14 ms·

The China ICO Ban

149 points by ot 9y ago

deleted 9y ago
[deleted]
designium 9y ago
One of the biggest issue is to make a distinction of what is a legit ICO vs a pyramid scam/pure fraud. Without a reliable source of truth, anyone can make a splashy website, add a bunch of advisors, create a catchy "kickstarter" selling point and raise millions. The issue with regulators is that they may enforce the same kind of scrunity applied to big financial firms to legit ICO and that can stiffle startup to raise money. My fear is that pushes the whole ICO game for only people who have the existing expertise in working around the regulatory rules; then only big players or people with big resources can play the ICO game.
- aaron-lebo 9y ago
  Who cares? What makes ICOs good in and of themselves? The % of people who actually need to raise tens of millions of dollars before they've built anything is almost nil. It incentivises empty promises and bullshit marketing and idea guys who have never built anything real in their life. Those are bad incentives for those businesses and for consumers, because they're the ones who ultimately pay for bad products.
  - deleted 9y ago
    [deleted]
- AJ007 9y ago
  There just haven't been enough enforcement actions yet. "Advisors" will think twice once there is a history of people doing these paid endorsements for fraudulent fundraising losing their jobs and going to jail.
  - mbgaxyz 9y ago
    Nobody wants to be the first ICO "advisor" to be made an example of... https://www.bitsonline.com/china-death-penalty-ico-traders/ https://www.bitsonline.com/china-death-penalty-ico-traders/ https://www.cbsnews.com/news/death-penalty-for-chinese-ant-farm-scammer/ https://www.cbsnews.com/news/death-penalty-for-chinese-ant-f... http://www.chinadaily.com.cn/china/2011-11/09/content_14061161.htm http://www.chinadaily.com.cn/china/2011-11/09/content_140611...
- problems 9y ago
  I have an email address that's on the old Mt.Gox leaked database. I get spam every day now advertising this or that new ICO. And I check up on them and every time they're making millions. New way to earn cash from spam I guess...
- the_stc 9y ago
  It's telling that the author had to use Ethereum as an example. It's just really hard to find good ICO examples that make sense and have a real business. Most ICOs have a hard time justifying their token. Some are obviously just speculative investments. I hope ICOs come to an end for the most part. We're doing something similar to an ICO, except issuing shares. Shares are a known thing, and well established. Share price should grow based on the company's prospects, not pumping schemes. Cryptocurrency fundraising as a whole is still incredibly valuable. In our case, legal risk means we can't raise money from people we know (oh, how that'd be so much easier!). Even without the anonymity issues, I think a lot of companies are going to abandon ICOs after the token bubble pops and stick to traditional share-selling, using tokens as a ledger.
  - dharma1 9y ago
    while I agree with you, I think the regulators (SEC already said as much) have even more of an issue with unregulated securities/shares
seibelj 9y ago
Please, please keep spreading FUD about ICO's and cryptocurrencies. Drive the price down for a few days so I can buy more.
- sgspace 9y ago
  How is this FUD when it is actual news?
  - nipponese 9y ago
    This is probably the first piece I'd read on the topic that ISN'T FUD.
thrill 9y ago
We have all the regulation that we need - it's already illegal to commit fraud and enforcement of that law is sufficiently addressed. Anything else is simply making it more difficult for valid efforts to be successful.
- exogeny 9y ago
  That's only true under the supposition that the authorities are of a sufficient expertise to be able to demonstrably prove that fraud. Surely you'd agree that ICOs are a somewhat new thing, yes? And surely you'd also agree that - having been through this once before in the mid 1990s - that new market technologies have a disproportionate amount of fraud in their early stages, which generates an attendant disproportionate amount of destabilization against the progress of that technology growing mainstream acceptance. I'm not sure if ultimately this is a politics thing or what; if people are getting scammed, it needs to be addressed. Full stop. I don't buy into the whole libertarian fantasy (ie: if they were scammed, it's their fault; no oversight!) because that puts a tremendous amount of power into the hands of the least scrupulous people. I don't really understand why people who believe in blockchain the most aren't screaming until their heads explode about regulation, honestly. How do you think it looks when people like Mayweather and Paris Hilton and friggin' Gurbaksh Chahal get involved? How does that advance the technology? How does that prove the value of the concept? If you actually believe in it, you should be for regulating bad actors out of it.
