OPINION: Why A Start-Up With An Upcoming ICO Welcomes China’s Banbr>
Lili Zhao is the Head of Global Partnerships at Brickblock, a blockchain investment platform. Brickblock is launching its ICO in late October.
Initial Coin Offerings (ICOs) seem to have suffered a similar fate – getting too fat and attracting too much attention. In early September, the People’s Bank of China (PBOC) declared ICOs an illegal fund-raising activity, following weeks of intense and critical media speculation.
ICOs reached a state of frenzy in China with reportedly $400 million raised since the beginning of 2017, in comparison to the global total of $2.16 billion. Millions were raised based on little more than a few pages of white paper featuring elegantly outlined concepts and promises for profitability that are understood by few, and scrutinized by fewer still.
The secret formula of getting rich quickly spread among investors. For a country that has produced more millionaires than any other in the last 30 years, the ICO became seen as yet the latest fast track to join the millionaire’s club.
When ICOs have become a business model in itself, rather than a financing method for an innovative business to grow, something has to be done. The Chinese regulator has rightly done just that.
According to the regulator’s in-depth study of numerous white papers circulated in the local market, 90% of the ICO projects were distinctly dubious or outright frauds. Of the rest, only less than 1% is genuinely invested in the technology claimed behind most ICO projects – blockchain. Therefore, there is an important distinction between China’s ICO ban and its support for the development of blockchain technology which has been included in the country’s 13th Five-Year Plan (2016-2020).
China’s regulatory move has galvanized other nations at the forefront of blockchain development to review their own oversight. In recent months, authorities in the UK, Singapore and the US have supplemented the PCOB’s actions with their own warnings on the risk and potential frauds of investing in ICOs while distinguishing it from their supportive stance on the development of blockchain technology.
The delicate balance that these nations are working to achieve will introduce the appropriate level of controls, regulations and infrastructure to foster innovation in this domain. Proposed measures from Japan and the Singapore are similar in that they are looking to curb potential frauds by parties who abuse blockchain technology. These measures are targeted at preventing money laundering through cryptocurrency transactions, especially in cross-border sales of securities.
So why would Brickblock, a start-up that is just about to launch its ICO in late October, welcome the China ICO ban?
DON’T BELIEVE THE HYPE
The ban will help to tame the ICO hype and provide a healthier eco-system for genuine and committed blockchain businesses to stand out and stand up to the test. It will have an adverse effect on short-term speculative investment but not too much on the long-term strategic investment committed to developing sustainable blockchain businesses.
Amid the scepticism from the public and regulator at a time when all scrutinising eyes are on ICOs, it could prove to be an optimal time for crypto investors and enthusiasts to single out the good ones from the crowd.
We are building a trading platform on the blockchain that enables investors to invest in real world assets with cryptocurrencies with smart contract execution to eliminate middleman costs and counterparty risks.
But critical to our success will be the legal framework and infrastructure: a legally binding digital trust fund is created which issues Proof of Asset (PoA) token that mirrors investors’ portfolios. This set up ensures the safety of investors’ assets even in the case of any platform insolvency.
The future of asset allocation is no longer about different asset classes, not even about including cryptocurrencies as an asset class, but rather about bridging the digital and real-world asset through tokenization. This will enable transactions to be done seamlessly and transcend asset classes beyond forms or borders.
As such, China’s ban is not a threat to us or any other legitimate blockchain-backed business. Just like the internet bubble, the fittest will survive and thrive. Neither ICO hype nor ban will help or hinder us to achieve our vision. To achieve that, we need strategic partners, visionaries, talents and the community who share our passion and long-term commitment.