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Published Tuesday, September 5th, 2017 in

China ICO Ban and Bitcoin Gambling

China’s central bank, The People’s Bank of China, declared that initial coin offerings (ICOs) were now illegal in the country. ICOs allow investors to purchase tokens of a platform in a similar way to how one might buy shares in a company. Investors buy the tokens from an ICO with the expectation that they can be sold at a later date for profit. The problem with ICOs is that many of them are either ponzi schemes or flat out scams; capitalizing on the opportunity to make millions from “vaporware” that was never intended to be built. The PBoC’s ban is heavy handed, but comes as no surprise – particularly with the USA’s Securities Exchange Commission also stating that ICO investments had not gone unnoticed. Of course this type of regulation is necessary to protect consumers from being exploited by the hype, however the impact of such regulation has collateral damage – particularly for the crypto gambling market – where the likes of FunFair, DAO.casino, Etheroll and Edgeless have all held ICOs and hope to target Chinese gamblers.

How does the China ICO ban affect Bitcoin gambling?

China has banned ICO fundraising – not Bitcoin. However, the ban on these cryptoassets spell a potentially more damaging advance into the broader cryptocurrency space. On the other hand, it is possible that China pulls back on its regulation once it has got a handle on these new ICOs, whose popularity has increased dramatically this year – usurping venture capital for total funds raised. Whilst Bitcoin may hold steady, the same cannot be said for the hugely popular smart-contract gambling platform FunFair (based on Ethereum), whose phase 2 ICO is expected to kick into action later this month. This announcement by China may well setback their second round, as FunFair aims to capitalize on the behemoth that is the Chinese gambling market.

Will the SEC follow suit?

It is unlikely that the SEC will outright ban ICOs in the same way that China did so yesterday. It is more likely that the SEC will (soon) announce that ICOs are to be treated as securities – ensuring that those issuing these tokens follow strict rules. This would make the US market even harder to access, forcing token issuers to deploy expensive legal frameworks around their ICO and creating enormous barriers to entry.

A noose is being tightened around the ICO market – justifiably so in some cases – but the success of the SEC and PBoC’s attempts to regulate the crypto market will now be put to the test. Given the anonymous nature of these coins, it is possible that this entire process transpires to be ineffective.

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