PBoC Advisor: 'China Was Right to Ban ICOs'

An advisor to China's central bank said he supports the recent government crackdown on domestic initial coin offerings (ICOs).

As previously reported by CoinDesk, the People's Bank of China and other regulators in the country moved in early September to restrict new offerings that utilize the funding model, through which parties can issue digital tokens that are cryptographically tied to a blockchain in order to raise funds or create a network effect for that project.

In announcing the ban, China declared the method a form of illegal financing, triggering a range of platform closures and efforts to refund investor contributions. According to Sheng Songcheng, counselor to the PBoC and an adjunct professor of economics and finance at the China Europe International Business School, the Chinese government made the right move.

Writing for Chinese-language newspaper Caixin, Songcheng – who previously said that the government should mandate disclosure standards for ICO organizers – argued that the crackdown was necessary in order to inhibit the "chaos" caused by unfettered finance.

He wrote:

"I fully agree with the move to ban ICOs in China, and the calls for refunds to be made to investors. In my opinion, these actions are largely aimed at averting risk and protecting investors’ interests while also being an opportunity to further regulate trading of virtual currencies. Still, it is important for China to continue to encourage the current development direction of blockchain technology."

Likening ICO-derived tokens to securities – a connection advanced by a growing number of regulators worldwide – Songcheng said that the push for refunds was a "fair one" through the lens of investor and consumer protection. He went on to suggest that regulators there could put in place new guidelines for the model so that "everyone plays by the new rules of the game."

In the op-ed, Songcheng called for tighter rules around bitcoin trading, though he also acknowledged that "bitcoin is a globalized asset, and so it is hard to ban it completely." Instead, regulators should hone in on its use for money laundering in particular.

Lastly, the PBoC advisor wrote that "blockchain technology itself is worthy of encouragement" from regulators, highlighting the work by companies like Alibaba in this area as examples that the government should promote.

"With the ICO chaos being cleaned up, the blockchain community will itself attach more importance to identifying solutions to existing problem and technology, and the blockchain industry will see more prudent development," he concluded.

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