China Crypto Regulations: Fears vs Facts

The cryptocurrency market was delivered 2 nasty kung fu hits this week. A Chinese ICO ban (Sept 2nd) and a report that Chinese local exchanges were about to be closed (Sept 7th). As a result the market has tanked substantially and it may not be the end of it yet (see graph below). But is this decline justified? What is really being 'forbidden' and which news reports should be taken more lightly?

Lets dive a bit deeper in these events and separate fears from facts. Or vice versa, truth from rumor.

• ICO ban
  On Monday the People's Bank of China (PBOC) issued a statement in which was by many interpreted as indefinite end to all ICO's. In particular it stated that coin offerings "are unauthorized" and illegal public fundraising would result in criminal investigation for things "such as illegal selling of tokens, illegal issuance of securities, illegal fundraising, financial fraud and pyramid schemes." Further in the PBOC statement it read that from the moment of the notice of the delivered notice "fundraising through coin offering shall be banned immediately."
  Yes this sounds bad, but it didn't end there. During an interview on a state owned national TV station, a government official clarified the ban and said "that China will look to resume ICOs in the future after establishing licensing regulation."
  Also a list was published with 60 ICO's under investigation, but apart from NEO and QTUM the list was relatively harmless in terms of market cap.
  One could argue that the ICO ban was in fact necessary with the recent surge in fraudulent ICOs in China and in the long term this may very well be the regulation that brings ICO's a better reputation nationally and internationally.

• Exchange ban
  On Friday another report was published by Ciaxin, a non state owned Chinese news agency, headlining:

"The Age of Crypto Exchanges is Over"

The article read that all Chinese local exchanges would be closed for trading. Naturally this led to another big selloff. However one could and and therefore should consider the possibility this is just a rumor.
A few reasons why:

1. The media outlet is not state owned and government guidelines are generally broadcasted via government owned outlets instead;
2. The announcement was posted at around 10 PM local time, which would be highly irregular for government announcements;
3. No official sources were named;
4. None of the Chinese exchanges (BTCC, Huobi and OKcoin) have received any notices from the Chinese authorities regarding closing or halting certain services.

All in all it is very likely that the Chinese ICO ban will have a positive effect on the cypto market in the long term while the second reason for the selloff, closure of Chinese exchanges, might be nothing more than a rumor.

What's ahead?

We will most likely see some more turmoil on the Chinese exchanges. Binance has moved most of its operations to Japan and has disabled Chinese investors from trading, while increasing the number of Western cryptocurrencies in its assortment.
In addition, many Chinese currencies are being de-listed currently. On top of that, Yuanbao is delisting "QTUM, NEO, RHC, MXI, and MRYC"

So turbulent times? Yes, but for the savvy investor, this is a time of opportunities.

Stay tuned!

References:
http://www.pbc.gov.cn/english/130721/3377816/index.html
https://cointelegraph.com/news/china-halts-60-icos-as-companies-cancel-sales-awaiting-legislation
https://bitcoinmagazine.com/articles/op-ed-chinas-ico-ban-characteristic-not-catastrophic/
http://boxmining.com/china-ico-ban-temporary-will-introduce-licensing-soon/

Images:
https://www.rottentomatoes.com/m/kung_fu_panda/