The China ICO Ban

Regulators in China imposed a blanket ban on ICOs over the long weekend.

A number of people have reached out to me via email and Twitter asking me what I think about this.

I think regulation of ICOs is inevitable and a good thing if done right (ie lightly).

The SEC’s comments on ICOs back in July were well done in my view.

There are all sorts of bad things going on in the ICO market right now, from outright scams to projects raising tens of millions of dollars on a white paper written in a day to celebrities getting in on the action.

We needed a cooling off period and if China’s actions are that cooling off period, then I welcome them.

However, a blanket ban on ICOs seems like bad policy to me.

The SEC is heading in the right direction by making a distinction between tokens with real utility vs tokens as a substitute for securities. The former is where the innovation lies. The latter is just a fast and loose way around the rules.

If you look back at the Ethereum token offering several years ago, it is hard to see how that was a bad thing. It provided needed funding to the Ethereum project and the result has been a wave of innovation on top of Ethereum, including the whole concept of ICOs.

If I am reading the Chinese regulators correctly, they are saying that an offering like the one that Ethereum did is not going to be allowed. That’s bad.

Many have speculated that this Chinese ban is temporary to give the Chinese authorities time to come up with sensible regulations. I suspect that is right.

However, I would not like to see the SEC and other regulators follow suit. I think a better move would be to work to rid the market of the scams and other bad actors and actions while allowing for real innovation to continue. That seems to be where the SEC is headed and I encourage them to keep going in that direction and not follow the Chinese.

The US has always been a home to innovation and innovators. We have been able to do that while applying sensible regulations (for the most part) on innovative new technologies. If we continue to take that approach we can compete and even beat China to market in areas like blockchain where they are arguably ahead of us. Naval said it well in this tweet yesterday:


Comments (Archived):

  1. jason wright

    regulators need to adopt the classic carrot and stick approach. If Dalia Blass approves an ETF then it will be granted to the model ‘guinea pig’ applicant (i.e. the model of compliance the SEC wants to observe in action in the market to see how it goes). this will give the approved party a competitive advantage and everyone else will quickly fall in line to establish competitive parity. the SEC will need to ‘take down’ a few bad actors, and work with overseas regulators to establish a level playing field. ultimately the same issue will pop up, offshore havens where the bar is set knee high to a grasshopper. will the Swiss play ball? will firewalls go up to block access to offshore ICOs? it’s complicated.gotta get to KYN and ATL compliance in these blockchain networks.although this may sound ‘mean’ i do think a founder or two being prosecuted would help to change behaviour. at the moment too many behave as if they are untouchable. egos and other less desirable human qualities are rampant in the space. it can be a bit much to observe.

    1. creative group

      jason wright:We concur in scope of your post but would hope prosecution is a deterrent to those concocting nefarious schemes and hoping or wishing anyone losing their liberty to the Penal Industrial Complex highlights the lack of understanding of it.Those who have the means, lack of any criminal background benefit more with less punishment.Referring to the rule and not the rare exceptions.

  2. William Mougayar

    A reporter reached out to me, and I told them this:The notice clearly hit at the segment of ICO promoters that had emerged in China with aggressive marketing practices of ICOs. These are the likes of ICOAge and ICO Info who have subsequently released statements about issuing refunds to their customers. These companies were holding custody of tokens while waiting to place them, and the regulatory notice squarely aimed at banning “unauthorized custody financing activities”.This implies that the regulatory authorities in China to follow through and authorize certain outlets and operators once the dust has settled and the bad actors have been flushed out. So, this initial sweeping action was one way to clean the slate for something more substantial that will come later. Therefore, I wouldn’t call it a gift yet to other jurisdictions.Regulators are iterating their way into the right regulations, and this is one case of extreme reaction which will be re-balanced in my opinion.

    1. creative group

      William Mougayar:When reading the China ban within hours of the report we wondered about your thoughts.When technology tied to finance is new there will always be people who want to take a short cut in gaining wealth. The same energy used in concocting a scheme could be used to establish a legitimate going concern. Greed from the investor is usually the motivating factor by the greed of the schemer.

  3. AG LR

    … so a huge gift to China… since China’s CSC has invested $400M in AngelList :-)Agree with the idea that Chinese regulator is just hissing the end of the first half of game and reminding who’s the boss, before coming-back with a more subtle legal canva.

  4. LIAD

    regulators don’t have it easy right now. complex and loosely defined technological innovations are upending the sacred financial systems that have underpinned the nation-state, geopolitical relations and trade for centuries. seems understandable they would over-compensate initially to stem the bleeding and then course-correct over time as the mist-clears.i don’t see how any reasonably intelligent person could have an opinion disimilar to Fred’s on this.

