China have recently become strict on the cryptocurrency markets… banning all ICO’s and ordering all unlicensed cryptocurrency trading platforms to shut down by the end of the month (which is all of them).

Obviously, this has attracted a lot of media attention and may have played a role in the recent drop in the cryptocurrency market value as a whole. However, it can be argued that this is not in fact extreme action. Laura Shin, presenter of the Unchained podcast recently spoke with Da Hongfei of NEO and Patrick Dai of Qtum to discuss the matter.

While ICO’s have proved an extremely efficient and effective means of raising capital, we have seen a huge spike in the number of ICO’s launched in recent months. It can be argued that a number of them are not actually managing to do what they promise, or that they are simply using a token distribution event as a way of making money. Da Hongfei argues that they’re in fact using the blockchain concept as a way of marketing their idea even though that particular project would not benefit/require blockcahin technology.

It was also reported today by BBC news, that China has been hit by a “Financial Scam ‘Epidemic‘”. This may not be linked in any way, however, it’s understandable for the Chinese government to be concerned about the safety of their citizens investments. It has been mentioned that the Chinese government believe up to 90% of ICO’s launched in their country have been fraudulent, although this figure is somewhat impossible to prove. If they are simply trying to protect their citizens financially then it can be argued that banning ICO’s is not so drastic as it will mean that no one can be scammed if they’re unable to invest.

Could this be good for cryptocurrencies long term?

China generally are at the forefront of technological developments, therefore it may have come as quite a shock when they made their recent announcements. The announcements seemed to cause other governments to speak up about regulation (or at least made them begin to think about it). The main talking point that seems to have arisen in the last week or so is the call to regulate the cryptocurrency market, some think this is mad and some think it is inevitable. Either way it certainly is making this a talking point and it seems that sooner rather than later we are going to see some form of regulation. Therefore it depends on whether or not you think regulation is a good thing or not as to whether you think China’s actions are positive or negative.

The problem with the increase in ICO’s is that a lot of investors who do not actually understand the technology or the projects are simply investing hoping for some quick profits. They may have seen other ICO’s in the past and heard of the huge profits people have made and are now walking into a potential scam, simply because they are blinded by the promise of profits. One argument against banning ICO’s altogether is that, it seems unfair to remove the decision making from the individuals, it is very clear that investing in a token sale can be risky and you could lose all your capital, however, you should be allowed to make your own choice on this risk. After all, investing in the stock market is risky but this is allowed.

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