- Over $4 billion raised last year by around 1,400 companies issuing their own digital coins through “initial coin offerings” (ICOs).
- BTCC founder and CEO Bobby Lee told BI: “I don’t touch altcoins, I don’t touch ICOs.”
- Lee supports more regulation around how ICOs are carried out.
LONDON – The founder and CEO of one of China’s biggest bitcoin companies says he would not invest in so-called “altcoins,” which are new cryptocurrencies created by companies through “initial coin offerings” (ICOs).
BTCC CEO and founder Bobby Lee told Business Insider: “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.”
2017 saw a huge boom in companies raising money by issuing their own digital currencies, which are structured similarly to bitcoin, in return for funds to build their business. Over $4 billion was raised through these so-called ICOs last year and there are now over 1,400 “altcoins” in circulation, according to CoinMarketCap.com.
But doubts have been raised about the viability of many of the projects raising money and the lack of investor protection or regulatory overnight.
Tezos has proved a cautionary tale for many watching the sector. The startup, which wants to build a more efficient blockchain, raised $232 million last year but has since been wracked with internal fighting and legal disputes. Investors have been told they are not eligible for refunds.
Lee said: “I only recognise 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.”
Founded in 2011, BTCC was the world’s oldest bitcoin exchange until it shuttered its exchange in September last year under pressure from Chinese authorities. The company has now pivoted to bitcoin mining and a mobile wallet product and employs 100 people in Shanghai.
‘This technology is a double-edged sword’
Aside from mismanagement and lack of investor protection, there are also concerns about scams in the ICO market, which is unregulated in many jurisdictions.
Lee told BI this week that there are “a lot” of scams and warned: “There’s going to be more of them, unfortunately.”
A Business Insider investigation last November found “pump and dump” scams rife in the cryptocurrency markets, with scammers targetting small altcoins whose prices can easily be manipulated.
Lee said: “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.”
Lee’s brother, litecoin creator Charlie Lee, has also voiced concerns about scams the space, telling Business Insider: “I think there’s a bit too much scam in the space, in terms of people getting in just to get rich quick.”
Bobby Lee said that while he’s “almost libertarian at heart” he supports some regulation of the cryptocurrency space.
“Regulation on how companies are run, whether people can do ICOs – stuff like that,” he said.
China and South Korea have both banned ICOs and the US has warned that these fundraisers are likely to be treated as security issuances and will be regulated as such.
US Securities and Exchange Commission chairman Jay Clayton said this week: “I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the US securities bar.”
Lee was talking to Business Insider at London Blockchain Week, where he also discussed how China’s recent crackdown on cryptocurrency trading has affected his business.