At the London Blockchain Week, BTCC founder and CEO Bobby Lee raised concerns about altcoins and the risks associated with them in an interview with Business Insider. He specifically mentioned that he does not trust altcoins offered by firms via ICOs, and will not be investing in any of them.
Business Insider quoted Bobby Lee saying: “Unfortunately I’m very conservative, I’m very old school. I don’t touch altcoins, I don’t touch ICOs. It’s just too risky. It just doesn’t make sense to invest in those guys. Maybe I’ll change my mind next month, next year, I don’t know.”
The ICO buzz exploded in mid-2017, and since then it has become the preferred fundraising method for blockchain firms. Companies have collectively raised over $4 billion via ICOs so far.
Today, there are 1491 cryptocurrencies in the market, according to coinmarketcap.com, and with many ICOs to be launched in the near future, this number will shoot up very soon.
But as this fundraising method is not regulated at all, except for in a very few regions, anyone and everyone is opting to launch an ICO. This often leads to poorly resourced teams with half-baked business plans raising millions and then unable to deliver any of their promises.
One such case is Tezos, one of the biggest ICOs held to date. It raised $232 million. The project is now wrecked because of a dispute between its founders and other executives, and as per the pre-defined conditions, investors are not even eligible for a refund. Many class action lawsuits have now been filed against the Tezos founders in multiple courts across the United States.
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“I only recognize and endorse: bitcoin, litecoin, ethereum, bitcoin cash. Anything outside of that basket I wouldn’t touch myself — I don’t touch myself, I wouldn’t touch myself, and I wouldn’t endorse or recommend for anyone else to touch,” said Mr. Lee.
Addressing the numerous scams pulled using ICOs, Bobby Lee commented: “There’s going to be more of them, unfortunately.”
“Certainly, buyers beware. This technology is a double-edged sword. It can enable good things but it can also enable bad things if you have a criminal mindset. That’s true of anything. If you have a steak knife, you can cut steaks with it or you can use it to stab people if you have a criminal mindset. The internet — you can use email for communication but it can also be used to entice for fraud. Any new technology can be used in two ways. The issue is not the technology itself, but the people behind who might try and use it for bad,” he added.
He firmly believes that regulation is necessary to minimize these fraudulent activities. Recently, Benebit was revealed to be a multi-million dollar scam through which fraudsters conned investors out of up to $4 million with a well-orchestrated fake ICO pre-sale.
China and South Korea, which were the top markets in the initial ICO boom, have both banned the mechanism amid concerns of fraudulent activity. The watchdog of the United States, which is currently the largest market for ICOs, also issued warnings and asked potential investors to consider the risks. But on the other hand, regions like Gibraltar have managed to regulate the controversial fundraising method.
Anyway, with the reports of upcoming ICOs by firms like Telegram, this market will surely continue to expand.