The explosive growth of Initial Coin Offerings (ICOs) have been one of the hottest news stories of 2017. These asset instruments allow organizations to raise investment capital through the sale of homegrown cryptocurrencies, that can be traded for cash or other forms of digital currency.
The September 4 announcement, however, of an ICO ban in China caused a momentary global panic that sent Bitcoin prices on a temporary tumble. The People’s Bank of China (PBoC) deemed ICO’s illegal, ordering all investments to be returned to contributors. News of this ban rippled through China’s startup world with these businesses fearing that future crowdsales will be outlawed.
Now in an interview on CCTV-13, China’s state run national television, Hu Bing from the Institute of Finance and Banking, an academic research organization that is loosely affiliated with the Chinese State, offered some clarity regarding the ban saying that China will likely resume ICOs in the future after establishing licensing regulations.
This opinion by Bing seems to line up with broader sentiments expressed in the global blockchain community, arguing that China’s total ICO ban was issued to simply stem the tide of scams in the country but that this new capital raising method is very much here to stay.
According to data from the CoinDesk ICO tracker, nearly $2 billion has been raised through ICOs since 2014. However, the growing prevalence of “pump and dump” and other forms of scams where backers have little or no recourse for getting their investment monies returned has been a major concern in China.
Here at BTCManager, we asked several leaders from the global blockchain community to weigh in on this ban and what it may portend for the future. Here are a few of their thoughts:
Luis Cuende, Co-Founder and Project Lead, Aragon
“Some governments and incumbents will try to shut down this movement, and come to unreasonable extremes in order to do so. However, thanks to the Internet and cryptography, there’s no going back. Eventually, some other governments will embrace token sales and crypto in general, creating jurisdictional competition, and forcing the incumbents to be reasonable. At the same time, we’re facing a very extreme moment for ICOs, where a lot of scam projects are happening. I believe that this will ease as the market matures.”
David Moskowitz, Co-Founder and CEO, Indorse
“Given the speculative environment surrounding ICOs in China, it is understandable that the authorities are looking at ways to safeguard consumers. As such, we welcome efforts by the Chinese authorities to protect consumers from fraudulent ICO activities. We hope the authorities will recognize the potential of the sector for economic growth and technological development and enact rules which will allow for the safe and secure future of the industry.”
Perry Woodin, CEO, Node40
“After the SEC published its July 25 investor bulletin on ICOs, it comes as no surprise that financial regulators in other countries are defining strict prohibitions against ICOs. Immediately following the SEC publication, NODE40 saw an uptick in requests for assistance in the accounting of distributed tokens. Token sellers suddenly became interested in compliance. Across the weekend, the cryptocurrency market lost almost 20 percent of its entire market worth, and the most heavily affected tokens were those borne from ICOs. It will be interesting to see what effect this prohibition in China has on current and upcoming ICOs.”
Trevor Koverko, CEO, Polymath
“Honestly, I believe that the Chinese ruling on ICOs is a gift for the rest of us. Blockchain projects are distributed by definition, and they will gravitate towards jurisdictions that welcome them and support them. Given the fact that blockchain people are some of the smartest and most innovative folks in the world, Silicon Valley should be sending thank you cards to the People’s Bank of China. Companies that conduct Initial Coin Offerings are speaking with regulators in various jurisdictions every day, and welcome an open dialogue. Guidelines are being worked on, and they are needed, but it’s important to note that ICOs are here to stay. The question is, where will they go?”
Jason English, VP of Protocol Marketing, Sweetbridge
“China’s banking leadership is changing, and as is the case with most nations, its financials are subject to market forces and managing a large amount of debt. Regulators there may be worried about unpredictable behaviors undermining currency, or simply cooling down an area of wild speculation.”
“We doubt this is a permanent move; China would not want to be left out of the digital currency market nor the development of blockchain applications in general. As much as 60 percent of the world’s Bitcoin mining is happening in China, and therefore, many of the large ‘whale’ investments in ICO projects have also been coming from cryptocurrency holders in China, whether directly or indirectly.”
“We believe this move is more about controlling speculative ICOs than it is about pulling out of cryptocurrencies or blockchain. This action is a foreshadowing of what could happen in other countries if these projects don’t pay attention to delivering real utility and transparency and self-regulate their methods of funding to become more responsible.”
“In the future, we predict China will again become more open to digital currencies and projects that are compliant with best practices and represent their business plans and tokens transparently.”