China, Regulation, and ICOs

Written by Omar Hannoun || September 04 2017

For several weeks earlier this year, the PBOC (Peoples Bank of China) focused on bitcoin exchanges and halted crypto-currency withdrawals from the main exchanges; now ICO’s (initial coin offerings) have grabbed their attention. With ICO’s growing in popularity they are hard to ignore, In China since the beginning of the year there have been 65 ICO’s, that have raised over 2.6 billion RMB. As such, the PBOC has been considering banning ICO’s as they expose investors to a very high risk and “illegally absorb public funds.”  

The regulatory attention is not surprising when taken in the context of ICO growth and is actually something we are seeing in multiple jurisdictions where regulators and governments are on a “wild goose chase” trying to regulate. The US's SEC (Securities and Exchange Commission) has shut down a few ICO’s and has been talking about setting some difficult barriers for new ones. In Canada, the government claims that ICO's are securities and should be treated as such. Singapore, Australia, Governments everywhere are all running for the wheel before they lose control.

In China specially we have seen many ICO fraud cases, not simply ICO’s failing but actual pyramid schemes and “fake” projects as such the position of the government on this matter is quite comprehensible. The PBOC is relying on an old executive order that basically bans illegal fundraising to try stop ICO’s while they introduce strict regulation controlling the size and value of  ICO’s while increasing disclosure and transparency requirements.

Regulation is highly needed in this space, due to its youth and global reach it proves to be a difficult task. We are still in the beginning of the crypto currency era, as time goes by we will see more mainstream regulatory demands, until then each government will experiment with their own set of regulations.