[Exclusive] Interview with ICOINFO Lao Mao: "The suspension of ICO business is not an order, but an active response to supervision."

On August 30, the blockchain ICO platform ICOINFO issued an "Announcement on the Suspension of ICO Business". Currently, all the "upcoming" and "ongoing" projects on the platform have been cleared.

ICOINFO platform stated that in order to prevent risks, it will take the initiative to suspend all ICO business from now on, and will continue to conduct business in accordance with policy regulations after the relevant regulatory policies are issued. The full text is as follows:

1. Temporarily stop ICO of new projects;

2. Users who have successfully participated in the project can obtain tokens as scheduled according to the established progress of the corresponding project party, and transfer the tokens obtained after the time when the project party allows token transfer;

3. The withdrawal function will be launched on time at 10:00 on September 5 according to the original development schedule, and withdrawals can be made normally after that;

4. During the suspension period, the recharge function will be suspended. Please do not recharge your ICOINFO account.

ICOINFO platform was established in July 2017 and is currently the second largest platform in terms of transaction volume. The main investor behind it is INBlockchain. According to the "2017 First Half Domestic ICO Development Report" released by the National Internet Financial Security Technology Expert Committee in July, the platforms with the largest ICO financing amounts are ICOAGE and ICOINFO, accounting for 30.7% and 22.9% of the market share respectively.

ICOINFO suspended new projects, and the news caused market turmoil. On the digital asset exchange Yunbi, the prices of various tokens fell sharply.

Yunbi.com is a platform with a large volume of digital asset transactions. It was wholly funded by the Bit Fund founded by Li Xiaolai in the early days. Yesterday, the prices of various tokens on Yunbi.com fell sharply. Among them, VEN (VeChain) fell the most, falling 40% in just 3 hours, and the largest drop since its listing was close to 70%; the prices of other tokens also shrunk a lot, with QTUM and 1ST falling by more than 10%.

In the view of some practitioners, one of the reasons for the sharp drop in the secondary market this time is that after intensive regulatory reports, some participants with large amounts of funds are shorting the market: "For example, VEN, which has the largest drop, has been trading sideways for a week after its ICO. Today, a large transaction suddenly pushed the price down. At the bottom, a large amount of funds are absorbing chips. After absorbing a certain amount of chips, they pull up the price to make a profit."

"The suspension of ICO business is not a notification or order from a certain department, but a way for us to proactively welcome supervision." Lao Mao, co-founder of INBlockchain, told All-Weather Technology.

ICOAGE, the platform with the largest ICO transaction volume, is not affected by the market and continues to launch projects normally. All-Weather Technology found that ICOAGE currently has two projects conducting ICO and five projects about to conduct ICO.

"We have not received any news from the regulators yet, and our ICO business will continue as normal in the future," Gong Ming, head of ICOAGE, told All Weather Technology.

How to proactively embrace supervision?

Earlier, there were rumors in the market that the regulatory authorities might take action. On August 24, the China Banking Regulatory Commission drafted the "Regulations on Dealing with Illegal Fund Raising (Draft for Comments)", which listed a series of situations in which the departments responsible for dealing with illegal fund raising should initiate administrative investigations. It is worth noting that these situations include illegal fundraising in the name of virtual currency.

Lao Mao said that the original intention of setting up ICOINFO was to create a better platform to help excellent projects in view of the frequent chaos in ICO in the industry. ICOINFO organized a professional review team of more than 10 people, including professionals from Goldman Sachs and PricewaterhouseCoopers, to study domestic and foreign projects and select excellent ones to be launched on ICOINFO. However, some junk projects also took this opportunity to go crazy. There are indeed uncertain risks in the market.

“The impact of ICO madness on the market is not only reflected in the sudden emergence of a large number of junk money-making projects, but even platform development has become a profession. It is said that a certain big shot has earned 200 million yuan by serving as a consultant for various ICO projects. Although this money appears to be paid by the project party on the surface, it will ultimately be paid by novice users,” he said.

Some heads of ICO token trading platforms told All Weather Technology that major exchanges in the industry regularly participate in regulatory meetings and have not received any requests for closure or rectification. They predict that future supervision may start with the trading platforms’ own supervision, with requirements for the platform’s project screening and investor qualifications.

How will platforms police themselves in the future?

The market is booming and ICO risks are getting higher and higher.

Due to the issuance of a large amount of junk assets, some trading platforms began to charge high entry fees. Some platforms charge 5 to 10 million to launch a new token variety, and the highest is even 60 million. These huge amounts of money are ultimately borne by retail investors in the secondary market.

“For ICO projects, any prior review is useless!” Lao Mao said frankly: After getting a large amount of funds, most teams need to rebalance their hearts, including their character. Those with bad character can just run away. If the project is originally a virtual coin, then everything has been planned long ago. The smarter ones can even push up the price while slowly retreating.

ICOINFO is currently looking for suitable adjustment plans, including:

1. Upgrade from prior review to post review.

Since ICO projects are mainly blockchain development projects, or at least exchange projects that can have clear results, it is entirely possible for the team to publish their own project plans and simultaneous plans for withdrawing funds in the white paper.

for example:

Before March 1, 2018, complete the test network and obtain 30% of the ICO funds after passing the code audit;

On September 1, 2018, the code was put online and after passing the code audit, 40% of the ICO funds were obtained;

…

Before achieving the goal and undergoing code audit, the team can only take 10-20% as basic R&D expenses. In this way, introducing a professional third-party code auditing agency to conduct professional code audits can almost eliminate the birth of all empty projects. The regulatory model of cooperation between regulatory authorities + code auditing companies + ICO platforms will help outstanding blockchain projects stand out.

2. Establish a regulatory risk fund.

Even with post-audit, there is no guarantee that a project will be 100% successful. Perhaps some projects cannot be completed in the end. In that case, after the success of each project's ICO, 5-10% of the funds will be centrally managed and handed over to the regulatory authorities as a compensation fund for project risks. The accumulation of small amounts will add up to a considerable fund. In this way, even if there are some projects that are not successful in the end, the participants can still receive corresponding compensation in proportion, which will greatly reduce the risk of ICO.