China’s financial regulators have released a joint statement banning the use of initial coin offerings (ICOs) to raise funds. The government also said that it will inspect ICO platforms and crack down on fraudulent practices.
The People’s Bank of China, the China Securities Regulatory Commission, the China Banking Regulatory Commission, and the China Insurance Regulatory Commission have declared ICOs illegal. All banks and financial institutions were also forbidden from doing business related to ICO trading.
Additionally, organisations and individuals that have successfully raised funds through ICOs must take action to return the funds in order to protect investors and mitigate risks, reports Chinese financial media outfit Caixin.
ICOs have become a widespread method for fundraising for projects based on blockchain technology. According to data cited by
Reuters, ICOs have raised around RMB2.62 billion (US$400 million) in cryptocurrency sales.
Several ICO platforms have already stopped operating, reports
CNBC. This follows a statement issued by the National Internet Finance Association last week, warning ICO investors to be alert to fraud and report any suspected scams.
The scepticism of ICOs is not unique to China. Regulators in the US and Singapore have raised alarm bells about the risk of fraud and money laundering through digital token sales. However, experts said that regulators must fully understand how ICOs work to avoid stifling innovation.
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