Today, the People’s Bank of China banned individuals and organizations from raising funds through initial coin offerings (ICOs), claiming that the practice constitutes illegal fundraising. Headlines were quick to proclaim that China had killed the cryptomarket, even as several Chinese exchanges announced that trading in crypto currency would continue as before the ban. Following the news, a number of experts predicted that the SEC will soon follow suit, driving a stake through the heart of the ICO market. Here’s why we believe this prediction is flat wrong.
The PBOC has an interest, as do other central banks, in ensuring orderly markets and the prevention of fraud and money laundering. China has an additional interest in maintaining its currency controls. While blockchain proponents trumpet the benefits of freedom offered by autonomous markets…. especially freedom from government oversight and intervention… crypto markets have predictably failed to serve the public interest: fraud is rampant, there are few protections for unsophisticated investors, and the mechanisms for keeping out bad actors are limited. PBOC reacted predictably: it saw an activity that was damaging its reputation and undermining its control, so it banned it. Do not be surprised to see a limited reversal of the ban within 36 months, after some of the more egregious problems have been rectified and the market has been regulated. Read Full Article