  5. Ami Ben-david

    I agree about China, so maybe a bit of topic, but you equate utility-tokens with innovation and security-tokens with the opposite. I would challenge that and claim that actually asset tokenization, when properly regulated, will have a much broader influence on innovation.Our entire modern economy is based the 19th century invention of limited liability companies and (paper) share certificates. Still in 2017 when you invest in a startup – the rights, share ownership, preferences, stock options, vesting and any other business logic regarding ownership are still held for all practical purposes in Excel sheets in a lawyers office. This makes these assets illiquid for years, and very inefficient in how, who from, and under what conditions, they can raise capital.I suggest that security or equity tokens are just the next (huge step of) evolution from crowdfunding. They enable global crowdfunding which also gives investors liquidity 24X7, instant settlement at practically zero costs and fees. I think it’s pretty easy to demonstrate how much innovation crowdfunding brought, and why regulating it was the right move – so regulating security tokens should be just the extension of that model.

    1. JLM

      .There is no question that tokens are a cousin of crowdfunding. The big question is — “Are they a security and therefore under the umbrella of the US Securities and Exchange Commission?”The SEC, in its inimitable fashion said, “Ummm, could be.”The US SEC reluctantly agreed to the crowdfunding provisions of the JOBS Act. Reluctantly because of the 200 year lag between the law and the SEC’s issuance of the implementing regulations.There is nothing as liberating as a clear set of regulations. There is nothing as confining as a set of regulations. The Devil resides in the details.JLMwww.themusingsofthebigredca…

    2. SubstrateUndertow

      Maybe the problem resides in the way we are presently framing the concept of regulation ?The old static clockworks regulator frameworks that get updated periodically as the regulations are intolerably overrun by changing business/technological realities is no longer adequate in an highly volatile/interdependent/viral network-effect environment?Maybe framing the concept of “regulation” as a set or relational-linked, ratio-driven and inertia-dappened dynamic feedback loops all steered by actual live operational economic/social metrics integration is more in line with our emergent living-system/organic economic reality?An organismic economic-organizing-principle is quickly being imposed on us by an unstoppable age of networked-AI. The sooner we capitulate and reframe the concept of social/economic regulation around a living-system of interdependent “regulator-dynamics” to create a global economic-nervous-system the sooner we can stop spinning our collective wheels.

  6. Vitomir Jevremovic

    Sometimes I wonder what would happen if no one interfered (regulators)?

    1. Matt A. Myers

      A lot of bad things likely. There are always bad people who will take advantage of systems if they can profit – and the more malicious they are, the further they’re willing to go – including murder and assassination – in order to get the results they want. All-or-nothing thinking isn’t a useful ego mind feature, it’s detrimental, it’s insane – as everything is nuanced and must be managed as such. It’s not like regulations don’t come from a reason. We have environmental regulations for reasons. Smoking was popular and promoted by doctors early on – people born into the world taught that we should trust them. Crypto-assets in their current form, where the early adopters will gain an unreasonable amount of wealth transfer should play out similarly. People are realizing social media designed with addictive engagement patterns are also bad for people and society – “social media is the new smoking” –

      1. Vitomir Jevremovic

        But regulators are not robots, they are people. Crypto community is made out of people too, that could in theory, regulate themselves, for the benefit of the community they created. Like wikipedia, or countless other self regulated online communities.

        1. Matt A. Myers

          In theory they can regulate themselves, in the U.S. and other “democratic” societies, how well do we regulate ourselves? Do the people who have the power of the U.S. government and military – not the elected officials or those manipulated to vote for them based on lies etc. but those who lobby and control in other methods – do they have the best interest of the whole world, of the whole global community? No, they don’t – and they’re winning the war against people. Yes, there’s a yin-yang cycle – and we’re in a dark time that may continue to get much darker because of ego mind being so rampant, and heart and community being wholly lacking; capitalism’s current structure is in part to blame, preventing people from having the time to gather and be in community to share and learn about others, protest if need be – which is why Universal Basic Income is very important to implement, and where a healthy-positive structured blockchain could allow for a UBI system to be well-implemented.There is the “global crypto-asset community” – and there are the individual crypto-asset communities out there. There are people trying to create “stable” coins, however the crypto-assets that have the biggest speculative value behind them are clearly gaining all of the traction and money being put into it. And money talks right? And we are fighting to get money out of politics – lobbying, right? So why don’t we fight to take the money/speculative nature out of crypto-assets too if they have such a strong utility value otherwise? There’s a parallel here that that money has a similar negative impact as money in politics has.

        2. Michael Elling

          Read Plato’s Republic. Analog, digital; no difference.

