Chinese Official Allays Fears, Reveals China’s ICO Ban is Temporary
A Chinese official has said that the country’s decision of the previous week to stop ICOs in China is a temporary move to allow the government time to formulate regulations and policies for it.
Last week, China, or more accurately, the People’s Bank of China, made headlines all over the world when it declared it illegal to use ICOs to generate funds. All those who had done so were asked to return the funds gathered. This move sent shockwaves all over the world, with many fearing for the future of blockchain-based start-ups. However, this ban appears to be temporary, as many experts had initially suggested.
Hu Bing is a researcher at the Institute of Finance and Banking in China. He clarified the ICO ban situation in China in an interview with CCTV-13. Bing said quite clearly that last week’s decision was not a ban on initial coin offerings, merely a pause. The government wanted to stop the fund generating method for a while until it can better understand it. This, according to Bing, will help them ensure that these funds aren’t used for funding terrorism or for money laundering purposes.
An ICO is an increasingly common phenomenon, where a blockchain-based start-up offers cryptocurrency tokens to investors before the service goes live. These are offered with the promise that the tokens are integral to the working of the service, and the service will thrive since there’s a good demand for it in the market. Investors put in their money thinking that once the business booms, the demand for tokens will rise rapidly, and they can turn a huge profit by selling the tokens they bought at cheap rates at inflated prices.
While ICOs do help generate a lot of funds in a short amount of time, finance institutions and regulators all over the world are a little suspicious of them. Without proper policies and regulations in place, there’s no telling who is investing in the ICO, and if all the money is legitimate and used for legal purposes.
China’s decision to half ICOs in the country last week came because of a similar stand against ICOs. Everyone knows that China is one the largest contributors to Bitcoin mining, but that doesn’t mean the country does not question cryptocurrencies at all. It only shows that they don’t have a problem with these currencies as long as there’s no foul play. The pause on ICOs will help them formulate the required policies to ensure this process is as legitimate and safe for everyone involved as possible. There’s even a hint of the government starting an ICO license, where any blockchain-based company will need to register for a license before hosting an ICO. This will prevent fake companies from raising funds using an ICO.
This news of the ICO ban being a temporary one comes as sweet music to many people around the world. While security and crypto-experts had maintained since the beginning that this block is temporary and only done because the government wants to understand ICOs better, an official announcement has its own effect. This also comes as good news to those investing in cryptocurrencies, because if a major world economy and power like China is making the effort to understand ICOs and use them properly, then that means this service has some substance and promise.
Whenever a new service like an ICO comes to the front, some skepticism is understandable. Companies and governments even need time to fully understand, test, and incorporate them into the existing systems before launching them on a global scale. Similar incidents occurred with technologies like autonomous cars, artificial intelligence, IoT, and Google Glass’s augmented reality function. The authorities and companies try to figure out the flaws and dangers of the service before coming up with policies to streamline them into public systems all over the world. The same is the case with ICOs.