China, ICOs and Crypto Regulation
As has been widely reported, China has banned all ICOs. Given the torrid pace of ICOs in China, many of which appear to be downright scams, this should not come as a surprise. What will be interesting to see though is what comes next. Here are some key questions.
First, is this a temporary ban only? Will China come out with a set of regulations that allow some ICOs to go forward? Given that China has allowed crypto currencies per se, I expect that they will come up with regulation and that this ban was them pulling the emergency break.
Second, how will regulators in other countries react? They might see this as an opportunity to follow suit, or they might see it as an opportunity to position themselves as more attractive to innovation. Given the cautious initial findings of the SEC around applying the Howey Test, I think they are unlikely to act rashly now.
Third, regulation will be a long term issue for innovators and investors in the crypto currency field. Because these systems are global from day 1, countries will find that they have less regulatory power than in more traditional financial markets. So I expect that what’s legal where will shift around a bunch over time. That adds an important component of risk and uncertainty to innovating and investing in the blockchain space. How big is that extra risk and what to do about it? That’s one of the key issues to wrestle with.
As we continue to invest in this space we will be paying close attention to this. So expect updates here in the coming months.