    2. JLM

      .Puerto Rico? Cuba?JLMwww.themusingsofthebigredca…

    3. SubstrateUndertow

      Chaos because regulation is endemic to all complex/adaptive systems.Its like asking if we could turn off all those complex regulator feedback systems within the hunan body would we possible create an innovative superhuman ?

  7. kidmercury

    coin enthusiasts will eventually need to summon greater political will. established nation-state currencies will seek to defend their position by declaring competing digital currencies illegal, sources of terroist funding, etc, or will seek to co-opt the blockchains and by creating one official blockchain and declare all others illegal. both results prevent the currency revolution and ensuing golden age from unfolding.ICOs are good for getting rich quick for some, but are antithetical to creating currencies for transaction-based economies, which most chain/coins purport to be interested in. the demise of ICOs is thus only a matter of time, regulatory intervention or not.

    1. JLM

      .The second political reality sets in, the ICO sponsors will do what every business ever has done — try to get gov’t to erect moats to protect their “unique” businesses.The other day I was brought up to speed on obtaining a bank charter in the US currently. My last involvement with the subject was more than 30 years ago.It cannot be done. I doubt Mother Theresa could pass the background implications.It will be innovation, corruption, regulation, death.JLMwww.themusingsofthebigredca…

  8. PhilipSugar

    One other point which is the elephant in the room:It was a way for Chinese people to get money out of China (I see this in action every day at UofD) and the Government didn’t like that.

    1. JLM


    2. Douglas Crets

      no. that outflow is miniscule

      1. PhilipSugar

        Judging from the R8’s, Bentleys, and AMG’s I see students driving in my town, I would have to very much disagree. I ask them and they say to get money out of China.Have you done business in China? I have a datacenter there, in Shanghai. I have a conference this month. I have a Chinese friend that buys scrap metal here in the U.S. and ships it to China because they can re smelt it without the environmental regulations that we have in the U.S. which make it unprofitable, they smelt it there pollute the air and ship it back to us.No you are seriously wrong.The Chinese Government does not like money leaving China.Except if they approve.

        1. Douglas Crets

          I have lived here, invested here, and worked here for over ten years. Beijing and Hong Kong. The data shows that the money leaving China through crypto currency was not large. The cost for doing so was too high.Sorry, but you should talk to the people who run these exchanges in China. It wasn’t happening.

        2. Douglas Crets

          And I should point out, buying things with cash (NOT BITCOIN) is a way to get money out of China. Same with buying houses, apartments, ships, yachts, food, warehouses, railway cars… But the level of people and amounts going thrugh bitcoin was miniscule and still is. China doesn’t account for much of the global trade in crypto. You are levying a bias to make a point, and it’s incorrect.

          1. PhilipSugar

            I’ll take your counterpoint. But I still think you have to consider the possibility.

          2. Douglas Crets

            I did consider the possibility, and then looked into it, researched it, didn’t rely on anecdotal evidence. Spoke to people. It wasn’t happening! The Chinese, like anyone else, don’t want to lose money to fees, and if you buy that much bitcoin to make capital flight worthwhile, you are going to mess up the rates, and you are going to get cut. There are easier ways to get that money out of china.

          3. LE

            I think you are both right. It’s part of a ‘long tail’ of ways the Chinese get money out of the country. As you know I am involved in another way they did and do this. Was truly incredible what happened.Also (and more to your point about bitcoin/ico’s) from what I know (and have experienced) Chinese are of a gambling mentality in addition to making a buck. Lucky numbers and so on. They are also very lemming like (statement of observation not some fact I dug up) so they will quickly hop onto what others in China appear to be doing. Sure everyone does this but my feeling is the Chinese are more like this than others possibly. Maybe I am wrong.All of that money going to real estate in the US but only in certain places. So even though Philly is only 90 miles from NYC most Chinese are not pumping up RE there and driving up prices (or any foreigners for that matter).By the way the other underpinning of kids buying expensive cars (have been told that at dealerships I frequent) is because foreigners are much more into display of wealth so they are perceived as important and more untouchable. So if they can spend and afford that’s what they do. (Ever notice how they fix up some interiors of houses or same with the Russians all Czar like..)

          4. PhilipSugar

            You are right on all counts. We had somebody from our Hong Kong office come over and he said…..damn look at all these Chinese kids driving six figure cars. We said yes, many Asian students drive expensive cars. He corrected us, and said no they are Chinese, it is a status symbol too.

          5. SubstrateUndertow

            Your assertion maybe correct how would a peanut gallery occupant like me know?But the Chinese government might be reacting not to the present volume but to what it sees as future uncontrollable volumes of outflow ?

