Six Chinese Blockchain technology industry associations have co-published the Guiyang Blockchain ICO Consensus, to establish an industry-wide standard for initial coin offerings (ICOs).
On June 4, Cointelegraph reported that the Chinese central bank, the People’s Bank of China, was planning to regulate the ICO market. The Chinese government intends to pursue its plan to regulate the ICO and Ethereum markets in China, to ensure that token sales and development activity around Ethereum are deemed legal under Chinese financial regulations.
At the time, local sources including CnLedger reported that Yao Qian, the head of Digital Currency Research Institute at PBoC, stated that it will regulate ICOs soon and provide a specific regulatory framework for its Ethereum industry.
Blockchain ICO Consensus
Earlier this week, sources including the China Money Network revealed that six Chinese Blockchain associations have come together to establish an industry-wide framework for ICOs.
Considering the fact that there are already 43 Blockchain projects in China that have conducted ICO campaigns, the group of Blockchain associations believed that it was necessary for the industry to regulate itself before the involvement of PBoC.
The group includes Guizhou Blockchain Industry Technology Innovation Alliance, Zhongguancun Blockchain Industry Alliance, Blockchain Finance Association, Guiyang Blockchain Innovation Research Institute along with two other unnamed Blockchain associations.
According to the China Money Network, China-based Blockchain projects and ICOs have already raised over $420 mln, which is around 30 percent of the total amount of money raised by ICOs to date.
The SEC has already started to investigate into ICOs that have conducted their token sale to US-based investors. In the upcoming months, based on the statement of Qian, the PBoC and the Chinese government will likely investigate into major ICOs that have raised tens of millions of dollars in their ICOs.
Within less than two years, the ICO market has become a competitor to traditional venture capital firms within the cryptocurrency sector. The vast majority of Blockchain projects and companies have conducted ICO campaigns rather than seeking for early-stage investment. As a result, ICOs have outpaced VC funding in 2017.
There are a variety of factors as to why Blockchain projects and companies prefer to conduct ICO campaigns than receive venture capital funding. First off, within the ICO market, there is no pressure from their investors. The vast majority of ICO projects that have raised hundreds of millions of US dollars have demonstrated no viable product or software. Yet, they have obtained large capital within a relatively short period of time.
In order to secure that amount of money through traditional and regulated channels, projects and companies need to provide actual market data and evidence of stable user base, consistent revenue and return on investment for investors.
Analysts note that it is a positive decision from the six Blockchain associations to self-regulate the ICO market before the PBoC decides to regulate it and prevent ICOs from suffering large penalties or legal violations that could lead to conflicts with the PBoC.