The biggest news in the cryptocurrency markets is China’s ban on ICO’s. The markets are already improving, after an initial drop, as news comes out that the ban may not be as harmful as it seems.
What Are ICO’s?
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 entirely in virtual money.
In exchange for money, funders receive the new currency.
ICO’s in China
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.
In July and August alone, the market went boom as China has a habit of doing sometimes. Chinese tech firms raised $766 million worth of crypto-currencies in local ICOs in just 8 weeks, according to Shanghai Security News.
How Many ICO’s
Some $1.78 billion has been raised through ICOs worldwide since 2014, according to data from the CoinDesk ICO tracker. China’s central bank called for the ICO ban on Sept. 4, saying it was an “illegal public finance” mechanism used for securities issuance and money laundering. Forbes reports Bitcoin prices fell because of China’s ruling, but quickly bounced back to life as of Wednesday.
What the ICO Ban Means
For now, the ban just means Chinese start-ups cannot use an ICO to raise money.
The ICO Ban is Temporary
Hu Bing, a researcher at the Institute of Finance and Banking, a Chinese government-supported academic research organization, claimed that the government’s ban on initial coin offerings (ICOs) is only temporary.
In an interview with CCTV translated by Box Mining, Bing explained that the suspension on ICOs and the government’s declaration of ICOs as an illegal fundraising method are only temporary, until local financial regulators introduce necessary regulatory frameworks and policies for both ICO investors and projects.
Up Next for the China ICO Ban
More importantly, Bing emphasized that the Chinese cryptocurrency community must understand that the government has not “forbidden” ICOs but instead “paused” them, demonstrating the government’s intention to resume ICOs in the near future. Bing also noted that the Chinese government and its financial regulators are currently considering the potential of allowing ICOs to raise money in a controlled environment, through a licensing program.
According to the Coin Telegraph, if the government decides to legalize and regulate the ICO market, its licensing program may structure similarly to the BitLicense program of New York State Department of Financial Services (NYSDF), which requires companies to obtain a license from the state in order to operate and serve people of New York.
The China ban on ICO’s is a small hiccup as governing bodies seek to regulate the cryptocurrency market.