Dagong supports the immediate ban on fundraisings through token-based digital currency, jointly announced on September 4 by People’s Bank of China and other seven government departments.
It is noteworthy that without investigations and credit ratings by the professional credit rating agencies, initial coin offerings (ICO) and other similar fundraising activities, despite their innovative forms, through Bitcoins or other token-based digital currencies, are highly risky and hazardous to financial security.
It is Dagong’s consistent stance that fundraising through crypto-currencies goes against financial logic and affects the economy adversely. Such activities mislead people about financial innovation, and are often easily employed as an instrument for illegal fundraising and financial frauds if not properly regulated.
In Dagong’s opinion, the ICO ban is a lesson for people to further understand financial knowledge and the function of credit. The workings of modern financial market depend on credit. And financial innovations, whatever the forms, will boil down to credit relations and credit capitals, which require professional credit rating to reveal debt repayment abilities of the debtors and the fundraisers.
The internet is teeming with news and stories, substantiated or not, and fast changing market information, which fogs market risks to retail investors. That being the case, correct understanding of finance and credit rating are in urgent need to identify risky investments; and real financial innovations ought to be supported and protected by professional credit ratings.
Although ICO has been timely banned, other fundraisings under different names still exist, taking advantage of regulation loopholes and lack of credit ratings. Hence it is Dagong’s advice that local governments of cities, where financial organizations spring up, should expedite formulation of alarming system for credit risks to forestall any unqualified and unregulated fundraising activities, in order to maintain market order and social stability.