Chinese ICO Regulations, NEO, and Possible Future Scenarios

As many of you probably already know, China on Monday, September 4th put up stricter regulations in regards to initial coin offerings (ICOs). The reaction in the cryptocurrency world was pretty quick with prices dropping all around. What was over a $170 billion total marketcap about a week ago has turned into a $146 billion marketcap, still very impressive considering at the beginning of the year the marketcap was nowhere near these numbers.

Before the Chinese regulations, about a week ago Bitcoin was looking at a high of almost $5000

Effect of the Chinese Regulations

Anything related to ICOs saw a substantial loss after hearing about the news from China. Losses could be seen all around for Litecoin, Ethereum, Bitcoin, and many others. Perhaps one of the biggest losers in this cryptocurrency bloodbath has to be NEO. NEO, previously known as Antshares, dubs themselves a platform for the new smart economy. Many have referred to NEO as the Chinese Ethereum, in the sense that NEO allows developers to create Dapps (decentralized applications) and organizations to host ICOs in a similar fashion to Ethereum. On September 4th, NEO fell from $28 to near $16 at the lowest point, that's over a 40% loss. Since then the NEO council has released an official statement regarding it's stance on ICOs and Chinese government regulation moving into the future.

In the chart below from tradingview.com you can see the price of Neo went from 670,000 satoshis to 524,000 satoshis on the large red candle.

Response from NEO community

Da Hongfei seems to be fairly calm in regards to the recent restrictions on ICOs.

Thanks for all the jailbreaking service offerings I received today. I'm all okay. 😅 Expect official announcement in the coming days. pic.twitter.com/3swq3n9See

- Da Hongfei (@dahongfei) September 4, 2017

NEO has made it a point from the beginning that it will be cooperative with authorities in China. The response from the community on Reddit and social media has been mixed, many have expressed a loss of faith in NEO, while many are optimistic about the future. At the time of this writing NEO is $22.67 on coinmarketcap.com. This is still a very high increase from what it's price was just about a month ago when it was hovering around $6. Currently the majority of volume for NEO is on Binance and Bittrex.

Binance - How are they moving forward in the midst of the Chinese ICO crackdown?

Binance is an international cryptocurrency exchange that is based in China. As a result of being incorporated in China they must also abide by Chinese regulations. The founder of Binance, Changpeng Zhao (known as CZ), is a former CTO of OKCoin and blockchain.info. Binance allows users to pay trading fees with their BNB token. Binance is also a unique platform in the sense that it was one of the first to give users Gas for holding their NEO. On the day of the ICO regulation announcements CZ posted up this tweet:

Only 18% of @binance_2017 users are from China, Other markets are gaining fast. pic.twitter.com/mF3DGMKWu6

- Changpeng Zhao (@cz_binance) September 4, 2017

The image that he posted has an Alexa.com ranking of Binance which shows that 23% of the users on the Binance platform are from the United States, and 18% of them are from China. Binance also posted an official update regarding their views on the regulations which you can view here.

Hshare - What is it and why was it affected so much by the regulations?

Another coin that was heavily impacted by the news of Chinese ICO regulations was Hshare. Hshare is a coin on the Hcash platform which acts as a connector platform between blockchain or DAG based coins. Hshare has many ties to China and is also a coin which is traded on the Binance platform and many other Chinese exchanges. On September 4th, Hshare went from more than 425,000 satoshis to 255,000 satoshis, ($19 to $11).

Possible Future Scenarios

There are many possible future scenarios that can happen in regards to regulations in the cryptocurrency world. The following list sums up a lot of those scenarios but in no way is it a totally exhaustive:

• China does not reduce regulations on ICOs but gives certain platforms more flexibility as long as they follow a strict standard. This would be a definite positive if it happens and would be a very positive thing for platforms such as NEO.
• China increases regulations to gain more of a control on cryptocurrencies in general. This would most likely be the worst scenario as it would cause prices to fall even more than already.
• A majority of coins move their operations outside of China, and operate and do ICOs legally in other countries such as Switzerland. This might not be a very likely scenario, but it would certainly be a positive for the platforms that move out.
• China defines a clear legal outline of doing an ICO and reduces regulations almost completely. Given China's track record of introducing regulations and later reducing them (as seen with Bitcoin and trading platforms in the past) this may be a likely outcome. On the international playing field with countries such as Russia getting ahead in the blockchain space, China would certainly not want to fall behind.

What do I think personally?

In regards to the recent regulations, I hold an overall positive sentiment because I believe that government regulations will pave the route for more traditional investors to get into cryptocurrency thus increasing the legitimacy of cryptocurrency in general and an increase in value in general. In the long term I can see platforms such as NEO doing well and working closely with government to come up with innovative financial solutions as well.

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