Eighteen months after raising $19 million in an ICO (initial coin offering), Israeli startup Colu has announced the closure of its blockchain project, and is offering to repurchase the tokens, named CLN, that it issued through its Colu DLT subsidiary. Colu says that the buyback will commence in October, and will continue for 90 days.
Per an August 13 report on Globes, Colu, which operates in Israel, the UK, and Gibraltar, states in its announcement that it will now focus on its City Currency activity, which is not based on blockchain technology. Colu’s payment app has so far been launched in four cities: Tel Aviv, Haifa, London, and Liverpool. A few months ago, the company announced that it would start to operate in Belfast. App users can load their accounts on their telephones with local currency using a credit card (shekels in Israel; pounds sterling in the UK), and pay with the app for products at businesses that work with Colu in the areas in which it is active.
Colu, which was founded in 2014 by David Ring, Mark Smargon, and CEO Amos Meiri, has raised some $40 million from investors. In February 2018, the company raised $27.5 million in a round that included a $14.5 million investment from IDB Development Corporation, a holding company controlled by Eduardo Elsztain. IDB Development invested $7 million in the presale of CLN coins and a further $7.5 million in options on 10% of Colu.
As in the case of most cryptocurrencies, the value of CLN coins went into steady decline after their issue. Their dollar price is currently 68% below the offer price in February 2018. According to the CoinMarketCap website, CLN’s current price is $0.03. It was issued at $0.95. Following yesterday’s announcement by Colu, demand for CLN rose, and the price per coin has shot up by 123%.
Colu stated in its announcement: “Colu DLT has already received support for the move from all its largest CLN purchasers from the original presale, which accounted for more than $17 million. As a one-time act, the company will now look to acquire the entirety of tokens as issued during the ICO crowd sale period or purchased on the secondary market, amounting to approximately 54 million tokens. Colu DLT will purchase the tokens in Ethereum at the original crowd-sale ETH to CLN rate, which is higher than the current market exchange ratio. Once the process is completed, Colu DLT will ‘burn’ the tokens purchased, rendering them worthless.”
“Moral responsibility to partners”
Colu cited its “sense of responsibility” towards holders of the tokens. It said that in recent months it had seen growth in its work with municipalities around the world, including substantial opportunities that it seeks to exploit, but that the CLN platform presented regulatory and technical challenges to this work, and that it had decided to realign its activity accordingly.
“The lack of clear regulatory guidelines in the areas of the world in which Colu is interested in operating makes the use of cryptographic currencies an obstacle at present to working with municipalities and other partners that have become the main focus of our activity,” Meiri said. “Colu develops and operates electronic wallets that are not crypto, which includes a rewards system within the app. This rewards system, based on a City Currency, helps to achieve economic, cultural and social municipal goals.
“CLN holders put their faith in us, and became partners in building the blockchain platform. For now, we are not continuing further with the platform. I believe that we have a moral responsibility towards those partners. We therefore decided to offer to buy back the CLN tokens form all holders on preferred terms in comparison with the tokens’ current market value,” Meiri added.