- bhouston 9y ago
  ICOs should be regulated like stocks because that is what they are. ICOs are the wild west of OTC stocks without any pretense of regulation. It is just scams everywhere.
- JumpCrisscross 9y ago
  The SEC has a limited budget. It is probably most frauds will require defrauded investors to fund their own investigations.
justicezyx 9y ago
Typical capitalism mindset: If I see upward trend and there is a problem, then let me earn my profit, government or regulatory bodies can come in when things go bad. If I see downward trend, and I am afraid of loss, I will ask government step in immediately instead of letting me die and fix the issue afterwards. Why not the opposite? Regulate heavily when it's not mature and when it finally proves it's maturity, set it free. Because that will not give a small fraction of the population the chance to scoop in a hugely inapproprotional profit.
- deleted 9y ago
  [deleted]
- aaron-lebo 9y ago
  If you heavily regulate immature industries, you 1) don't know what to regulate and 2) don't give the industry the ability to reach maturity. It's the mature massive companies that are the danger to market and personal freedoms anyway.
  - neom 9y ago
    That logic is almost akin to: I'm raising a kid and I don't know what a human needs or how it will turn out so ¯\_(ツ)_/¯
    - aaron-lebo 9y ago
      No because other people have raised children. As of 2000, nobody knew what a mature social network looked like.
      - deleted 9y ago
        [deleted]
  - justicezyx 9y ago
    Regulate will kill an industry? Can you give me an example?
aaron-lebo 9y ago
edit: there will be enough criticism of this piece, but here's a semi relevant quote: In the information age, the barriers [to entry into programming] just aren't there. The barriers are self imposed. If you want to set off and go develop some grand new thing, you don't need millions of dollars of capitalization. You need enough pizza and Diet Coke to stick in your refrigerator, a cheap PC to work on, and the dedication to go through with it. We slept on floors. We waded across rivers. - Carmack
- LastM6 9y ago
  "Not exactly a surprising reaction coming from a VC who's making a curated list of ICOs a business." Bingo.
AndrewKemendo 9y ago
ICO is a distribution service on-top of a blockchain system. That's not all that interesting in this conversation. What is interesting is the same thing that has been interesting from the beginning of the blockchain discussion. Namely that these "coins" purportedly offer an alternative currency to sovereign national currency. I have always held the view that, the fundamental utility of doing commerce through a currency that is outside of sovereign national control/purview is a hard ceiling for any of these systems. Probably the biggest lever a government has on their nation is monetary policy. There is no way that a government would allow the subversion of that. At the point in which any alternative currency based market becomes big enough to matter within the boundaries of an existing currency based market, then all a sovereign nation needs to do to kill it is make convertibility to the local currency illegal. China is basically saying, "look we don't even want to come close to this type of alternative currency possibly getting huge" - and the ICO method allows pretty much anyone to convert Yuan to "coin." So they went ahead and did what I have been suggesting would happen, but much earlier than I suspected. The only way that wouldn't work is if nearly all necessary services, retail, logistics etc... uses the alternative currency. In which case the native currency has effectively failed and thus the government has failed as well. So I don't see what the real upside here is, outside of very tiny, niche marketplaces that require this kind of currency. I haven't heard anyone actually respond to this line of criticism of Blockchain. Blockchain is a perfect solution for many things, but as a currency it's dead on arrival IMO.
- ojr 9y ago
  "Blockchain" is nothing but a fancy database without Bitcoin, good luck making it completely illegal like alcohol, marijuana, torrents
  - korzun 9y ago
    > "Blockchain" is nothing but a fancy database without Bitcoin, good luck making it completely illegal like alcohol, marijuana, torrents I will put my money on the Chinese government. Your Bitcoins are worthless if you can't exchange them. A business will not risk losing their 'real' assets in favor of Bitcoin 'economy.' The play in the U.S is cute but make no mistake; the government can pull the plug at any given moment, and there is absolutely nothing you will or can do about it.
bhouston 9y ago
