Various industry pundits believe China’s latest move in banning ICO’s does not necessarily mean the end for FinTech companies involved in Blockchain and cryptocurrency ventures.
According to a report by CNBC, China’s ban on ICOs may stop many Bitcoin-related crimes and scams and improve the market in the long run. However, the move will definitely not shut down ICOs entirely.
Temporary pause, but not a full stop
Sasha Ivanov, CEO of Waves, thinks that the move will definitely help the industry. He predicted that regulated ICOs will have a place in China in the future.
“There’s no secret that a lot of the initial coin offerings, with ads on Facebook promising huge discounts and returns, are nothing but a scam. The Chinese government could cope with those companies working in a shadow zone of the law, but they have finally lost patience, as more and more companies tried to raise millions for nothing.”
While China’s ban on ICOs may hurt some cryptocurrency developers and keep some startups from raising their capital, it is unlikely to shut doors on China’s FinTech industry. As they say, the intermingling of technology and finance will not leave China.
Stan Glukhoedov, CEO of Prosense, a virtual reality broadcasting service based in Moscow, agreed that regulating ICOs can help both the industry and government to cleanse the ICO market from scammers and criminal activities.
He further explained that they’ve long been expecting the strengthened rules on ICO markets in China but are still considering launching an ICO later this year.
“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. 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.”
Exploring the long term effects of ICO ban
China’s announcement earlier this September stressed that organizations that have participated in raising money through ICOs were required to pay back their investors if they failed to meet certain rule-based requirements, but not all of that capital needs to be returned.
Currently, China’s ICO market is believed to be plagued with scams and money laundering activities, which is why the announcement banning ICOs came as no surprise. Industry leaders agreed that the ban will mostly hurt local developers, who may just look elsewhere to raise virtual funds for their FinTech start-ups.
Meanwhile, other players like Bitcoin miners need to pay close attention to Beijing’s virtual currency watchdogs, as it may not be easy to trade their virtual currencies if the Chinese government decided to enforce further crackdowns beyond ICO marketplaces.
How are they preparing?
With the current regulation in place, ICOs need special preparation before launch. Glukhoedov shared that educating themselves about ICO regulations is one of the most important things cryptocurrency entrepreneurs can do.
“Becoming educated about current ICO regulations is essential, but for more complex regulations, we are working with a crowdsale backing agency to ensure our company is in full accordance with current laws. Though uncertain and developing regulations can seem negative for campaigns, we believe it is inevitable and can help clean up the market from scammers, which will leave strong and serious companies to launch ICOs.”
Benefitting other global ICO markets
Blockchain industry in China is relatively new. As rival tech markets like the US, India, Russia and even Hong Kong continue to legitimize currencies like Bitcoin, Chinese policymakers are unlikely to allow themselves to fall too far behind.
Currently, they are behind Russia in terms of building tech infrastructure. Russia’s trade settlements agency of the Moscow Stock Exchange is on its way to building the infrastructure to make it legal for qualified investors to buy and hold digital currencies.
Nick Evdokimov of ICOBox, thinks that China’s moves to ban ICOs will benefit other ICO markets. He thinks that it may be early to predict, but China’s move will result in potential loss of ICO orders which will be channeled to other global agencies.