Recent reports suggest that the People’s Bank of China (PBOC) may be considering a move to enact a regulatory framework for Initial Coin Offerings (ICOs). Chinese cryptocurrency news source cnLedger posted the news on Friday, noting that Chinese central bank Digital Currency Research Institute head Yao Quian addressed the issue while discussing digital currencies and related technologies. As cnLedger tweeted,
“Yao Qian, head of Digital Currency Research Institute at PBoC: Bitcoin does not fulfil the criteria of a currency; will soon regulate ICOs.”
The source comments linked to by cnLedger provide a useful glimpse into the central bank’s current views on digital currency, blockchain technology, and the rise of ICOs as a funding option for crypto projects. The commentary begins by stating the bank’s view that Bitcoin cannot fulfill any of the three basic functions of money, and then defines digital currency as a “non-monetary digital asset” rather than actual money.
In addressing the ICO phenomenon, the central bank seems to recognize the important role that these coin offerings have played in financing many new crypto-related projects. The author cites a number of useful projects that have utilized ICOs to fund innovations in payments, asset transfers, gaming, digital wallet systems, and more.
The paper ultimately concludes that regulation is needed to ensure that these ICOs don’t do more harm than good. Its author recommends that the authorities issue guidance on these coin offerings in the near future, because “a complete regulatory framework is essential to promote the healthy development of the entire blockchain industry.”
The author mentions several possible regulatory measures, including greater transparency in communicating risk, more information disclosure, greater attention to anti-money-laundering concerns, and some type of project review for pending ICOs. The strongest recommendation, however, involves education for investors:
“In ICO regulation, strengthening investor education is particularly important. Mature markets need mature investors. Looking back on history, all kinds of asset bubbles and all previous financial crises are, to some extent, a manifestation of human weakness. At present, ICO tokens are still a new thing ... there is still a lot of controversy and differences. ICO investor protection needs to be regulated, but in the long run, investors still need their own maturity, including professional knowledge, stable emotions and rational decision-making."