How The China ICO Ban Has Affected The Crypto-Community

How The China ICO Ban Has Affected The Crypto-Community

Is the China ICO Ban relevant to the community?

Quite recently, the government put in place a China ICO Ban, which declares ICOs as an unregulated way to raise capital. This missing regulation allows scam companies to damage investors in the token. The China ICO Ban seeks to make sure that scam ICOs cannot affect the population, due to the losses already made in 2017.

We’ve heard all about ICOs – this innovative way for startups to raise funds – but how much of it is still legal? Not many, and that’s partly due to the number of fake ICOs that are coming up. These ICOs advertise a company which is almost hollow; they present a white paper with great technology and don’t follow through with the project. Since ICOs aren’t regulated, it’s legal for them to just stop working on the project at a later date. That leads to a loss of the token’s value and thus the investors lose their money. Meanwhile the founders or fundraisers end up with millions in BTC and ETH.
That’s why the US has made unregulated ICOs illegal and there’s a China ICO Ban now.

Why the China ICO Ban affects startups:

The China ICO Ban works effectively in reducing the number of scam ICOs going on but at the same time, it eliminates all of the ICOs. Thus, companies that actually have a genuine claim to raise capital can’t do it. Unfortunately, startups in China no longer have the right to carry out such activity. This is partly due to how people view ICOs and believe that they could only be scams.

We’re going to explain how ICOs work so that you can be informed how they CAN be genuine. An ICO is a widely misunderstood way of “raising capital”. I’m sure you’ve read articles about companies like the Basic Attention Token raising millions in minutes.

What is an ICO?

Firstly, ICOs are sort of comparable to IPOs. In an IPO, you sell shares for the first time to the general public. In an ICO, you sell tokens for the first time to the public. However, these token’s aren’t a representation of a share of that company.

These tokens are company-specific and are made to be used within the company’s project by users. When users use these tokens for things in the company’s project, the value of the tokens will rise over time. As more people use the project, more people will want that token and thus the value of the token will rise.

Now, you sell those tokens before the project even begins, in order to raise capital. You will set a value of the token which you believe will be the minimum. If people invest at this stage in the project, they will benefit from a rise of the token’s value. That’s why it’s attractive to invest in a token ICO.

That’s also why ICOs could be considered an illegal way to “sell shares” however, it’s not at all the same thing.

Why does the China ICO Ban slow the growth of Cryptocurrency?

Now that the US has started regulating ICOs and the China ICO Ban is in place, we will definitely see a lower number of scam ICOs happening right now. However, I think that this move from these two countries will push people away from cryptocurrencies in general. I think this does more good than bad. Unfortunately, launching a ban and campagning about the dangers of ICOs naturally pushes people away. I think this move will prevent the use of Blockchain technology in Asian markets since the people will be quite cynical about it in the future.

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About Article Author

Michael Serrano
Michael Serrano

Michael is an engineer and a bitcoin evangelist. He has been involved in cryptocurrencies since 2013. His biggest wish? 1 billion users of bitcoin, ether and litecoin by 2020. In the last 10 years he has worked for various early-stage start-up as a back-end developer.

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