The large majority of ICOs I've read about are massive scams. There is rarely any underlying value, but because of the hype you can still make tons of money via pure speculation, celebrity endorsements and other various types of pump/dump approaches. It is way worse that OTC. I think it is most self-aware scammers and the majority of the rest are naive. The only ones I've seen that are not truly scammers are those providing the platform for ICOs (e.g. Etherium, etc), because at least they are doing what they say they are doing.
- vasilipupkin 9y ago
  how do you make money via the schemes? if an ICO raises money, it has to attempt to build the product, or else, the people behind it are highly likely to suffer wire fraud charges. Meaning, you can't do an ICO, collect the money and buy a boat. You'll likely go to jail.
  - elmigranto 9y ago
    You can always accidentally forget to change your web server login from default admin:admin and get hacked.
  - bhouston 9y ago
    Are ICOs binding? Can you claim failure after a best attempt at building the proposed product? Can you build a shitty version of the product via outsourcing via Upwork to a third world country. And then claim surprise when it barely functions at all?
    - vasilipupkin 9y ago
      I think if you don't put forward a bona fide best effort, you are vulnerable to fraud charges. Yes, you can probably build a shitty version. But if it can be proved via any email or conversation or some other means that this was your intent, you will be vulnerable to fraud charges. You can't just steal the money you raised in an ICO
Sharlin 9y ago
This is the first time I've heard of "initial coin offerings" but eg. the Bloomberg article doesn't bother to explain the term at all. I can't be the only one, right?
- Nursie 9y ago
  At least one seems to turn up in every ICO discussion on HN :) AFAICT it's a way of issuing your own coins/tokens, which people pay for (usually in ether) and they generally act as a sort of share of the enterprise they are funding - promises of profit sharing etc are usually there. Many seem to be rather worthless, and some ideas have apparently achieved masses of funding based on some buzzwords and a white paper. These tokens can then be traded, with values dictated more by hype-cycle than the actual progress of any product. IMHO it's part of the current trend of reinforcing and amplifying the wealth of those that already hold crypto-currencies and are already plugged into the scene. Witness the BCC fork a few weeks ago now ICOs, etc.
- ww520 9y ago
  I've only looked at this thing in passing. Here's my take of it. Bitcoin is too hard to come by. You have to spend money and electricity to mine it. So people are thinking, hey, why don't we create a new crypto coin, ShiningCoin, using the available crypto infrastructure, like Ethereum. And let's set aside 1 million ShiningCoin as the initial coins, before mining the rest. Voila, we just got 1 million coins without spending the money and effort to mine them! Ok, let's offer 100,000 of those initial ShiningCoin to investors to fund our development effort to build up ShiningCoin, promising them with huge growth in ShiningCoin value ahead; everyone knows crypto currency only goes up, right? We'll ask investors to pay 1 Bitcoin for 1 ShiningCoin. We then got 100,000 Bitcoins (or 100K X $4000/bc = $400 millions) at the Initial Coin Offering. Yeah, we're rich! That's basically how ICO works.
- ahabsnake 9y ago
  your not the only one
Nursie 9y ago
Given what was said on business-insider I'd look at the statement to potentially be far more far-reaching - http://uk.businessinsider.com/initial-coin-offering-china-bitcoin-ethereum-peoples-bank-of-china-law-all-crypto-illegal-etoro-2017-9?r=US&IR=T http://uk.businessinsider.com/initial-coin-offering-china-bi... It could be that all crypto-currency trading, either between crypto-currencies or from crypto-currency to 'fiat' in China is now illegal.
thesausageking 9y ago
A guy who's an investor in one of the biggest ICOs of all time (Filecoin) wants governments to not ban them. But it's not about him; it's about "beating China to market". ok.
deleted 9y ago
[deleted]
jbigelow76 9y ago
-- Slightly off topic -- I've got a dumb question as someone who only catches bits and pieces of crypto currency stuff by way of HN and twitter. Is an ICO a way to put coins out on the market and skipping all the mining stuff? Does the mining still happen to release new coins or is the amount floated at time of the ICO the total number of coins that will exist for currency? edit: added off topic note.
- gruez 9y ago
  see: https://news.ycombinator.com/item?id=15176596 https://news.ycombinator.com/item?id=15176596
voycey 9y ago
I'm interested in how someone who says Bitcoin is a classic bubble has never heard of ICO's, surely if he has enough information on Bitcoin to determine that it is a bubble then he would have looked at the whole ecosystem and understood what an ICO is?
denisehilton 9y ago
So that means no more Bitcoin mining in China? Why would they ban it when there's a huge amount of revenue coming to their country.

