Regulators Put a Break on Cryptocurrency Boom with ICO Investigations
The Chinese Central Bank has declared it illegal to raise funds using an initial coin offering for a new cryptocurrency as regulators try to halt the juggernaut that ICOs are to better understand them.
Creating a new cryptocurrency is quite popular these days. Anyone good with computer networks, and with an idea for a cryptocurrency, can launch a new service even without having a substantial funding initially. The reason why this is possible is that of ICOs, or initial coin offerings. The creators put up a sale for coins or tokens of their cryptocurrency to investors, which they can later use. The investors get a good number of cryptocurrency coins, and the COOs get their funding.
ICOs are really common these days because of the amount of money they can generate. An ICO launched a service that aims to aid ICOs raised around $150 million, while AirFox raised $6 million in its ICO for its AirToken service. This money is raised in a short amount of time, meaning a creator can become a millionaire almost overnight.
However, regulators all over the world have cast a suspicious eye towards this process of ICOs. As a result, the total value of cryptocurrencies has gone down by 18%, according to CoinMarketCap. This downfall was apparently caused by the Chinese Central Bank’s ruling against ICOs. It stated that it is illegal to raise money by launching new cryptocurrencies. A combined statement from the People’s Bank of China, securities and banking regulators, and a few government departments have asked all those who have raised money using this method to return the funds. This statement comes after a few other countries have also investigated into the working of ICOs.
— Paris Hilton (@ParisHilton) September 3, 2017
US Securities and Exchange Commission, in July, released a statement after its investigation into the matter concluded. The investigation took place because of the biggest ICO failure recorded until now. In 2016, DAO lost cryptocurrencies worth millions of dollars because of a software bug. Since then two ICOs have been halted. One of the projects called Harbour stopped its ICO as a precautionary measure to give more revision and assessment time to the administrators. The other, called Protostarr, was canceled because its CEO was investigated by the SEC.
The popularity of ICOs is enormous. While many investors involve themselves in ICOs to avail the services offered, and lend a helping hand to the hosts of the ICO, there are some celebrities that are involved in these as well. Notable personalities include Floyd Mayweather and Paris Hilton. The latter has even gone on and met the COO of Ethereum in 2016, with her involvement in ICOs spanning more than a year already.
As for the latest action by regulators, most people believe that this isn’t a fatal blow to ICOs, not in the least. Most experts think that this is a step that regulators and banks all over the world are taking simply to make time to better understand ICOs. The process has always troubled regulators, and in order to know it better and learn how to regulate it, they are taking such measures to put the practice on hold to allow for detailed investigation. Zennon Kapron, Director of Kapronasia, a financial technology consultancy based in Shanghai, said that regulators all around the globe are struggling to get to grips with ICOs. The ruling by Chinese regulators is quite similar to what regulators in the US and Singapore think.
People in the cryptocurrency sector are of a similar opinion, saying that this step is just a temporary action against ICOs, and will reverse quite soon. They believe that once the merits of the process and practice of ICOs become clear to regulators everywhere, they will do away with the period of over regulation and make things better for cryptocurrency creators again. Everyone believes this is far from being the end for ICOs.