The Chinese state has continued on its path of rigid confrontation with everything and anything that has any connection to cryptocurrencies. After exchanges and domestic ICO offerings, the People’s Bank of China or PBoC has now turned against foreign but still locally-targeted ICOs.
The news is not a big surprise to anyone who has been following the movements in the industry and the regulatory domain of China. The superpower has been on somewhat of a warpath with the cryptocurrencies and many of its derivative blockchain technologies.
Now, the new targets are the initial coin offerings that are located overseas but still take the Chinese citizens as a major target for their offer. Yet, the same process might prove to be a bit more technically demanding and actually end up hurting the Chinese economy more than protecting its participants. Here are the details about the recent news relevant to ICOs, but also the reason that makes the story more complicated than it at first seems.
The PBoC Statement
One of the vice governors of PBoC has once again issued a very combative statement against the ICOs. The official said that the many of the same ventures have moved outside of China, but their targeting still favored Chinese investors.
The same information was provided by the Internet Finance Rectification Working Group, where the same official said that the ICOs, crypto asset trading and so-called disguised ICOs are all illegal in China. What is more, they represent a form of illicit fundraising.
The official went even further and said that any financial phenomenon or product that lacks the government’s authorization will be “crushed” as soon as it surfaces. There were no additional details given on how this process of crushing might take place. All following news reports failed to cover how any government body plans to curb the activity to foreign ICOs or the act of crypto trading.
On one Chinese TV network, this report was followed by one that detailed how regulators are looking at WeChat, the huge messaging app to see if any cryptocurrency traders are working in the country. On the other hand, WeChat appears to be internally cracking down on these users by limiting their access to fiat currencies on a daily basis.
Messaging apps, like eSports, are growing in China and any effect on them is definitely not something that can be discarded. Also, they show that the measures of the government are not as much focused as they appear to be spread out over many different platforms and even entire domains.
A similar form of pressure appears to have been placed on online forums which discuss things like investments. Here, the government appears to have forced the platforms to state that they are monitoring threads for things like soliciting investors in sales of ICO tokens. If the platforms observe these, they stated that they will be coming down hard on the same users.
A Relevant Market for ICOs
China issued a complete ban on ICOs back in September 2017, which created a big ripple effect through the crypto industry. At the same time, it began cracking down on a range of digital exchanges, all in the same apparent effort to bring hard regulation into the market.
But, the ban had only a minuscule effect. The companies providing ICOs moved outside of the borders of China and more or less continued with the same process. The targeted demographics for ICOs remained inside of the same borders, which is the reason why these continued to cater to this audience. The audience, in turn, continued to buy into cryptocurrencies and the ICOs that launched them.
For the government, this meant that the citizens are still both under the risk of getting scammed out of their bitcoins or some other digital currency, but also that they still have the means to purchase foreign currency a lot easier and more covertly than going through the official system. The second factor, in particular, made an impact on the reasoning of the government and likely led to the pressure on the PBoC to make out statements like the previously showcased one.
Healthy ICOs versus the Scam Ventures
Like many times before, the Draconic Chinese state apparatus seems to be throwing the baby with the bathwater or at least risking to do the same. It has a track record of continuing to put all ICOs into the same basked and dealing with them in the same mindset – one represents all of them and vice-versa.
This has shown itself to be bad for everyone, including the state. It is sure that the main and true reason for any crackdown by China is their fear of fiat yuan being siphoned off abroad through dark and gray means of transport. For the government, this is a huge threat to their fiscal policy and the same reason why the country is so obsessed with stopping the flow of money from the mainland to the gambling hub of Macau.
Here as well, the ICOs are perceived as nothing more than an illegal means of fundraising. Of course, many ICO ventures should be a thing to fear if the investors do not mind throwing their finances into the fire. Some of these are downright scams in everything but the name.
But, others are nothing like that and it is an open question is China ready and willing to ignore these, in spite of the potential of growing a whole new IT industry sector.
There is a certainty that China will not drop this approach to both ICOs and general cryptocurrencies. While the illogical nature of these is evident to all, it is most likely that they are considering themselves as out of options. Instead, China could see it in a binary fashion – either you block them all or allow all of them to go on.
The second possibility is not something that a huge state like China would allow. Thanks to that, there is little doubt that the Chinese ban and all of the PBoC harsh measures will keep on existing in the upcoming period.