          6. Douglas Crets

            YOu would need to start educating yourself. Part of the problem is that many people in the West think of China and its government as a monolith that acts in concert with itself. That’s not how it works. And it’s also not helpful to think of things in generalizations, which is often what people do when thinking of China. If you are content being in the peanut gallery, and content with people informing you from this perch, prepare to never know what is going on. IT’s the kind of world where you need to go there, learn about it, and become part of it to truly understand. If you are not taking that risk, you are missing out on what is happening in this format.

    3. Tommy

      Right. This is about scams and currency controls.

    4. William Mougayar

      Very good point. Sounds logical.

  9. Douglas Crets

    I’m in China currently, where I work and invest. The talk in Chinese circles is that ICOs may come back and if they do come back will only be listed on a small number of approved platforms. The issue seemed to be less about runaway profits for people investing in these, and more to do with some banks were allegedly serving as intermediaries for these ICOS and using funds to alter their overcooked or weakening loan books. In this light, you could also see the ICO ban as a way of cooling off bank behavior, which is also a good thing.

  10. Twain Twain

    China has already extracted the value it wanted from blockchain and moved onto other technologies. SV is behind its curve.

    1. SubstrateUndertow

      I’d like to hear you unpack that a little more ?

      1. Twain Twain

        They lead in Quantum Computing, Deep Learning (speech and vision recognition), robotics AND … male:female engineers is 60:40 which compares with Silicon Valley’s 82:18.

  11. Matt A. Myers

    “If I am reading the Chinese regulators correctly, they are saying that an offering like the one that Ethereum did is not going to be allowed. That’s bad.”Why is that bad? Ethereum’s Ether and Bitcoin, contrary to what the pro-crypto-asset folks like to admit to or acknowledge, are globally de-centralized Ponzi-like schemes. This fact when mentioned is generally immediately justified with talking about something different or ignored completely.. There are a lot of brilliant people on HN, for example, that see and understand this – and are far more eloquent about it than I; in part I’m saying this to acknowledge the echo chamber that seems to have developed here at AVC.In one of Albert’s talks you recently embedded here, he said there are 2 ways to have things be adopted – how we get people collaborating. The method of using the State IMHO is the best way – the elected government to implement a healthy-positive blockchain technology that isn’t diverting wealth unnecessarily and unreasonably to early adopters – to gain the utility of blockchain and eliminate the speculation and profiteering and other malicious behaviours that will come from a speculative environment. It’s IMHO the only way to go.Ethereum’s Ether etc could have raised VC money for a blockchain crypto-asset that didn’t act like a Ponzi-scheme — the regularly used comparison around the internet of crypto-assets being akin to buying stock in a stock market is apples and oranges, it’s a redirection argument. These blockchains only raised VC money once the absurd potential gains became apparent through the speculative nature of these specific crypto-assets – otherwise it would seem VC money would have arrived much sooner if the utility had already been discovered; yes, there’s value to having a platform like Coinbase for the eventuality of a blockchain(s) that’s decided upon to be used by the State – and hopefully not decided through lobbying of politicians, embedding of people into the State/politics who are incentivized/biased towards/own these crypto-assets in their current form, etc.It sounds like you don’t think Ethereum would have been able to raise money through VCs.It’s a good distraction tactic to direct conversation and thought towards “preventing scams” and the such, and away from what can easily be argued as a scam (not the utility part of blockchain, the Ponzi-like scheme of these specific blockchains that are the most popular because of their incentivized structure) – of Ethereum’s Ether, Bitcoin, etc. Likewise with praising the ‘innovation’ of ICOs where this is simply perpetuating this Ponzi-like scheme; if it was using the mechanism I describe below, where people actually contributed real currency into buying stock in a company, you’d eliminate these absurd amounts of “money” raised (not anywhere near liquid) during the ICOs – where intelligent people would need to actually be educated, and be more than a whitepaper with buzz words, in order to raise funds – which turns similarly into what the current VC model looks like, however perhaps with ICOs it could function well to allow individuals even with just $20 to put money into say the equivalent of a Google IPO that they thought was a great idea.If a crypto-asset is to become a GENUINE crypto-currency, it must act like a currency. 1 Bitcoin should = $1 USD … and that $1 USD should be destroyed, e.g. it becomes transferred into the Bitcoin, so no one is gaining USD to profit. The problem then arises however that there are resource costs (energy of mining, and hardware), so then this system would have to be paid for/run by one or many States – perhaps every citizen in a nation or globe provided mining abilities is the end answer. The energy costs will soon be solved, the resource costs – well, we all have unused CPU resources already.Currency should only have a transactional potential behind it, not a stock market-speculative nature inherently tied to it. A parallel I like to draw attention to for utility/transaction is email. The earliest adopters of email shouldn’t now be rich because they were the first. I hesitate including this last paragraph because it perhaps dilutes the strength of what else I’ve written above, or it could be focused on as an easy thing to comment on or dismiss.Anyway, Ethereum’s Ether and Bitcoin in their current form – the Ponzi-like scheme embedded in it – is a creation of ego mind’s insanity and greed.I’d love to hear Albert’s thoughts on this.

