Initial coin offerings (ICOs) may be coming back to China, but this isn’t necessarily a good thing.
ICOs Are Making an Unwarranted Comeback
China has issued a statement saying there’s been a “resurgence” of bitcoin, crypto and blockchain-related activities within the nation’s borders. One thing that’s allegedly been happening, according to sources, is that ICOs are making a slow but triumphant return to the country, but this isn’t warranted or promoted by regulators. They just seem to be returning on their own, and considering China outlawed ICOs roughly two years ago, a fight is likely emerging on the horizon.
China placed a ban on ICOs in the year 2017, and for the most part, financial experts and crypto enthusiasts can see why. The amount of money stolen from legitimate investors through fraudulent ICOs exceeded $500 million in 2018, and the ICO process has been winding down ever since.
At one time, ICOs were among the most popular methods of garnering capital for new businesses and startups, though for the most part, they’ve drifted away and are seldom seen in today’s ever-changing funding arena. ICOs have garnered a relatively shady reputation over the years given how much money has been stolen using their protocols.
The process has been known to occur in one of two ways. Sometimes, executives running an ICO are flat-out rotten and seek to get their fingers on money that’s not theirs. How do they do that? By posing as legitimate businessmen seeking capital for a new enterprise through an ICO. By hosting the event, investor interest becomes peaked. They pledge their dough in exchange for a new coin that will ultimately give them access to the new company’s products and services.
However, weeks or months later, the business simply disappears, and its doors never open to the public. Thus, the investors that have placed their money into the startup lose out. Their money is gone, and they’re stuck with empty pockets, bruised egos and a new coin that’s not going to do them much good.
The alleged executives, on the other hand, run off with what they’ve earned and start new lives in some foreign region that’s not likely to make them face the consequences of their actions.
Too Much Fraud
Other times, people looking to start legitimate companies or practices are simply unable to get the money they need to keep businesses afloat. Things start out normally enough; they host an ICO and work to get the funds they’ll need to bring another company to the mix. Sadly, they can’t stir enough hype, and the venture shuts its doors before things can begin.
Financial authorities in China are asking those who have knowledge of unregistered token sales to come forward and report what they know so appropriate action can be taken.