Despite China’s best efforts to disrupt cryptocurrency exchange and making it illegal for Chinese startups to raise funds by initial coin offering (ICO), blockchain technology continues to thrive and even managed to carry bitcoins past the $14000 mark. At first, the blockades took the entire cryptocurrency market in China by a storm but they quickly recovered.
Why? Because of the simple fact that bitcoin blockchain technology is completely decentralized and autonomous. They are aloof and invulnerable to pointless legal barriers set up by countries, and the fact that they could face China’s ban head on proves that there is no stopping cryptocurrency.
If China’s egotistical ban proved anything, it’s that blockchain technology is here to stay for the long haul. At least until someone invents something better to upend it from its roots.
South Korea soon followed China’s lead by banning startups launching ICOs. There are huge risks when it comes to investing in ICOs because regular people sometimes end up buying into outright scams, which is what leads to these bans.
South Korea’s regulator, Financial Services Commission (FSC) said on Friday that they would ban all ICOs and those who fail to comply will be met with strict penalties. They added that cryptocurrency trading should be more closely monitored and controlled.
It doesn’t help the case of ICOs that scammers are using pump and dump schemes, something which the US markets regulator, the SEC has dealt with just last month.
This news has triggered a small drop in the value of Bitcoins and Ethereum. It is not possible to predict if the Korean ban will have a more profound effect on the value of cryptocurrency in the coming days.
There is however one benefit of the ban – namely that it can help filter out the scammers in the ICO market and will also help reduce the number of teams planning new startups. Remember, there were 43 of these ICO startups operating in China in the month of July alone.
Vitalik Buterin, founder of Ethereum, released a lengthy whitepaper made of 15 pages, which attempts to address some of the issues concerning regulators. He outlined a different kind of ICO, calling it an ‘interactive coin offering’.
The whitepaper is a means of bringing fundamental principles of rational free market economies. For instance, when a new company offers their stocks through IPO, they have to release their financial data prompting investors to arrive at a stock price. No such thing exists with initial coin offerings, because they sell tokens which have never existed before, making it impossible to come up with a valuation.
Buterin and his co author, Jason Teutsch, propose two ways of solving this. One, that there will be no upfront cap on the amount of money raised. Two, is to allow all ICO investors to purchase their sales, something which has been unheard of in token sales. This, they argue, will take care of all scammers because potential buyers can always enter and exit the sale based on the behavior of other buyers.