    1. eeks

      What makes Bitcoin or Ethereum a ponzi-scheme? Because if more people buy into the system, the asset denominating the system goes up in value as measured in USD/EUR/whatevr? If that is your definition, what risk asset ISN’t a ponzi scheme?Separately, what would be the point of creating an expensive to maintain decentralized trust minimizing scheme like Bitcoin and then pegging it to a centralized debt based currency system like the USD? It quite literally defeats the purpose of a decentralized currency.The point of Bitcoin is not that it’s digital or that it’s a payment rail. When the Fed creates dollars it does so digitally on a database at this point and when I send my friends money I use Venmo or Paypal depending on whether they are young and cool or old fogeys. These solutions work and exist today.The point of Bitcoin is to provide a money system that is not just digital but one that specifically does not only not depend on the Fed or any sovereign state and does not depend on any central company to be an intermediary but that exists in a stateless disembodied decentralized state where trust is minimized and transactions are practically uncensorable. It allows money to exist between people absent the state.If this isn’t important to you and you don’t see the point of this, so it goes, Bitcoin won’t ever seem like it has much point to you. But be clear about what is and what it isn’t before you write 1000 words criticizing what it isn’t and what it would never want to be. Also read up on ponzis vs risk assets because definitionally you’re being very loose with ponzi.

      1. JLM

        .All that you say is true, but the problem is that right now, crypto is being touted as something to be used in a similar legacy manner — wire transfers and IRAs, being two examples.If you use something new and novel as a replacement for or a component of something which is currently highly regulated, you will not avoid regulation and regulation is statist.JLMwww.themusingsofthebigredca…

        1. eeks

          “All that you say is true, but the problem is that right now, crypto is being touted as something to be used in a similar legacy manner — wire transfers and IRAs, being two examples.”I’d suggest you’re not as close to it as I am. I don’t think there are real world analogues to Maker to Numeraire to Aragon and to many other projects. New business models are being created and also yes, existing business models are being ported. There are about 2,000 different blockchain based projects that are being attempted. Hard to treat them monolithically at this point nor to know what will work and what will fail (most will fail).I’m not sure how your next para follows from your first para or what I wrote?

      2. Matt A. Myers

        So first off, I try very hard to make sure I say Ponzi-like scheme – which I believe I did properly in my post above.It of course isn’t identical to Ponzi schemes. I’ve written about it elsewhere, I don’t have time to write a proper answer right now for you though. Not avoiding your comments, it seems I’ll be writing a book on the topic at some point – so I appreciate the counter-points people share.Also, the positive values you attribute to Bitcoin, I believe, could be attributed to a blockchain without such incentivized structures that Bitcoin and Ethereum’s Ether use. Would such a blockchain that has the utility of providing that monetary system you prefer work for you, even if it didn’t have the speculative/gambling nature of these currently popular blockchains?

    2. Girish Mehta

      I would repeat something I said here before – Money itself is the ultimate bubble. While the mechanics of how cryptocurrency is created are different, it is not very different in some “moral” sense from how sovereign/fiat money is created today. I say that as somebody who has been a skeptic of BTC/cryptocurrencies here for a long time, and continues to be even more skeptical today.Also, currencies always have a speculative nature tied to them. There is nothing fundamentally wrong with that, and it can have benefits. Currency speculators live by the sword and die by it…and in the process they sometimes bring efficiency, while making themselves a profit.p.s. I don’t think its a echo chamber here on this subject. Some of us have expressed our skepticism often on this subject and questioned the assertions. In the end, there will be a Reality of Outcome…and I suspect that day is still far away.

      1. JLM

        .Currency speculators pray for volatility. They are agnostic as to which way it goes as long as it goes somewhere where there is a different future than the status quo. They are betting on change.JLMwww.themusingsofthebigredca…

        1. Matt A. Myers

          And because it is de-centralized and global, there’s no shortage of players.

        2. Girish Mehta

          Not true. Betting on volatility is just one kind of speculation. Its not the only one.Consider Soros and Black Wednesday when he broke the British pound. He was far from agnostic, he would have been carried out if the bet went the other way (which was a possibiity till the last 12 hours, on its very last day in the ERM the Bank of England raised interest rates by 300 bps in the morning and another 200 bps in the afternoon…the latter increase was then cancelled in the evening when the UK announced its exit from the ERM). Soros got heavily criticized, but there was fundamental inefficiency that had been built into UK’s entry into the ERM (or the ERM itself), which gave Soros his opportunity in the late summer of 1992.

