China’s blockchain industry looks overseas as ICO blanket ban stirs fear

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China’s cryptocurrency speculators have had one hell of a week. Since the Chinese government’s announcement on Monday banning all token crowdsales – also known as ‘initial coin offerings’ or ICOs – the country’s blockchain community has scrambled to comply.

ICO platforms where companies list their crowdsales, like Icoinfo and Icoage, have halted their services. Domestic exchanges have taken down tokens from ICOs, forcing investors to withdraw. Even a bitcoin conference in Beijing was affected by the new regulations – the company postponed the event and moved it to Hong Kong.

“Though there will be no ICO related content [during] the summit, we decided to change the time and location of the summit to lower the risks of being canceled,” wrote cryptocurrency startup BitKan, the conference organizer, in an email statement.

In China, the gold rush is over – for now.

The global ICO market, where blockchain startups issue their own digital tokens to investors via crowdsale, has seen an explosion of capital this year. According to industry publication CoinDesk, companies around the world have raised a total of more than US$1.7 billion via ICOs. With little more than a conceptual white paper, blockchain startups have been able to raise millions of dollars worth in cryptocurrency – sometimes as quickly as less than a minute.

In China, however, the gold rush is over for now. Concerned about financial instability, fraud, and disorder, the Chinese government has stepped on the brakes. New rules prohibit new ICO projects from launching and require completed token sales to refund their investors.

See: Everything you wanted to know about ICOs but were too afraid to ask

How and when companies refund clients remains unclear. The ambiguity of China’s blanket ban on ICOs has made it difficult for companies to assess next steps, forcing many to play it safe. BTCChina, one of China’s largest cryptocurrency exchanges, has stopped trading ICOCOIN, the only ICO-related token on its exchange. Some international blockchain startups that have raised token crowdsales this year – especially those significantly backed by Chinese investors – are taking precautions by offering refunds.

Registering an entity overseas is an option for domestic firms, especially in blockchain-friendly markets like Singapore, Switzerland, and Estonia. For instance, Bodhi, a blockchain-based prediction market company, is choosing to register in Singapore to continue operations, according to a statement released to its investors. Its development team will be based in Silicon Valley. Chinese investors who bought its token via ICO platforms will be refunded.

The ambiguity of China’s ICO ban has made it difficult for companies to assess next steps.

“The effect [of the ban] must be watched slowly. Every day is different,” explains the spokesperson of a Beijing-based blockchain startup, who requested anonymity due to fear of repercussions from the government. The company hasn’t launched an ICO but has invested in others. Now, they’ll wait and see what happens.

“Because the government has no way of effectively monitoring ICOs, they’ve stopped them from happening at all,” she explains. As the market develops, it has simultaneously spiraled out of control, so they had to stop it entirely.

Crossing borders

Meanwhile, cryptocurrency holders are rushing to withdraw tokens from exchanges and transferring them into digital wallets, as Chinese exchanges might halt withdrawals in the future. Scrutiny from the People’s Bank of China over capital outflows forced the country’s largest exchanges, such as Huobi and OkCoin, to temporarily stop withdrawals in February.