The Rationale Behind ICO Suspension
The sudden halt of Initial Coin Offerings (ICOs) on September 4th marked a pivotal moment for blockchain regulation. According to Sheng Songcheng, Counselor of the People's Bank of China and Executive Dean of CEIBS Lujiazui Institute of International Finance, this intervention was both timely and necessary.
"ICO's rapid growth naturally drew regulatory attention," Sheng explained in an exclusive interview. "From a traditional legal perspective, ICOs resemble capital fundraising activities. Without proper oversight, they pose significant risks—especially with numerous unpromising or fraudulent projects flooding the market."
Key concerns driving the decision:
- Investor protection against speculative "air tokens" and pyramid schemes
- Market integrity to prevent "bad money driving out good"
- Early warning signs of retail investors (including inexperienced participants) entering en masse
Sheng emphasized that serious blockchain investors and entrepreneurs actually welcomed the regulation, viewing it as essential for long-term industry health.
Bitcoin Trading: Challenges and Regulatory Responses
With ICOs suspended, attention turned to Bitcoin trading platforms. Sheng acknowledged practical difficulties in outright prohibition:
- Global nature: Bitcoin trades can shift overseas or underground
- Established adoption: As blockchain's first major application, Bitcoin has widespread recognition
- Price volatility: 2021 saw prices peak at ¥32,500 with 20-30% fluctuations
However, Sheng stressed the need for stricter standards:
- Enhanced identity verification for traders
- Transaction fees (typically 0.2%) to deter speculation
- Crackdowns on anonymous transfers that could facilitate money laundering
"Bitcoin represents blockchain technology—not currency itself," Sheng noted, reiterating his pioneering 2014 stance that virtual currencies fundamentally differ from legal tender.
Blockchain Technology: China's Strategic Opportunity
Despite regulatory actions on ICOs and Bitcoin, Sheng strongly advocates for continued blockchain development:
Current Landscape
- China leads globally with 550 blockchain patent applications (2008-2017)
- Major players like Alibaba, Tencent, and Ping An actively participate
Innovative applications include:
- Blockchain e-commerce platforms
- BaaS (Blockchain-as-a-Service) solutions
- Distributed ledger-based social assistance programs
Future Outlook
The World Economic Forum predicts 10% of global GDP will be blockchain-stored by 2027. Sheng highlights China's advantages:
- Large, tech-savvy population
- Strong mobile finance adoption
- Potential to lead in practical applications
"Application diversity drives blockchain advancement," Sheng observed, noting ongoing improvements in encryption, transaction speed, and energy efficiency.
FAQ Section
Q: Why did regulators target ICOs specifically?
A: ICOs combine crowdfunding characteristics with high-risk speculative trading—requiring oversight to protect investors and maintain market order.
Q: Will Bitcoin face similar restrictions to ICOs?
A: While complete prohibition is unlikely, expect enhanced KYC procedures and transaction monitoring to prevent illicit activities.
Q: How can legitimate blockchain projects thrive post-regulation?
A: By focusing on tangible problem-solving rather than token speculation, and collaborating with regulatory bodies for compliance.
Q: What makes China particularly suited for blockchain development?
A: Our combination of technical talent, large market scale, and existing digital infrastructure creates unique innovation opportunities.