What is the way out for ICO after the emergency halt? Global blockchain assets fell across the board

On the afternoon of September 4, after the ICO (initial coin offering) was suddenly stopped, the subsequent disposal work became the focus of attention from all walks of life: shutting down transactions, returning coins, and buying back listed tokens all became possible.

On the afternoon of September 4, the People's Bank of China, together with six other departments including the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission, issued the "Announcement on Preventing the Risks of Token Issuance and Financing" (hereinafter referred to as the "Announcement"), which severely characterized the behavior of financing through the issuance of tokens, including ICO: "Token issuance and financing" is essentially an act of illegal public financing without approval, and is suspected of illegal issuance of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities.

It also ordered that all types of token issuance and financing activities should be stopped immediately from the date of publication of the Announcement.

The most pressing issue right now is undoubtedly what will happen to companies that have conducted ICOs and raised virtual currencies such as Bitcoin or Ethereum from investors but have not yet been listed on exchanges? What will happen to the tokens that are currently being traded?

Issuer or repurchase tokens

A person from a Shanghai trading platform told reporters that some companies that have just completed fundraising but have not yet gone public have gradually returned their coins (Bitcoin or Ethereum) to investors. "For those tokens that are being traded, the process is more complicated. We have stopped trading of tokens such as ICOCOIN and Loopring. In the future, issuers may buy back all the tokens that have been listed and traded."

A source also told the reporter from China Business News: "Once the shares are repurchased, it is difficult to say the price. Referring to the past, the repurchase will generally be based on the 15-day average market price."

The head of a company that had previously conducted ICOs in many places around the world (including China) and has been listed in many places told the reporter from China Business Network: "The announcement was issued very urgently. I had not received any news before, and I have not heard of the term 'buyback'. I still don't know how to deal with the tokens listed in many places around the world."

At present, various trading platforms have taken action. The reporter of China Business News learned that Biying.com issued an announcement that the ETCWin platform will suspend RMB-ICO token transactions and RMB recharge services from 18:00 on September 4, 2017, while the RMB withdrawal function can be used normally. As of the time of the reporter of China Business News, RMB transactions on Biying.com have been completely closed.

As of press time, some token trading platforms such as Yunbi.com are still trading normally, but Yunbi.com also announced on the afternoon of September 4: "Due to the recent large number of people participating in transactions, in order to reduce server pressure and ensure the smoothness of web-based transactions, Yunbi.com has temporarily suspended the API (application programming interface) trading function. Currently, the sosobtcapp client, imtokenapp client and personal API transactions have been temporarily suspended. The time for reopening the third-party trading interface will be notified separately."

On the morning of September 4, media reported that the regulatory authorities had issued the "Notice on the Cleanup and Rectification of Token Issuance and Financing" (hereinafter referred to as "Document No. 99"), requiring local governments to organize relevant departments within their jurisdiction to immediately conduct a survey of token issuance and financing activities within their jurisdiction, and requiring token issuance and financing trading platforms within their jurisdiction to report the financing entities, senior executives, financing amounts, financing time, etc., and to have a detailed understanding of the specific circumstances of token issuance and financing platforms and financing entities. On the evening of September 3, the First Financial reporter asked many token trading platforms in Shanghai and Beijing about this, but the platform leaders said that they had not received local investigation notices. However, on the afternoon of September 4, a blockchain company leader revealed to the First Financial reporter that a Beijing platform had received a notice and began to report the platform's specific trading currencies and token issuing company information. In addition, some platforms have stopped trading RMB against various ICO tokens.

The central bank mentioned in the Announcement: "From the date of this announcement, all types of token issuance and financing activities shall be stopped immediately. Organizations and individuals that have completed token issuance and financing shall make arrangements for liquidation, reasonably protect the rights and interests of investors, and properly handle risks."

In addition, the Notice emphasizes: "Any so-called token financing trading platform shall not engage in the exchange of legal currency and tokens, 'virtual currency', shall not buy or sell tokens or 'virtual currency' or act as a central counterparty to buy or sell tokens or 'virtual currency', and shall not provide pricing, information intermediary and other services for tokens or 'virtual currency'."

The reporter from China Business News also learned from several trading platforms that because the central bank’s “Announcement” was released very suddenly, some platforms had not received any relevant investigation information from the local financial office until noon, and are currently preparing for subsequent “clearance” and other matters.

Global blockchain assets fell across the board

"The current situation is that when it comes to the digital currency market, the world looks to China, China looks to changes in regulatory policies, and China's changes also directly affect the trend of the world's digital currency," Wang Duo, founder of the Biyuan Community, told China Business News.

Bitcoin, Ethereum and other recognized high-quality blockchain assets have been falling since last weekend. Bitcoin has fallen from its historical high of 32,500 yuan on September 2 to 26,600 yuan today, while Ethereum has fallen from a high of 2,522 yuan to the current 1,800 yuan.

In addition, tokens of projects that are globally listed and have actual blockchain applications, such as Status (SNT), TenX (PAY), and OmiseGO (OMG), also fell. The 24-hour declines of the above three blockchain assets were approximately 6.75%, 3.26%, and 5.24%, respectively.

For example, Singapore-based TenX was born on June 21, 2017. TenX is a network blockchain payment system based on Ethereum blockchain technology. This system allows blockchain assets (digital cryptocurrencies) to be used to issue debit cards through TenX, VISA, and Master, allowing users to make quick payments around the world. It is precisely because of the participation of these two giants that TenX has become more popular.

Status can be seen as the Ethereum blockchain version of WeChat. Based on Ethereum's Whisper and Swarm protocols, it implements decentralized instant messaging, Dapp calls and wallet functions (OTC functions will be added later). Similar to WeChat, Status starts with instant messaging and provides the function of transferring Ethereum/other ERC20 tokens within the chat window, similar to sending and receiving red envelopes on WeChat. Its characteristics are that the Ethereum protocol can realize self-sovereignty and an Internet without institutional surveillance, using a peer-to-peer protocol that does not rely on a central server, sending transactions and smart contracts to friends, and enjoying encrypted chats with default settings.

However, even for some high-quality projects, there is a saying in the industry that the market is taking the opportunity to squeeze out the bubble. "In June, there was a 'bear market theory' in the industry, but the bear market has not yet arrived, and the current situation feels a bit like a catch-up decline." Wang Duo told reporters. Judging from the trends of major blockchain assets, this year's increase has indeed reached an astonishing level. It took only two months for Bitcoin to rise from 20,000 yuan to 30,000 yuan.

ICO and IPO have certain formal similarities, but they are very different in essence. ICO does not issue stocks but digital tokens. Blockchain startups use crowdfunding to exchange mainstream digital currencies such as Bitcoin and Ethereum to raise funds for entrepreneurship. Earlier, when ICO had not yet become popular among ordinary retail investors, it was only used by "currency circle" enthusiasts to fund blockchain projects that could not obtain VC investment. However, in China, due to the entry of many retail investors with the mentality of "one coin, one villa", the ICO ecosystem has become more and more complicated, and speculation is prevalent. Many projects even involve illegal financial activities such as fraud and illegal fundraising, which seriously disrupt the economic and financial order and were eventually "cut in half" by regulators.