China Bans ICOs, Is This Good News Or Bad News?
China announced early this morning that it would be banning all ICO activity.
Including requiring ICOs that have already raised funds to refund those funds back to investors. Although it didn't specify how that would be done.
There was also this little inclusion that seemed to go a step beyond just an ICO crackdown...
"Digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings."
Does that sound more like an outright ban on digital currencies in China as opposed to just an ICO crackdown?
The entire release can be read here:
Is this ultimately good or bad news?
On the surface it doesn't sound like that bad of news as it seems there needed to be a crackdown on all these ICOs as many of them had very little assets behind their projects, yet were getting multi million dollar valuations.
Many seemed to be looking to create a new coin as a means of creating a quick buck for themselves as opposed to launching an actual value adding project.
I had been hoping for a "separating of the wheat from the chaff moment" for a long time now.
Perhaps I am missing something though, because...
The cryptocurrency markets are currently in a free fall, specifically the altcoin space.
Bitcoin is down roughly 8% since the news broke and Ethereum is down roughly 15%.
Meanwhile, many altcoins are really taking it on the chin and some are down 20-30%.
Steem is down roughly 25% since the news out of China broke.
If all the sudden ICOs got heavily scrutinized and all of the sudden money stopped flowing to them that was interested in the crypto space, wouldn't that likely mean that more money would flow to the ones that are legitimate and are already trading on exchanges?
Perhaps it is the piece about no off-ramps to fiat currencies being the major driver of the decline?
Let me know if I am missing something in the comments section below.
Is this ultimately good or bad news for the industry as a whole?
Sources:
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Definitely good news! All the ICOs (kind of IPOs) are sucking money out of BTC and Alts. Now money will go into Steem etc.
China needs to start using the Bitshares exchange ASAP, CNY volumes are climbing steadily but I hope a tsunami is headed straight at the DEX. Governments telling people what they can and can't trade/invest is a relic of the past. Chinese citizens can buy and sell all day long on the DEX without fear of the exchange being shut down or their accounts being seized or frozen.
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My take is that China wants to cool the jets a little bit on all of these ICO's. Once they get a handle on some form of moderate regulation ICO's will be allowed to resume. Just like they regulated exchanges to prevent all of the margin trading going on with Bitcoin.
read my comment below in regards to this action not being taken solely in the crypto market vacuum. China is facing the likelihood of a thermonuclear war with their neighbor and longtime ally-ish/attack-dog.
They're battening down the hatches. atm, imo.
Interesting. I hope there is no war, that would not be good for any of us
Honestly feel like they are trying to add more value to their own stuff like NEO, GAS, and BTM. All, I'm pretty sure, are already backed by the Chinese gov and could be a play to protect their market and add value to it. Kind of like how the US had Amazon so that gave way for the creation of Alibaba to take advantage of all the Chinese made goods. The majority of the BitCoin mining farms seem to be in China and this looks like they are trying to exploit weaknesses in the system to disrupt things and then give their own stuff (like the coins mentioned above) value. Just a very humble opinion but you can never count out the Chinese and their shrewd business sense.
That seems like the likeliest scenario to me as well. It is interesting that Japan chose to go the legalization route and China seems to be leaning the other way currently...
Hmm, well lets see. Right now Eth is creating ICOs and gaining value. Value that Bitcoin could be gaining. Now that ICOs are banned by China, now is the time for Bitcoin and forks of Bitcoin.
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It is possible. Litecoin will soon have a platform for ICO's and smart contracts. I am not sure many know this is coming to Litecoin. The more I am in this field (two years full time now) the more I like LTC
Exactly. And make sure their cronies get in on it before the growth really takes off. We've seen the same pattern there before, multiple times in the last few years.
I would agree. Looks like Chinese Communist Party officials are butthurt they missed the boat and decided to cause a panic with a vague, strongly-worded statement to cause a market panic.
wake up call
Exactly. I just posted this a minute ago https://steemit.com/bitcoin/@jetblake/all-reds-no-worries-do-not-panic-sell
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Ya it's a good thing to weed out dubious firms from trying an ICO to get funding without some good management and accountability. In a year, we will get better start ups and those dubious ones will not be able to trick users.
Exactly. it will be safer if ICO's have some criteria to meet before being allowed to reach the public for solicitation
It's probably going to be some "red" days for the next few trading days. I think Eth and Neo will get hit the worst. After the dust settles, it should be good for current alts and BTC, as the money will return to sound projects, rather than speculating on the next ICO for a "quick" buck.
Yo ,
Very interesting read, Thanks you for sharing it!
I dont think these behaviors are solely in the crypto market vacuum. Consider also the pending thermonuclear war between the US and NOKO, particularly since SOKO and Japan stand to suffer tremendous losses if anything goes wrong and China/Russia face the disaster of refugees pouring across their border if there isn't total annihilation.
Markets getting shaken, imo. China is trying to pull in as much yuan as they can as uncertainty increases.
Certainly, there are some self interest here
I think you're right to look at the move as a part of the larger geopolitical fabric. My initial thought when I saw the news was that a) the CCP is looking to protect against capital flight. Their economy has been in a bubble for some time, and an unregulated securities market is certainly a threat, especially as tensions rise in their corner of the world.
The good news is that they're working towards diffusing tensions w/India: https://www.msn.com/en-au/news/world/india-china-agree-to-pull-back-troops-to-resolve-tense-border-dispute/ar-AAqUD6v
And so I agree with some of the other commenters here, too, that this announcement might also be a way for them to bring some semblance of stability for future investors, i.e., their pals. They're very interested in cryptocurrencies, and so they want to make sure they don't get fleeced.
pocketsend:100@blakemiles84, China may want to attract capital from the outside by China regulated ICOs?
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Most ICOs are registered in Sweetzerland anyway
Any time governments try to control free markets it is bad news. Even if ICOs are getting out of hand it should be the free market that sorts the wheat from the chaffe. I don't think the crypto markets are overreacting to this news. Chinese citizens are huge adopters of crypto and if their government impedes them in anyway it will permanently effect the crypto market cap. Also, at this point, blocking exchanges from converting to fiat would make it very difficult to transact in any crypto currency within China. It would effectively be building a firewalll between fiat and crypto to slow it down and prevent it from spreading like wild fire to protect government backed fiat. If that is the case it is a dire situation.
Good news for established cryptos. Less shitcoin ICOs = less pollution of crypto ecosystem. Now money should flow into legit coins such as BTC ETH etc. I like this news.
Those were my thoughts as well. That money will likely go to the legitimate players, which is what we want anyways.
Exactly!!
Exactly my thoughts. Let these illegitimate coins just die off and never to be heard of again. In the end, it will make the established coins stronger.
pocketsend:100@cryptovegabond, this move may well shift focus on major established coins and bring new impulses to currencies instead of projects with pie-in-the-sky goals.
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While I think people looking for a quick buck (who didn't research the investment) in ico's are the issue here, the crackdown was bound to happen. That much money that fast attracts regulators.
Ultimately, this is good news. More integrity is introduced to the game, and right now it looks like Christmas with all that red on the board.
I think so as well. Every week millions of dollars that might have invested in Bitcoin or some other legitimate coin were being siphoned off to less legitimate coins. I would think this would ultimately boost the value of the major coins after the dust settles...
Now that a lot more people know the story of Bitcoin, they are trying to repeat the same results, but this time have a piece of the pie. The problem is, many of these people are still very inexperienced and have little knowledge of the crypto world, and are pumping money into these crap coins.