DEBATE: Should the FCA follow China in banning cryptocurrency firms from raising funds through ICOs?

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The digital currency sector, and the blockchain technology that underpins it, is revolutionary (Source: Getty)

Should the FCA follow China in banning cryptocurrency firms from raising funds through Initial Coin Offerings (ICOs)?

Chris Carter, journalist and an expert in cryptocurrency, says YES.

There are plenty of unethical money-making schemes that could tempt one to rally a column of angry investors to the front door of the FCA’s offices. ICOs are no different. Celebrities from Paris Hilton to Floyd Mayweather are shamelessly profiting from ICOs at the expense of less educated retail investors by floating worthless digital assets.

The digital currency universe has swollen in size in just 12 months from $12bn to near $180bn and many, including the fabled celebrity-class, have profiteered at the expense of their doting fanbases who haven’t a clue what they are buying into. ICOs are an ugly offshoot of the wider digital currency universe, presently in the midst of a massive speculative bubble. Deliberately overhyped by a nexus of extremely effective marketing, these assets are driving a neo-penny stock scam in the form of so-called “digital currency”.

Disappointingly, thus far we have heard nothing from the FCA on these con artists. If someone there is reading this, I entreat you to ban ICOs on our shores this instant.

Read more: ICOh-no: China's the first country to ban initial coin offerings

Mihir Magudia, executive director of LEOcoin Foundation, says NO.

A total ban of ICOs is unnecessary and would stifle innovation. While it is true that ICOs have been used to steal money from people who thought they were investing in a credible project, not all ICOs are equal, and the genuine ones are an important tool for bringing new ideas to reality.

Happily, it is not hard to tell a genuine ICO from a scam. If it is backed by a company registered on an island with limited company oversight, if the ICO lasts longer than 30-60 days, if there are spurious delays to having the new coin traded on a transparent public exchange, or if the ICO copies the name of an older coin to confuse researchers and investors, it is best avoided.

The digital currency sector, and the blockchain technology that underpins it, is revolutionary. ICOs are an important part of this, and if we want to achieve its potential, an intelligent approach to regulation is required: one that weeds out the scams while protecting the real innovators.

Read more: Estonia could be the first country to do its own initial coin offering

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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