China bans ICOs

Less than a year after warning Bitcoin exchanges, the central bank in China has once more dented confidence in the crypto markets by taking the decision to ban ICOs, causing cryptocurrency values to plunge.

ICOs banned

The People’s Bank of China has this week issued a statement branding sales of tokens as illegal and disruptive to the country’s financial and economic stability. The ban is being blamed by analysts for the sharp decline in crypto values this week.

However, the country’s reaction can actually be deemed as reasonable, and the ban on ICO activity could really be seen as being the most effective way of protecting potentially vulnerable investors.

China’s financial market is massive and lacks control. In addition, the rapid growth of reach and innovation has led to bubbles across a broad range of asset classes, some of which are less than pristine. A combination of new technology and unknowns could prove to be the perfect storm for financial chaos if action was not taken to steady the ship. China’s ruling party places a high value on the social stability of the country, and it was pretty obvious that the regulators would intervene, especially given the forthcoming 19th National Congress.

A temporary setback

However, China is not averse to innovation in technology and finance. In fact, the Chinese central bank recently announced that it is ramping up its research into blockchain and sent researchers to the US on a fact-finding mission. At the end of last year, China revealed it had been testing a blockchain-based digital currency.

The ICO ban should therefore not be viewed as a definitive statement on blockchain. It is not likely that the ban will be in place for long, given the country’s desire to become an increasingly major player in the global markets.

It seems likely that China is merely taking its time to monitor and examine the cryptocurrency markets and blockchain in more detail before deciding how best to integrate tokens into its current financial system. In the meantime, investors in the new technology must bide their time and watch the markets for future developments around the world.