149 points by ot 9y ago

deleted 9y ago

[deleted]

One of the biggest issue is to make a distinction of what is a legit ICO vs a pyramid scam/pure fraud. Without a reliable source of truth, anyone can make a splashy website, add a bunch of advisors, create a catchy "kickstarter" selling point and raise millions. The issue with regulators is that they may enforce the same kind of scrunity applied to big financial firms to legit ICO and that can stiffle startup to raise money. My fear is that pushes the whole ICO game for only people who have the existing expertise in working around the regulatory rules; then only big players or people with big resources can play the ICO game.

aaron-lebo 9y ago
Who cares? What makes ICOs good in and of themselves? The % of people who actually need to raise tens of millions of dollars before they've built anything is almost nil. It incentivises empty promises and bullshit marketing and idea guys who have never built anything real in their life. Those are bad incentives for those businesses and for consumers, because they're the ones who ultimately pay for bad products.
- deleted 9y ago
  [deleted]
AJ007 9y ago
There just haven't been enough enforcement actions yet. "Advisors" will think twice once there is a history of people doing these paid endorsements for fraudulent fundraising losing their jobs and going to jail.
- mbgaxyz 9y ago
  Nobody wants to be the first ICO "advisor" to be made an example of... https://www.bitsonline.com/china-death-penalty-ico-traders/ https://www.bitsonline.com/china-death-penalty-ico-traders/ https://www.cbsnews.com/news/death-penalty-for-chinese-ant-farm-scammer/ https://www.cbsnews.com/news/death-penalty-for-chinese-ant-f... http://www.chinadaily.com.cn/china/2011-11/09/content_14061161.htm http://www.chinadaily.com.cn/china/2011-11/09/content_140611...
problems 9y ago
I have an email address that's on the old Mt.Gox leaked database. I get spam every day now advertising this or that new ICO. And I check up on them and every time they're making millions. New way to earn cash from spam I guess...
the_stc 9y ago
It's telling that the author had to use Ethereum as an example. It's just really hard to find good ICO examples that make sense and have a real business. Most ICOs have a hard time justifying their token. Some are obviously just speculative investments. I hope ICOs come to an end for the most part. We're doing something similar to an ICO, except issuing shares. Shares are a known thing, and well established. Share price should grow based on the company's prospects, not pumping schemes. Cryptocurrency fundraising as a whole is still incredibly valuable. In our case, legal risk means we can't raise money from people we know (oh, how that'd be so much easier!). Even without the anonymity issues, I think a lot of companies are going to abandon ICOs after the token bubble pops and stick to traditional share-selling, using tokens as a ledger.
- dharma1 9y ago
  while I agree with you, I think the regulators (SEC already said as much) have even more of an issue with unregulated securities/shares

seibelj 9y ago

Please, please keep spreading FUD about ICO's and cryptocurrencies. Drive the price down for a few days so I can buy more.

sgspace 9y ago
How is this FUD when it is actual news?
- nipponese 9y ago
  This is probably the first piece I'd read on the topic that ISN'T FUD.

thrill 9y ago

We have all the regulation that we need - it's already illegal to commit fraud and enforcement of that law is sufficiently addressed. Anything else is simply making it more difficult for valid efforts to be successful.

exogeny 9y ago
That's only true under the supposition that the authorities are of a sufficient expertise to be able to demonstrably prove that fraud. Surely you'd agree that ICOs are a somewhat new thing, yes? And surely you'd also agree that - having been through this once before in the mid 1990s - that new market technologies have a disproportionate amount of fraud in their early stages, which generates an attendant disproportionate amount of destabilization against the progress of that technology growing mainstream acceptance. I'm not sure if ultimately this is a politics thing or what; if people are getting scammed, it needs to be addressed. Full stop. I don't buy into the whole libertarian fantasy (ie: if they were scammed, it's their fault; no oversight!) because that puts a tremendous amount of power into the hands of the least scrupulous people. I don't really understand why people who believe in blockchain the most aren't screaming until their heads explode about regulation, honestly. How do you think it looks when people like Mayweather and Paris Hilton and friggin' Gurbaksh Chahal get involved? How does that advance the technology? How does that prove the value of the concept? If you actually believe in it, you should be for regulating bad actors out of it.
bhouston 9y ago
ICOs should be regulated like stocks because that is what they are. ICOs are the wild west of OTC stocks without any pretense of regulation. It is just scams everywhere.
JumpCrisscross 9y ago
The SEC has a limited budget. It is probably most frauds will require defrauded investors to fund their own investigations.

