The People’s Bank of China has spoken, and said BU to ICOs.
It’s been too good for too long, maybe a whole six months. The Ethereum Token ICOs, at least the upper echelon ones, have been bringing in tens or even hundreds of millions worth of USD, mostly in cryptocurrency.
It seems like anyone with basic website design skills and an ability to spin stories in technobabble can roll an ICO. And that everyone and their cat have been. In the process, wild claims of technological breakthroughs are being made, that once revealed will lead to a world of self-driving AIs, chained to happily autonomous gals and blocks.
But also promises are being made of future riches for the ICO participants. And words like “equity” and “dividends” are thrown around indiscriminately. These utterances awaken the Beast of Regulation, and every State and Country and Empire has one, in an air-conditioned cave near the Capital. But the Beast of each domain has a different name and the tone of the bark and the speed of the bite do vary.
In People’s Republic of China, AKA the mainland, the Beast has many heads but speaks in one voice, that of the People’s Bank of China. The central bank of the world’s busiest economy has some $3 trillion in reserves and not only sets monetary policy, but oversees most of financial institutions.
On Monday, September 4th, the PBoC was joined by six Ministries and Commissions, including Industry and Information Technology, Commerce, Banking, and Insurance, in denouncing the ICOs as “illegal financing and issuing securities, and involving financial fraud and pyramid schemes”.
Companies in China had raised over $400 million via ICOs so far this year, which is at least a quarter of the world-wide ICO take. In China’s case the bark was accompanied by the bite, and a list of 60 ICO platforms for listing and trading was published for immediate action. Note that BTCC, Huobi, and OKCoin, the country’s largest exchanges for trading cryptocurrency, like Bitcoin or Ethereum, are not on the PBoC list.
Just about all the entries in the list are in Beijing or Shanghai, but there are three entries from Hong Kong. A curious outlier on the list is Allcoin, of Vancouver, Canada. An established exchange that accepts USD, it offers token listing services, and have been involved in a number of China-based issues.
Two of the largest Chinese ICO exchanges responded immediately, with icoage.com bringing the site down and ico.info announcing “suspension of ICO business”. Of the three Hong Kong entries, Wen Blockchain Group does not google, eBTCbank is down, but Baseico is up, though perhaps on hiatus.
Chinese exchange Binance is a name familiar abroad, and they are on the list of 60. But they are continuing operations, having announced that going forward they will only serve international customers (supposedly over 80% of their current clientele), and will be blocking IP addresses from China.
Binance suspended deposits of five ICO tokens, each one very recent and a major loser:
Health Care Chain HCC Launched mid-August, down 10X
Flow Ore Community LLT Launched September 1st, down 3X
Election Chain ELC Launched August 25, down 4X
Bytom BTM Launched August 9, had a 3X pump a week later, 8X dump since
YOYOW Launched August 20, down 3X
But trading of NEO on Binance is as active as ever. It is their largest product, at $7 million of daily volume representing almost a quarter of their business. NEO is a re-brand of Antshares, which was launched in August 2016. The coin lingered for a while, had a huge run-up during the summer of 2017 and is trading at around half of the peak value of $43. It is the largest cryptocurrency originated in China, with a market cap of $1 billion and a daily volume of almost $50 million, with half of all trading on Bittrex and around 15% on Binance.
It’s unclear that Binance, located in Shanghai, can outwit the 3-trillion-dollar panda. NEO may not be affected terribly by losing 15% of the trading capacity, but there is another candidate for trouble. Walton Chain, apparently a substantial Chinese and Korean joint venture for running RFID IoT on a Blockchain had an ICO two weeks ago. They have achieved a $40 million market cap, but 99% of the $5 million WTC daily volume is on Binance.
Across the Pacific
In the US cryptocurrency media the China news was misrepresented as specifically naming 60 ICOs, and not the ICO token exchanges. And the cryptocurrency markets (over)reacted in the wake of the revelation, by shedding up to 20% of the BTC or ETH prices, and across the entire market. But within five days the valuations have stabilized and the coins appear ripe to continue the relentless run-up of the previous two months.
This is not the first time this year that the regulatory news from China pushed the international markets down, and each time they were shrugged off quickly. Same as regulatory news from the US, and continuing pilfering of cryptocurrency exchanges, and a blatant theft of Ethereum from three very recent ICOs, due to the bug in the contract code of the Parity wallet.
In the next article we’ll be reviewing the bark of the Beast of Regulation in the US, and make guesses as to what the bite will be.
Disclosure: I do not own any ICOs originating in China, nor do I use any of the exchanges there, and not planning to.
