The unfree peoples Republic of China has suddenly declared illegal any Initial Coin Offering (ICO), ordering the practice to cease immediately under threat of imprisonment, ordering any financial or non-financial institution to not provide any direct or indirect service related to ICOs, and ordering those that have already ICO-ed to immediately refund the investors and close shop.
“All types of currency issuance financing activities shall cease immediately,” the “People’s” Bank of China (PBoC) said in a notice according to a rough translation, before adding:
“The organizations and individuals who have completed the financing of the tokens should make arrangements for repatriation… The relevant departments will seriously investigate and deal with non-stop tokens issued financing activities and the completion of the tokens issued financing projects in the illegal acts.”
They do not directly provide any reason for the blanket ban, but indirectly state they wish to “maintain the normal financial order.” They further call the $10 billion combined market cap of ICOs as “market chaos.”
This is the very first blanket ban for any country in the world with the declaration unprecedented in its sweeping and very general statements for this space.
However, China has backtracked before. A notice issued by them in 2013 was interpreted as banning bitcoin, but then further clarification suggested they only banned institutions from dealing with it.
This banning and unbanning led to its own meme, while China went on to dominate the crypto-market, until earlier this year when PBoC temporarily cut-off bitcoin withdrawals.
That was in the context of Yuan fast losing value due to intentional devaluation in 2016, leading to capital controls, which were somewhat circumvented by digital currencies, until they took regulatory control of Chinese bitcoin exchanges.
Probably in response, Japan took the opposite direction, declaring digital currencies as legal tender. While South Korea rose to become a key player in this space.
If this ICO ban in China truly stands, then we may see economic exiles find shelter in the far more friendly Japan or in South Korea, while the smarter entrepreneurs outside of the country might start avoiding China completely.
They were honored with Devcon 2 in Shanghai last year, at a time when the country appeared to be far more friendly, in a symbolic global summit for both China and this space.
But the blanket restriction in economic freedom through a sweeping general banning of ICOs, without any exceptions, suggests that rather than looking east, this space may need to look to Europe or USA if the SEC does change its tune after the considerable shake-up.
We are reminded once again, in this very 21st century, that though China rises, it does so authoritatively, with their people remaining unfree, even in economic activity.
Though they’ve enjoyed some good reputation in this space, their lack of openness, their lack of transparency, their lack of any public consultation or public accountability for bureaucratic decisions, might indicate such good reputation was misplaced.
They may now probably lay out some regulatory framework for ICOs, but the damage has been done. Those that have a choice may think more than twice before entering a market with an unpredictable government which can retroactively suddenly declare even past actions as illegal.
While their neighbors would do well to grab with both hands what might be a once in a generation opportunity to court some of the highest talent, skilled coders, and entrepreneurs.
Because technology is advancing, whether we like it or not. New business models are being created. Even knew paradigms. Those that can adapt to change will thrive. Those that stand in the way of progress will most probably decline.
