You might be familiar with the term IPO or Initial Public Offering. It’s when a company decides to offer its shares to retail investors and subsequently becomes a publicly traded company. ICOs or Initial Coin Offerings operate on a similar concept with one major difference. Companies that raise funds through ICOs don’t part with shares. They issue virtual tokens or coins of digital currency. China today announced a ban on ICOs as it considers them to be a form of illegal fundraising.
ICOs have gained popularity rapidly as it enables digital currency entrepreneurs to raise significant sums quickly by creating and selling their own digital tokens without much regulatory oversight.
China has banned individuals and organizations from raising funds through initial coin offerings. It views this practice as illegal fundraising. A joint statement from the People’s Bank of China, the securities and banking regulators, and other relevant departments informs those who have completed ICO fundraisings in China to return the funds.
It’s believed that regulators in China are banning ICOs as they first seek to better understand this phenomenon. There’s hope in the community that they might ease off on the restrictions at some point down the road.
It’s unclear at this point and time if and when China will decide to relax these restrictions on initial coin offerings.