China ICO ban will help to stop fraud and scams, experts say

Part of the problem regulators may have is that ICOs cover a wide range of activities, according to Linus Lindgren, strategic investor and advisor at BTCXIndia.

“One side of the spectrum would be to sell parts of future revenue of a company via issued tokens to investors who look to speculate in the value of such tokens. The other side of the spectrum could be charities issuing ‘thank you’ tokens in exchange for donations. In between, there are many varieties and mixes of these,” he told CNBC via email on Monday.

“The discussion to be had now is where on the ‘token spectrum’ regulators will draw the line, and where and how these activities should be regulated.”

The move by China received mixed reactions. Cryptocurrencies fell on the move as it created negative market sentiment. Bitcoin hit a low of $4,037 on Tuesday but has recovered to around $4,500 on Wednesday.

Some, such as David Moskowitz, co-founder and CEO of blockchain-powered social network Indorse, welcome the move as a way to protect consumers from fraudulent ICOs.

“We hope the authorities will recognize the potential of the sector for economic growth and technological development, and enact rules which will allow for the safe and secure future of the industry,” he said in an press statement.

Others were more skeptical, pointing out that the ban could lead to competition with other countries that are more welcoming for ICOs.

“Some governments and incumbents will try to shut down this movement, and come to unreasonable extremes in order to do so. However, thanks to the internet and cryptography, there’s no going back,” said Luis Cuende, co-founder and project lead at blockchain developer Aragon, in an email.

“Eventually, some other governments will embrace token sales and crypto in general, creating jurisdictional competition, and forcing the incumbents to be reasonable.”

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