How the ICO Regulatory Framework May Change in Asia

When China implemented a ban on Initial Coin Offerings (ICOs) at the beginning of September, cryptocurrency markets across the globe took a heavy tumble.

This prompted many to speculate that the game was very much up for these rogue new currencies and the talk of 'a bubble' became louder by the day. This has since largely dissipated and the likes of Bitcoin, Ethereum and others have seen their prices rally since then, albeit not to their previous unprecedented highs.

ICO Financing

ICOs started as a popular, if controversial, way of raising capital by offering a percentage of a new cryptocurrency in return for an investment of legal tender. They have since expanded to become a source of crowdfunding for a variety of startups beyond the digital currency sphere. Despite some remarkable recent successes and celebrity endorsements many are urging investors to be cautious.

With the dust now settling since the announcement by the Peoples’ Bank of China (PBoC) that it regarded ICOs as ‘illegal and disruptive to economic and financial stability’, there is a sense that the steps taken by the Chinese were a reasonable response to an increasingly runaway phenomenon. Now, it seems that other Asian countries are also considering implementing regulatory measures.

Reflecting concerns voiced back in July by the US Securities and Exchange Commission (SEC) regarding ICOs and their potential pitfalls, Singapore has been mulling over imposing regulations of its own. Meanwhile, over in Japan legislators are in agreement that action needs to be taken although the precise details of such a move are still being worked out.

With ICOs and the trade in cryptocurrencies in general being completely unregulated – a state reflective of their very nature – the concern exhibited by financial authorities is understandable. Whilst there is no doubt that cryptocurrencies are here to stay, the potential for instability is going to stick around for the foreseeable future. Bitcoin and its imitators may be an established feature of the financial landscape, but ICOs are very much an upstart trend. Some sort of regulation is needed.

Sensible ICO Regulation

It is perhaps appropriate that the strongest moves in this direction have so far come from Asia. China has long been wary of unregulated growth and its potential impact upon social order in the country. Moreover, this October sees the opening of its 19th Communist Party Congress, the biggest event in Beijing’s political calendar and President Xi Jinping will be looking to present an image of stability as he seeks a second five-year term of office.

Beyond Beijing, the geopolitical situation in the region remains fraught as tensions continue to simmer over North Korea, whilst in Japan a snap election has just been called as the current government seeks a stronger mandate to address this and other issues. Order and stability are very much the watchwords.

It will be interesting to see what happens next. South Korea, the third largest cryptocurrency market in the world has hinted at implementing regulations of its own but so far has only talked of ‘punishing’ ICOs. Just how far-reaching Seoul’s measures will be remains to be seen.

The investment climate in Asia is seen as being much more responsive to cryptocurrencies and their potential than in other parts of the world and so it is highly unlikely that the inevitable regulations are going to be overly stringent.

The ‘wild west’ mentality that persists elsewhere in regard to cryptocurrencies is much less prevalent, despite the actions of the PBoC. What is probable is that the understandably wary regulatory bodies will seek to rein in ICOs themselves before too long. If this helps to safeguard investors then so much the better.