inviting investors to buy tokens.
In June, the Bancor token project based on the ethereum blockchain raised $154m in an ICO.
The previous record was held by cryptocurrency The DAO, which was famously hacked and which saw $55m siphoned off by cyber-criminals.
The move by China followed hot on the heels of similar warnings by financial authorities in Singapore.
“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,” the Monetary Authority of Singapore said in a statement in early August.
It is understood that start-ups raised a record $1.27bn in the first half of 2017, according to equity research firm Autonomous.
This outstrips the amount of venture capital investment in fintech start-ups in the same period.
Chinese soldiers on Tiananmen Square. Image: Songquan Deng/Shutterstock