          1. JLM

            .I am using the word “agnostic” in the sense of not caring which of two opposing positions is morally superior, or, even correct.The anecdote you cite seems to support the notion that it is volatility — mercurial change — which drove the opportunity.After the opportunity surfaced, Geo S did not care which direction it went, he was going to lay his bet on the side he thought was the likely outcome devoid of any sense of moral rectitude.JLMwww.themusingsofthebigredca…

          2. Girish Mehta

            I am neither defending nor criticizing currency speculation. I am saying that when currency markets exist, speculation exists and to repeat my earlier sentence – “Currency speculators live by the sword and die by it…and in the process they sometimes bring efficiency, while making themselves a profit”.To the event in question – It was not mercurial change, it was an event 2 years in the making (1990-92) driven by the impact of German reunification in 1990 and UK’s entry into the ERM in 1990, followed by the weakness of the UK economy in 1992. Soros was watching the impact of these macro events.During the first half of Sep 1992, the Bank of England spent $27 Billion worth of reserves to defend the sterling. When Britan finally exited the ERM on Sep 16 1992, the pound fell 14 percent against the DeutscheMark. That was a ~$3.8 Billion transfer from British taxpayers to hedge funds. John Major was responsible for taking UK into the ERM (forcing Thatcher into it in the last days before she was ousted) and felt his credibility was at stake if Britain left the ERM.By the very last day, the Bank of England’s buying of the pound was simply providing liquidity to Soros/Druckenmiller and other hedge funds on the other side. Every hour hedge funds were selling more of the sterling that was being bought by the Bank of England that kept buying a currency that would get devalued in just a few hours.~$3.8 Billion paid out by the British taxpayer to defend a rate and system that was indefensible.Speculators are out to make a profit. Sometimes they create a crisis through self-fulfilling events. That is a bad thing.Sometimes, they identify inefficiencies which would get worse if speculators did not step in and take the opposite position. Small, controlled forest fires prevent large, uncontrolled forest fires.Not a defense. A characteristic of free markets.

          3. Amar

            ~$3.8 Billion paid out by the British taxpayer to defend a rate and system that was indefensible.That is one depressing statement to read πŸ™‚ But it is also a great example of the “high risk, high reward” ethos that capitalism is supposed to represent.I am grateful for my wife, my girls, my dog and my house πŸ™‚

        3. PhilipSugar

          Where are you points and figures????

      2. Matt A. Myers

        The best would to go back to bartering system where you know your neighbour and you get milk in exchange for eggs. Why? Because of the trust it can develop through accountability.And why do currencies have to have a speculative nature tied to them? If creating a new currency system, why can’t we agree to eliminate that aspect? The currency market clearly allows speculators to be happy if a war starts in a region or instability, and that then incentives the insane ones to hope for or even perpetuate war and instability – purposefully trying to make money on others suffering and misery. That’s pretty fucked, no? Why don’t we try to solve this?There’s quite the echo in here. The readers and posters in crypto-asset and ICO related posts seem to have quite a few less people commenting and engaging in them from the general/usual crowd..

        1. JLM

          .One of the reasons we have markets and money (currency as a store of value) is because you neighbor may be a brick maker.JLMwww.themusingsofthebigredca…

          1. LE

            Did a good amount of barter in the 80’s on what was a trade exchange where you earned and spent ‘trade credits’. Typically perishable goods (hotels, restaurants) and low margin products did very well. Also accountants, lawyers and professionals. Products with low margins (electronics) nobody wanted to sell. Got trips all I could eat. But since I worked all the time I couldn’t do that.One day the trade exchange added to the mix a vendor that sold industrial type supplies that we could use at our company. Things we needed and paid cash for (let’s say in your example ‘concrete’). Well I wasted no time in mopping up all the things I could. Depleted all of their trade credits. The clerk at the supply house (who had no clue) just thought he had a new great customer. I literally exhausted all of the things they had by jumping on that immediately once I heard. Being the pig that I am. (And had, as always, fun). The trade exchange got upset because they wanted that vendor for all the other accounts who did the same thing that we did. Funny thing was the next thing I knew the guy I dealt with at the trade exchange came knocking on my door and wanted to work for me. And he did and later started his own business from what he learned from me.That guy had lost his shirt trying to do coal mining. His father actually built houses and he lost his fathers money in the venture. That’s the reason he ended up working a shit job at the barter exchange.The barter exchange was started by the scion of a famous family that owned a big stock brokerage.(Now ask me what I ate 2 days ago I won’t be able to tell you but this from the 80’s is crystal clear to me).

