The bank called for a halt to all ICO activity in the country after it said it was damaging the financial sector in China
The Central Bank of China (CBE) said that all ICO – initial coin offerings – were illegal and ordered financial entities to stop too much activity related to the issue, the regulator said.
The Central Bank of China said it had completed an investigation into individual ICO organizations and individuals, saying that such activity was an impediment to the country’s financial order and should be banned.
ICO is an issue in which companies that develop an enterprise rely on a network of blocks (block blocks) for the public to raise funds, and in return the investor receives coins. BlockChain is a distributed and secure database – found on many computers that synchronize with each other – as opposed to a single-body repository. This technology makes it possible to operate without a central body whose function is to manage or supervise the activity.
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The ICO, which raised $ 1.6 billion, has been identified as a threat to the stability of China’s financial markets, in light of the efforts of regulators in China to curb financial channels other than traditional banking institutions. ICOs, considered a way of bypassing venture capital funds and investment banks in raising funds, caught the attention of central banks, who see it as a threat to their authority.
The main problem with the ICO is that, unlike an ordinary issue in which the purchasers receive shares, ICO accepts the purchasers by virtual and unique nature for the issuing company. Thus, the value of this currency rises only if the issuing company has proved viable, and is able to attract more people and increase liquidity.
The initial currency offering market has not calmed down. Since the beginning of 2017, companies that have pledged to build digital platforms on the Blockchine network have raised about $ 1.5 billion. These funds, ranging from a few million dollars to about $ 250 million each, were not months old or included conversations with investors in which detailed business plans were presented. They were completed in less than 24 hours, after the publication of an Internet message page.
The speed of raising and the willingness of investors to participate in it raises the question of whether this is not a financial bubble. A bubble is a concept that describes a situation in which property prices are significantly higher than their real economic value, but it is very difficult to determine the “economic value” of many assets. Does anyone know the economic value of a gold bar, a picture in a museum or an antique car? It’s all about supply and demand.