Ban on coin of­fer­ings seen as healthy move

China Daily European Weekly - - Business - By REN XIAOJIN renx­i­ao­jin@chi­nadaily.com.cn

China’s re­cent ban on ini­tial coin of­fer­ings is not ex­pected to de­ter the com­mer­cial use of blockchain tech­nol­ogy, an­a­lysts say. Rather, they be­lieve the ban to be a nec­es­sary step for bet­ter reg­u­la­tion of the tech­nol­ogy.

Sheng Songcheng, a se­nior of­fi­cial of the cen­tral bank, said dur­ing an in­ter­view with China Busi­ness Net­work that blockchain is promis­ing and such scru­tiny will only push the in­dus­try down a health­ier path.

“To elim­i­nate the mar­ket frenzy once and for all, so that ev­ery­one can start again by fol­low­ing the new rule, is a very mean­ing­ful strat­egy,” Sheng said. “Cryp­tocur­rency is the best-known prac­tice of blockchain. It is im­pos­si­ble to stop it, but it is time for scru­tiny.”

China’s top reg­u­la­tors, in­clud­ing the cen­tral bank, have banned ICO prac­tices, an in­creas­ingly pop­u­lar ap­pli­ca­tion of blockchain glob­ally, which has helped Chi­nese star­tups raise al­most 2.6 bil­lion yuan ($400 mil­lion; 334.4 mil­lion euros; £301.44 mil­lion) in the first half of the year, ac­cord­ing to a re­port by ex­perts on the in­ter­net fi­nan­cial se­cu­rity tech­nol­ogy.

The crack­down led to a 20 per­cent fall in the price of Bit­coin from $5,000 to $4,000 three days af­ter the ban, as China has one of the largest num­bers of cryp­tocur­rency own­ers.

A fin­tech worker, who re­quested anonymity, says the Bei­jing-based com­pany he worked for has stopped its ICO pro­ject.

“Cer­tain reg­u­la­tion is nec­es­sary,” he says. “But as ICO has been such an ef­fi­cient way for tech com­pa­nies to raise funds, I be­lieve it is more likely to be a short-term ban un­til they can reg­u­late it ef­fi­ciently.”

Ac­cord­ing to Huang Zhen, di­rec­tor of the re­search in­sti­tu­tion of fi­nan­cial laws in the Cen­tral Uni­ver­sity of Fi­nance and Eco­nomics, “ICO could have been a cre­ative tool for star­tups if used well. Cur­rently, there is an un­healthy frenzy to­ward ICO which has at­tracted lots of play­ers with­out ad­e­quate knowl­edge about blockchain or ICO. Such ir­ra­tional in­vest­ment can lead to po­ten­tial fi­nan­cial risks.”

The ban “is to pro­tect the fi­nan­cial tech­nol­ogy sec­tor and in­vestors with strong reg­u­la­tions, and stop il­le­gal fund-rais­ing”, Huang added. “It will help both startup own­ers and in­vestors to stay away from ir­ra­tional in­vest­ment be­hav­ior.”

Yu Liang, chief op­er­at­ing of­fi­cer of Qing­song­chou Net­work Tech­nol­ogy Co, one of China’s lead­ing blockchain com­pa­nies, says the com­mer­cial ap­pli­ca­tion of blockchain is still rare in China and the ban on ICO will not stop the in­dus­try from grow­ing, but it will en­cour­age those in the in­dus­try to use the tool in a legal way.

“Blockchain has a promis­ing fu­ture in the fi­nan­cial sec­tor, from what is hap­pen­ing in the world,” Yu says. “Its na­ture — de­cen­tral­ized, trans­par­ent and tam­per­proof — makes it ap­pli­ca­ble in a wide range of ar­eas such as char­ity.”

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