        2. Girish Mehta

          I don’t think we have much to disagree on re our fundamental position on BTC/crypto. I nit-picked on your point that a currency “should” not have a speculative nature to it and wanted to say that all currencies have some speculative element to them, thats how markets work. The problem with BTC/crypto right now is that the speculators have taken over.

    3. creative group

      Matt A. Myers:A Weekly Reader take on a complex issue.Well written and elucidated on.Thanks

      1. Matt A. Myers

        Thanks – I needed to vent again apparently.

    4. Michael Elling

      What I am wondering is what happens when some of these very large ICOs (VLICO) begin to run out of money or collapse. What happens to their tokens as they get converted back to ether or bitcoin and then into dollars. When there is a sudden rush to the door a la the bank panics of the 1800s and 1900s, who is there to backstop the currency’s value? The selling begins to feed on itself and then all the ICOs are starved of capital or have to go back to the real markets for capital to survive, leaving the existing tokens nearly worthless. Or maybe this won’t happen…Your other points about governments vs speculative markets go back to Plato and earlier; we’re still not getting it right.

  12. Douglas Crets

    I don’t quite agree with Naval that it’s a gift, but I understand why it is taken so. It’s a gift in the way that it’s China’s gift to the world financial markets. The SEC was not aggressive enough. China, leading earlier last year, I think, with the Xi Jinping WEF speech about China’s role in world capitalism, is, it seems from this view, taking the lead where the SEC should have been leading all along. It’s been taking the lead in a quasi-moralism that Trump is definitely not winning at. This actually puts SEC on the back foot and makes them look weak, and I don’t see how Silicon Valley can turn this into their favor, because the SV position seems to be lately that they are against government. SEC is passive, looks weak. China leads with action rather than commentary. China’s blockchain companies getting investment to the order of, in the Bitmain case, US$50 million. The parties involved in that deal, I am sure, know a thing or two about what the PBOC regulators believe about the future of tech.Listen, the ban is temporary. China does not want to crush blockchain. They want a financial system that is a lot like these ideas of having a Russia only internet. Blockchain that locks in a completely transparent and monitored way of dealing in finance, to control the shadow banking system, to make sure what happens in China stays in China, is controlled by China and brings growth to China.America’s blockchain ideology is completely different. It’s a completely different opera. The libretto isn’t even literally in the same language.

    1. Matt A. Myers

      This is a very important possibility and distinction to be aware of..

    2. creative group

      Douglas Crets:”Blockchain that locks in a completely transparent and monitored way of dealing in finance”We doubt that part of the reasoning and more of the benefiting Chinese only interests.Example:Lattice Semiconductor Corp (LSCC.O) said in a filing Friday it will seek Trump’s approval for its proposed $1.3 billion sale to Canyon Bridge Capital Partners (Chinese Government backed) that is being advised to block by the Committee on Foreign Investment in the United States (CFIUS).

      1. Douglas Crets

        They won’t get approval. I am not sure what your comment means. There is no a priori incentive for the Chinese to create a regulatory regime that benefits the world first, but they will create such a regulatory scheme for ICO and crypto currencies that will enable the Chinese to benefit, and for the rest of the world to play in that market, with restrictions.

        1. creative group

          Douglas Crets:we agree with you more than you agree with yourself. Reread our posts on the Topic again.Thanks

