By ODEM IO | October 9, 2017
China’s move last month to ban initial coin offerings surprised some cryptocurrency enthusiasts, though some began shifting their digital assets to exchanges outside the mainland as early as the beginning of the year.
Expectations in China are that the ban on ICOs will be temporary. It will probably stay in place until the government is better able to protect investors and understand how digital currencies affect the economy and capital markets. China is also likely considering ways to capture a larger share of revenue from cryptocurrency trading.
How will the ICO ban affect crowdfunding and the continued development of blockchain technology? The answer lies in understanding China’s desire to spur blockchain-related innovation while reining in the excesses of the ICO phenomenon. Already a world leader in fintech and blockchain technology, China doesn’t want to be left behind.
China’s leaders know full well that blockchain technology is an emerging engine of economic growth. It can’t completely turn its back on cryptocurrency developments, especially as the country grapples with the social and economic implications of its rapidly aging population.
An important question is whether China will continue to allow cross-border payments using digital utility coins within blockchain applications. Our reckoning is that payments for product and services in utility coins will continue, though they will probably require an extra administrative step or two.
Fiat currency will still need to be deposited in a digital wallet and flow through a currency exchange in China. From there, buyers of products or services can move funds to an exchange outside of the country and use normal payment methods. China’s banking laws will continue to limit the external transfer of fiat currency to U.S. $50,000.
Overall, the outlook is positive for companies seeking to conduct micro-payments or cross-border fund transfers, despite the government ban on initial coin offerings. The challenge is to ensure that outbound currency transactions remain are as seamless and user-friendly as possible.