justicezyx 9y ago

Typical capitalism mindset: If I see upward trend and there is a problem, then let me earn my profit, government or regulatory bodies can come in when things go bad. If I see downward trend, and I am afraid of loss, I will ask government step in immediately instead of letting me die and fix the issue afterwards. Why not the opposite? Regulate heavily when it's not mature and when it finally proves it's maturity, set it free. Because that will not give a small fraction of the population the chance to scoop in a hugely inapproprotional profit.

deleted 9y ago
[deleted]
aaron-lebo 9y ago
If you heavily regulate immature industries, you 1) don't know what to regulate and 2) don't give the industry the ability to reach maturity. It's the mature massive companies that are the danger to market and personal freedoms anyway.
- neom 9y ago
  That logic is almost akin to: I'm raising a kid and I don't know what a human needs or how it will turn out so ¯\_(ツ)_/¯
  - aaron-lebo 9y ago
    No because other people have raised children. As of 2000, nobody knew what a mature social network looked like.
    - deleted 9y ago
      [deleted]
- justicezyx 9y ago
  Regulate will kill an industry? Can you give me an example?

aaron-lebo 9y ago

edit: there will be enough criticism of this piece, but here's a semi relevant quote: In the information age, the barriers [to entry into programming] just aren't there. The barriers are self imposed. If you want to set off and go develop some grand new thing, you don't need millions of dollars of capitalization. You need enough pizza and Diet Coke to stick in your refrigerator, a cheap PC to work on, and the dedication to go through with it. We slept on floors. We waded across rivers. - Carmack

LastM6 9y ago
"Not exactly a surprising reaction coming from a VC who's making a curated list of ICOs a business." Bingo.

AndrewKemendo 9y ago

ICO is a distribution service on-top of a blockchain system. That's not all that interesting in this conversation. What is interesting is the same thing that has been interesting from the beginning of the blockchain discussion. Namely that these "coins" purportedly offer an alternative currency to sovereign national currency. I have always held the view that, the fundamental utility of doing commerce through a currency that is outside of sovereign national control/purview is a hard ceiling for any of these systems. Probably the biggest lever a government has on their nation is monetary policy. There is no way that a government would allow the subversion of that. At the point in which any alternative currency based market becomes big enough to matter within the boundaries of an existing currency based market, then all a sovereign nation needs to do to kill it is make convertibility to the local currency illegal. China is basically saying, "look we don't even want to come close to this type of alternative currency possibly getting huge" - and the ICO method allows pretty much anyone to convert Yuan to "coin." So they went ahead and did what I have been suggesting would happen, but much earlier than I suspected. The only way that wouldn't work is if nearly all necessary services, retail, logistics etc... uses the alternative currency. In which case the native currency has effectively failed and thus the government has failed as well. So I don't see what the real upside here is, outside of very tiny, niche marketplaces that require this kind of currency. I haven't heard anyone actually respond to this line of criticism of Blockchain. Blockchain is a perfect solution for many things, but as a currency it's dead on arrival IMO.

ojr 9y ago
"Blockchain" is nothing but a fancy database without Bitcoin, good luck making it completely illegal like alcohol, marijuana, torrents
- korzun 9y ago
  > "Blockchain" is nothing but a fancy database without Bitcoin, good luck making it completely illegal like alcohol, marijuana, torrents I will put my money on the Chinese government. Your Bitcoins are worthless if you can't exchange them. A business will not risk losing their 'real' assets in favor of Bitcoin 'economy.' The play in the U.S is cute but make no mistake; the government can pull the plug at any given moment, and there is absolutely nothing you will or can do about it.

bhouston 9y ago

The large majority of ICOs I've read about are massive scams. There is rarely any underlying value, but because of the hype you can still make tons of money via pure speculation, celebrity endorsements and other various types of pump/dump approaches. It is way worse that OTC. I think it is most self-aware scammers and the majority of the rest are naive. The only ones I've seen that are not truly scammers are those providing the platform for ICOs (e.g. Etherium, etc), because at least they are doing what they say they are doing.

