It seems it will take more than a government ban on ICOs to move Chinese investors away from cryptocurrencies. According to a report in Chinese publication Caixin Global, both investors and issuers in China have found a way circumvent the laws banning cryptocurrency fundraising and trading, which came in to effect late last year.
Although ICO demand largely stems from Asia, China enacted laws that banned the sale of tokens in September last year, which also inspired South Korea to follow suit. Despite the crackdown, Asia, especially China, Japan and South Korea, remains the place where mining has thrived and investors are always on the lookout to reinvest their profits in promising ICOs.
Although the ban is still in effect, investors have continuously accessed newly-issued tokens which are highly speculative, while the issuers have been domiciling their projects from other countries which are supportive of blockchain technology and cryptocurrencies. Similarly, issuers are also offering their digital tokens for free, in accordance with the Chinese laws.
Focus on Foreign Exchanges
Chinese officials have now turned their attentions to foreign cryptocurrency exchanges that boast a certain Chinese presence, such as on social media. An anonymous source close to the Chinese government agency in charge of Internet finance regulations, told Caixin that officials are now blocking the IP addresses of such exchanges.
Risk management experts opine that blocking access to regulated cryptocurrency exchanges is undesirable as the regulators have the power to monitor transactions. “It is just a matter of time before the regulator catches on with the foreign exchanges that are allowing Chinese to participate in ICOs,” said the anonymous official.
CCN argues that the effectiveness of the Chinese ban on ICOs can be compared to a parent trying to calm down their rowdy children. While the volume has gone down significantly, the activities around ICOs are still live, in veiled attempts like airdrops, IMOs and redomiciling.
The majority of companies and startup projects have been able to bypass the ICO ban through airdrops, where tokens are distributed at zero costs. At the same time, the project developers or issuers of the tokens benefit from marketing prowess which such events offer, since the projects gather momentum among the community members.
Another way to circumvent the ban is through the use of Initial Miner Offerings; IMOs. These deals supposedly allow investors the opportunity to back the mining of new coins, but a self-regulatory agency in China warned they have all the features of an ICO. A good example is Xunlei IMO, where the participants lent their computer bandwidth in exchange for Lianke coins. The regulator was categorical that this amounted to fundraising.
Of all the tricks, ICO issuers are also using the conventional one of moving their base abroad and soliciting for Chinese investors using third party intermediaries.
Do you think it’s time for China to lift the ICO ban and come up with effective regulations? Share your thoughts with us in the comments section.
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