Chinese Regulators are Targeting ‘Pyramid Scheme’ ICO’s
After initiating withdrawal controls on Chinese cryptocurrency exchanges, Chinese regulators are now shifting their focus to Initial Coin Offerings.
China to Crack Down on ICOs?
According to a new draft legislation, Chinese regulators have expressed their intentions to implement stricter regulatory measures for Initial Coin Offerings or ICOs.
China Securities Regulatory Commission is currently in talks with a few Blockchain enterprises. The Commission has expressed their particular concern with pyramid schemes in the form of ICO projects. The parties are now in the process of gathering expert advice and public comments.
CN State Council released draft targeting illegal fund-raising. Raising virtual currencies may be investigated by gov't. (Draft section 15)
— cnLedger (@cnLedger) August 25, 2017
Currently, most ICOs have only blocked United States’ citizens from participating in their fundraising process. However, some ICO-based projects are already starting to block Chinese citizens from taking part following the news.
One such project is Red Pulse, a platform specifically tailored for the Chinese market, which today announced it will discourage Chinese citizens from investing in its ICO.
Due to stricter ICO regulations, we've had to make the difficult decision to disallow Chinese citizens from participating in our ICO.
— Red Pulse (@red_pulse_china) August 29, 2017
The regulatory rumblings have become all too common for cryptocurrency users, however. Last year, Chinese regulators have forced Chinese cryptocurrency exchanges to upgrade their KYC/AML systems for user withdrawals, which many argue makes the environment safer for investors and encourages fintech innovation in China.
“Today’s story is just part of a bigger picture,” explained Andrew McCarthy, CSO of LakeBanker, which is planning its own ICO in September. “China is fighting hard against pyramid schemes and other sorts of financial fraud often associated with organized crime. If you’re not yourself a criminal you should be happy they’re doing this. ICOs are really a tiny part of the overall problem.”
The Chinese government is doing its job: they go after the bad guys and give the good guys some space to work and to make progress. LakeBanker is one of the good guys.
The ICO Hype is Real
ICOs have become a very popular way to raise fundings for projects or startups. This year alone, ICOs have managed to raise a whopping $1.25 billion USD in funding, and the hype-train hasn’t stopped yet.
ICOs have become popular because they have lowered the barrier to entry for regular people, making them very profitable albeit risky avenues to raise funds. In fact, an ROI of several hundred percent is not uncommon nowadays.
The picture below shows the performance of recent ICOs, some of which have jumped from pennies to a couple of dollars in value.
With such returns, there is no doubt cryptocurrency investors will continue to pour more money into ICOs as regulators and bleeding edge technology continue their game of cat and mouse.
What are your thoughts on the new regulations? Do you think that they will hinder the growth of cryptocurrencies in China? Let us know in the comments below!
Images courtesy of ICOstats, Pixabay