It appears not everyone is a fan of cryptocurrency.
WhatsApp Bans Crypto Fundraising
Recently, WeChat – the Chinese equivalent of WhatsApp, Facebook’s official messaging app – secretly announced a ban on cryptocurrency fundraising and trading. If companies are looking to raise capital or funds from investors, they cannot engage in cryptocurrency-related tactics to do so.
This would involve both initial coin offerings (ICOs) and initial exchange offerings (IEOs). ICOs have garnered something of a mixed reputation over the past year. At one time, they were the most prominent ways of raising capital for new startups and businesses. However, they’re now considered something of a fraudulent venture, and many worry companies utilize this strategy to rip off their investors.
The way it works is like this: a new startup or enterprise decides it needs to raise money, so it advertises to investors that they can place their money into the company’s reserves. In return, they receive access to the business’ cryptocurrency, which they can then use to purchase both goods and services from the startup.
All seems well with this tactic, though many companies that have utilized ICOs since 2018 have either proven phony or disappeared after they cannot raise enough capital to stay afloat. In both cases, they wind up closing their doors early and run off with the money they’ve already earned. The investors are left with shrunken pockets, diminished pride, and a coin that’s virtually useless to them.
IEOs work in roughly the same manner, only this time, the token that the investors gain access to are immediately listed on a cryptocurrency exchange for trading. This is the main difference between IEOs and ICOs, where investors must wait weeks to months on end for the coin to wind up on an exchange and incur successful trading. With ICOs, there are no guarantees, but while IEOs are slated to be safer and more professional, they rarely perform due diligence on the coins they offer, which makes them just as risky in many ways.
China is home to many stringent cryptocurrency laws, which is forcing WeChat to reformat itself and ban all crypto-based funding. The ban will go into effect on May 31, and all accounts that violate these terms will see their accounts disappear.
China Is Too Tough on Crypto
Over the last year, WeChat has been forced to ban as many as eight separate companies from its services for utilizing cryptocurrencies in ways that don’t comply with current China-based laws.
In a recent story, China announced that it was examining the possibility of banning bitcoin and cryptocurrency mining, saying the effects of such mining are negative on the environment. It’s unclear when or if this rule will take effect, as bitcoin mining has been an untouched target in China for many years and remains a serious form of revenue.