China Ban on ICO is Temporary, Licensing to be Introduced: Official
During an interview with state-owned national television network CCTV-13, Hu Bing, a researcher at the Institute of Finance and Banking, a Chinese government-supported academic research organization, claimed that the government’s ban on initial coin offerings (ICOs) is only temporary.
The Chinese Academy of Social Sciences and its Institute of Finance and Banking are affiliated with the State Council of the People’s Republic of China, the chief administrative authority of the People’s Republic of China. The Chinese Institute of Finance and its researchers are considered to be a government institution and government officials.
In his interview with CCTV translated by Box Mining, Bing explained that the suspension on ICOsand the government’s declaration of ICOs as an illegal fundraising method are only temporary, until local financial regulators introduce necessary regulatory frameworks and policies for both ICO investors and projects.
More importantly, Bing emphasized that the Chinese cryptocurrency community must understand that the government has not “forbidden” ICOs but instead “paused” them, demonstrating the government’s intention to resume ICOs in the near future. Bing also noted that the Chinese government and its financial regulators are currently considering the potential of allowing ICOs to raise money in a controlled environment, through a licensing program.
Essentially, if the government decides to legalize and regulate the ICO market, its licensing program would structure similarly to the BitLicense program of New York State Department of Financial Services (NYSDF), which requires companies to obtain a license from the state in order to operate and serve people of New York.
Leaving the US stage
Many startups in New York have left the state due to the impractical policies proposed by NYSDF and the BitLicense. Specifically, even large-scale startups like ShapeShift, which remain as one of the most widely utilized cryptocurrency exchanges, have left New York because of the state’s strict policies in regard to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
But, five companies including Coinbase and Bitstamp have maintained their operations in the state of New York, spending upwards to $100,000 in order to obtain their license.
In the upcoming months, it’s possible for the Chinese government to roll out a licensing program for ICOs, as an attempt to restructure the market and introduce legitimate ICO projects and Blockchain startups to the public for token sales and fundraising.
It is important to consider that the Chinese government has a history of banning many emerging and innovative technologies. For instance, in 2013, the Chinese government and its financial regulators had banned Bitcoin on two separate occasions. PBoC went as far to ban Bitcoin transactions and trading activities. But, as trading activities simply moved over to over-the-counter markets and the market became even more difficult to regulate, PBoC and Chinese financial regulators came to a consensus to legalize and regulate Bitcoin.
A similar situation may transpire with the ICO market. If ICOs and Blockchain startups simply move to Hong Kong, Singapore and Japan, countries that have expressed their optimism towards ICOs, the ban on ICOs by the Chinese government will only hurt the Chinese Blockchain sector.
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