China’s ICO Ban Doesn’t Mean It’s Giving Up On Crypto-Currencies

China's ICO Ban

China’s recent ban on so-called initial coin offerings (ICO) doesn’t mean regulators are slamming the door on the country’s fintech techies, including the crypto-currency players who operate in the mainland and in Hong Kong. China’s mainland ICO market is rife with scams and and not at all regulated, so the shut down of new ICOs was no surprise, industry experts agreed. It mostly hurts the local developers, who may just look elsewhere to raise virtual funds for their new digital world start-up projects. Others, such as bitcoin miners, may have to watch out for Beijing’s crypto-currency watchdogs, as hiding a warehouse full of computers trading virtual currencies is not easy.

“We expected toughening in ICO and crypto-currencies regulations in China for some time already. The Chinese government might consider the idea of a decentralized economy as one of the major threats to the existing regime,” says Stanislav Glukhoedov, CEO of Prosense, a virtual reality broadcasting service based in Moscow. “On the other hand, maybe increased attention from governments can help clean up the ICO market from scammers and we suppose that in the near future the number of teams planning new projects through ICO mechanisms will be reduced, and those who will stay will be strong, serious companies.” Prosense is considering launching an ICO this year.

There were 43 ICO platforms in China as of July 18, according to a report by the National Committee of Experts on the Internet Financial Security Technology. Sixty-five ICO projects had been completed, the committee said, raising 2.6 billion yuan ($398 million), Bloomberg reported. Then in July and August alone, the market went boom as China has a habit of doing sometimes. Chinese tech firms raised $766 million in crypto-currencies in local ICOs in just 8 weeks, according to Shanghai Security News.

ICOs are sort of a hybrid between the initial public offerings of the equity markets, crowd-funding and venture capital, allowing start-ups to raise funds for new technology projects, funded in crypto-currencies.

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Some $1.78 billion has been raised through ICOs worldwide since 2014, according to data from the CoinDesk ICO tracker. But it is unknown how many ICOs are scams, or dud companies with no shot of success and no chance for investors to cover themselves. China’s central bank called for the ICO ban on Sept. 4, calling it an “illegal public finance” mechanism used for  illegal securities issuance and money laundering. Bitcoin prices fell because of China’s ruling, but quickly bounced back to life as of Wednesday.  Bitcoin is up 56.3% against the dollar in the past four weeks, and up thousands of percentage points in the last five years. But Ethereum, one of the most popular currencies for ICOs, is still in a holding pattern.

Source: Forbes