The Ban Hammer: Good or Better?
So with the most recent selloff that wiped almost 20 billion dollars off the coin market cap and like all selloffs, a culprit should come into play. It’s safe to look over the mighty great wall for clues on why this took place. China, yes, the biggest cryptocurrency market in the world, might be at the center of attention once more.
In a statement released by the People’s Bank of China, China’s central bank declared that initial coin offerings (ICOs) are illegal and that organizations and individuals are no longer permitted to conduct anymore of such fundraising practices. With wind of this already passing through as early as a couple of days back, it might not come as a shocker but come to pass indeed it has.
It would have been a busy and unsettling day for anyone involved in the crypto market as everyone rushes to grasp what this would mean for their organization, their portfolio etc. For myself, between handling friends’ texts queries on whether this is a government conspiracy to holding emergency meetings, I was very pleased with what transpired. Yup, you heard it right. Pleased. This could have been yet another milestone in a brief but already colorful journey for cryptocurrencies.
Selloff or Correction?
One thing I find funny is if this was a growth of 20 billion in market cap, no one would have called it a bubble. My point here being, just 6 weeks ago, Bitcoin was $1800 and despite the largest Bitcoin share market facing pinpoint regulations, it’s still holding way steady past $4300. While others have fallen a tad more, comparing to how much it have grown over the course of 2017, most have outperformed themselves and a little correction was bound to take place anyhow. It’s still way way too soon and too big to even be concerned about valuations sinking
Separating the Pretenders
Is regulation even a bad thing? Well, I guess most people are too sick of regulations to give a thought whether it broods well. The main reason why PBoC took action so swiftly was that the hope of a paper and a token (in relation to a chip and a chair) was becoming too wild. Well, all of a sudden, you saw startups filing their whitepaper and ideology onto ICO sites and setting alarming numbers as targets. While this was perfectly fine, it was those with malicious intent that riled and forced the authorities to take action. Scams were reported siphoning large amounts of funds without a trace of accountability. These bad sheep were seemingly growing in numbers and there had to be a stop to such as seen with a complete ban of nascent funding mechanism. Of course, we are almost guaranteed to see regulations put out soon regarding ICOs and this would truly give it the safety blanket it requires.
Too Big to Ignore
Another point of view which my avid crypto buddy truly believes is that ICO got so big the government cannot help but step in. What might that imply? Well, ICO truly is a successful example of a sharing economy and the internet yet again providing solutions to previously daunting challenges. Cryptocurrency widely viewed as the disruptor to the almighty financial sector, has once again provided an avenue for elevated crowdfunding through the form of token sales and it is working! Well, the few reasons why the government would step in because it is so successful includes the obvious, tax and identity issues and of course maybe it isn’t part of it yet (PBoC cryptocurrency incoming ahem)
What Can Be Done?
Let’s face it. For those who understand cryptocurrency, they are the ones who probably didn’t sell a thing during this newsflash. Understanding the underlying technology of crypto would mean that besides declaring it illegal, there is very little the authorities can do pretty much. Have wallet balances been frozen like bank accounts? I quote CnLedger, a local bitcoin and cryptocurrency news source,
“PBoC bans ICOs. From now on, no organizations and persons in China are allowed to raise funds via ICOs. Fund-raising platforms are not allowed to provide trading and exchange services. Raised funds should be ‘cleared up’ and refunded to protect investors.”
That last sentence is more like a plea to those who have already collected funds to disburse them back accordingly. This is the real power of what cryptocurrency is all about and should never be forgotten. It is the people’s currency and that control will never be in one person’s hands no matter who it is. Remember when China took a similar stance on withdrawals though exchanges? That only spurred the use of p2p platforms and Bitcoin continued to grow in strength. Barring a flat out miracle, ICOs will and should continue to take place out of China and the United States but in the midst of their comfy homes, mainland Chinese would still be able to freely transact cryptocurrencies and ICOs will be nothing but a taboo word that thou shall not mutter.
Of course, in the ever changing landscape of the cryptocurrency world, we might be in for another surprise in a few days. It is good to monitor what develops from this and what countries might follow suit but as of now, I will take a seat back and let everything unfold before sounding the alarm.