Today we’re not going to review an ICO, but we are going to go over some news that could end up having a huge impact on ICOs. You may have heard already, but China has effectively banned all ICOs as well as restricting their citizens from participating in them. The decision was made by the state-run People’s Bank of China which referenced the country’s laws in their decisions.
Watch as Jeremy breaks down how China came to this decision and how it will effect ICOs and cryptocurrency going forward. Will this decision be the first of many attempts by government to limit token sales?
People’s Bank of China’s statement
So the People’s Bank of China released a statement outlining their decisions to ban ICOs, and I’m here to breakdown the statement that the bank released.
Alright, so their first step is to define token sales which is pretty straight forward. However, the paper goes on to outline which laws token sales are breaking: including illegal distribution of financial tokens, the illegal issuance of securities, illegal fundraising, financial fraud, and pyramid scheme.
The second part of the statement declares that all fundraising activities must stop, and completed ICOs actually will have to refund Chinese citizens and risk having their assets seized.
This is pretty similar to the SEC decision about the DAO, which estblished that ICOs are securties.
So what practical effect does this decision have?
China has always been a closed market, with their governments supporting entities and projects that they have “chosen” to be their sanctioned business. It is anything but a free market, as their leaders consistently pick winners and losers, and act accordingly to make sure the winners keep winning.
However, the enormous population and amount of capital within China could end up impacting the enormous amount of money pouring into these ICOs. China has over a seventh of the world’s population and the second largest economy. So, sure; it will definitely impact the totals these ICOs are bringing in.
This was displayed in how the market reacted to this decision. Prices crashed, mainly out of recognition that it will be harder for Chinese investments to drive up prices. We have seen prices bounce back a little, but not close to the levels that they were.
Will it stop ICOs?
Not by any means. China is going to be restricted with the decision not to allow ICOs. In fact, I think savvy Chinese investors will likely just move their capital to different markets, focusing on ICOs outside of China’s jurisdiction.
I think this statement and the SEC’s statement on the DAO is showing a greater trend. Issuers of fiat currency are trying to restrict their citizens to use only that currency. Will this work? I don’t think so. Cryptocurrencies have the ability to transcend borders. I doubt that any of these countries have to power to completely squash token sales.
So that’s our news update on China banning ICOs. This is a developing situation, so subscribe, and stay tuned to see if anything else happens.
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