vasilipupkin 9y ago
how do you make money via the schemes? if an ICO raises money, it has to attempt to build the product, or else, the people behind it are highly likely to suffer wire fraud charges. Meaning, you can't do an ICO, collect the money and buy a boat. You'll likely go to jail.
- elmigranto 9y ago
  You can always accidentally forget to change your web server login from default admin:admin and get hacked.
- bhouston 9y ago
  Are ICOs binding? Can you claim failure after a best attempt at building the proposed product? Can you build a shitty version of the product via outsourcing via Upwork to a third world country. And then claim surprise when it barely functions at all?
  - vasilipupkin 9y ago
    I think if you don't put forward a bona fide best effort, you are vulnerable to fraud charges. Yes, you can probably build a shitty version. But if it can be proved via any email or conversation or some other means that this was your intent, you will be vulnerable to fraud charges. You can't just steal the money you raised in an ICO

Sharlin 9y ago

This is the first time I've heard of "initial coin offerings" but eg. the Bloomberg article doesn't bother to explain the term at all. I can't be the only one, right?

Nursie 9y ago
At least one seems to turn up in every ICO discussion on HN :) AFAICT it's a way of issuing your own coins/tokens, which people pay for (usually in ether) and they generally act as a sort of share of the enterprise they are funding - promises of profit sharing etc are usually there. Many seem to be rather worthless, and some ideas have apparently achieved masses of funding based on some buzzwords and a white paper. These tokens can then be traded, with values dictated more by hype-cycle than the actual progress of any product. IMHO it's part of the current trend of reinforcing and amplifying the wealth of those that already hold crypto-currencies and are already plugged into the scene. Witness the BCC fork a few weeks ago now ICOs, etc.
ww520 9y ago
I've only looked at this thing in passing. Here's my take of it. Bitcoin is too hard to come by. You have to spend money and electricity to mine it. So people are thinking, hey, why don't we create a new crypto coin, ShiningCoin, using the available crypto infrastructure, like Ethereum. And let's set aside 1 million ShiningCoin as the initial coins, before mining the rest. Voila, we just got 1 million coins without spending the money and effort to mine them! Ok, let's offer 100,000 of those initial ShiningCoin to investors to fund our development effort to build up ShiningCoin, promising them with huge growth in ShiningCoin value ahead; everyone knows crypto currency only goes up, right? We'll ask investors to pay 1 Bitcoin for 1 ShiningCoin. We then got 100,000 Bitcoins (or 100K X $4000/bc = $400 millions) at the Initial Coin Offering. Yeah, we're rich! That's basically how ICO works.
ahabsnake 9y ago
your not the only one

Nursie 9y ago

Given what was said on business-insider I'd look at the statement to potentially be far more far-reaching - http://uk.businessinsider.com/initial-coin-offering-china-bitcoin-ethereum-peoples-bank-of-china-law-all-crypto-illegal-etoro-2017-9?r=US&IR=T http://uk.businessinsider.com/initial-coin-offering-china-bi... It could be that all crypto-currency trading, either between crypto-currencies or from crypto-currency to 'fiat' in China is now illegal.

thesausageking 9y ago

A guy who's an investor in one of the biggest ICOs of all time (Filecoin) wants governments to not ban them. But it's not about him; it's about "beating China to market". ok.

deleted 9y ago

[deleted]

jbigelow76 9y ago

-- Slightly off topic -- I've got a dumb question as someone who only catches bits and pieces of crypto currency stuff by way of HN and twitter. Is an ICO a way to put coins out on the market and skipping all the mining stuff? Does the mining still happen to release new coins or is the amount floated at time of the ICO the total number of coins that will exist for currency? edit: added off topic note.

gruez 9y ago
see: https://news.ycombinator.com/item?id=15176596 https://news.ycombinator.com/item?id=15176596

voycey 9y ago

I'm interested in how someone who says Bitcoin is a classic bubble has never heard of ICO's, surely if he has enough information on Bitcoin to determine that it is a bubble then he would have looked at the whole ecosystem and understood what an ICO is?

denisehilton 9y ago

So that means no more Bitcoin mining in China? Why would they ban it when there's a huge amount of revenue coming to their country.