  13. JLM

    .There are few things which play trump to a bid to ban something.Those who are encouraged to think a total ban is the first step in an effort to draft “sensible regulations” may be disappointed.I recall the lead up to the Chinese takeover of Hong Kong. You will recall that the Brits controlled Hong Kong subject to a renegotiated 99-year lease which was the result of three treaties: 1842 Nanking Treaty, 1860 Peking Convention, Extension of HK Territory 1898.The reason this is important to know is that only the New Territories were leased.China had ceded the Island of Hong Kong and Kowloon to the Brits in their entirety. The Brits did not have to give them back, but the development in HK became so intertwined that it was impossible to carve out the New Territories and return them.It is worth noting that the Brits called the exercise the “handover” while the Chinese called it the “return.”When this bubbled to the surface in the late 1980s and early 1990s, the world was convinced that the result would be a new lease agreement. Nobody could imagine the Chinese taking over Hong Kong and its wicked capitalistic ways. The whole world got it wrong — maybe this is happening again.In those days I had a partnership with a huge English company which had extensive HK holdings and used to chat about it with the Lord who ran the company. Undoubtedly one of the most well informed persons on the planet, he poo pooed it and said it was a paperwork exercise and the Chinese wouldn’t know what to do with HK if they got it.It was hinted at when China was admitted to the UN in 1971 (check my date, operating from memory). The tipoff was that the Chinese began to immediately make waves about the status of Hong Kong and Macau. Their intellectual basis was to complain of “unequal treaties” imposed upon them by imperialists.No sooner than they did than the UN took HK and Macau off the list of “colonies” thereby paving the way for their return to a sovereign nation, China. It was a signal everybody missed at the time.It wasn’t until 1979 that the HK Gov went to China to discuss the subject with then Boss Deng Xiaoping who was not encouraging. The Brits thereafter marked all leases and mortgages to be in effect “for so long as the Crown administers the Territory.” You can imagine what this did to the real estate market in the short term.I belabor this point because there is no evidence that the Chinese possess any regulatory gear between “pedal to the metal” and total ban. They rule by fiat. They do not negotiate and their courts are not the place to adjudicate delicate points of business.That has particularly been the case in Hong Kong, where the Chinese President Xi just recently went to remind them they were part of China and that the recent “freedom riots” were not to be tolerated, whereafter they stopped. [Put Charlottesville in your mind and imagine an American President doing the same thing. Now, you get an idea of the difference in the environment the Chinese and the US SEC operate in.]Xi threw a fit over Pres Trump talking to the President of Taiwan and Trump ended up ceding to the One China policy meekly.The Chinese hold the cards in North Korea and have no intention of solving that problem for the world as they do not intend to allow an invasion route into Manchuria. They could turn off one valve and the problem would be solved.There is the specter of crypto being a mechanism to allow wealth of burgeoning middle class to escape the country. I think this is a little overblown, but just a little. Anybody with money in China is already moving it out for safekeeping if nothing else.The PRC believes it is a tolerant, indulgent, and permissive steward of capitalism in China. Within 100 miles of the ocean, there is a capitalistic China which complements Hong Kong.The C in PRC still stands for China but it means “communist.”If the SEC is looking for signaling to China, then it is way more troubled than anybody thinks.I don’t see the Chinese publishing a nice set of regs any time soon.JLMwww.themusingsofthebigredca…

    1. Chimpwithcans

      I watched the final test of the British Lions’ tour of South Africa in ’97. The Springboks had already lost the series, so some fans held a massive sign in the crowd: “We may have lost the rugby, but you lost Hong Kong”. I thought that was pretty funny, though in hindsight i think South Africans would prefer to lose an island than a rugby match.

      1. JLM

        .I saw the Springboks play the New Zealand team in ATX.Those are some serious physical specimens.The NZ team did their war chant, haka. OMG!I had seen the haka done by a NZ unit when I was in the Army and thought it was very cool, but those NZ ‘ballers made it fearsome.JLMwww.themusingsofthebigredca…

        1. Chimpwithcans

          All Blacks playing the game on another level for last few years…much to the chagrin of the Springboks who are slightly off the pace. Extraordinary how small NZ is and they consistently produce the players. Proof of a deep rooted rugby culture.

    2. PhilipSugar

      I can tell you for a fact Mainland Chinese do not consider or treat Hong Kong as part of China. Just see the internet speed between the two.

      1. JLM

        .I once heard Jon Huntsman speak in a less than a dozen person group. It was at the LBJ School and the talk was at the LBJ Library. He had just ended his stint as Obama’s Amb to China.Guy speaks Mandarin.He was talking with Newt Gingrich. Gingrich didn’t say a word.Huntsman said four very intriguing things:1. The way China treated Hong Kong was a dress rehearsal for the reunification of Taiwan with China. He said the highest level Chinese expect Taiwan to come back into the fold and they are prepared to use force.The Chinese have more landing craft on the shore facing Taiwan than the allies used at Normandy.2. The real leaders of China are 90-somethings who still have first hand memories of Mao, WWII, and the Korean War.They will be replaced by 80-somethings, not 50-somethings and that the youngish, westernized, public leadership of China is simply a front.3. The Chinese considered themselves as having taken a brutal beating from the Americans in Korea. The Korean War casualty rolls have always been a matter of a lot of controversy.The US lost about 34,000 KIA. The ROK about 138,000 KIA. The US lost about 8.5K KIA before Chinese intervention and the balance afterwards.The Chinese lost 400K KIA and 500K WIA. In addition, the NKs 290K KIA.This was previously reported to be PVA losses of 114K KIA and 340K WIA. Those numbers were more in keeping with the expected ratio of KIA to WIA, but Huntsman said the higher numbers were what the Chinese had told him.The reason this is important is because the Chinese saw that war as a hugely bad trade (400K KIA PVA v 34K KIA USA).4. Mao had four wives. This was, apparently, a highly classified bit of data until fairly recently though I see it now in print in places.Hunstman (son of the billionaire Huntsman) has served as Amb to Singapore, China, and now is the Trump nominee to Russia.It is comforting to me that he is in the administration as it relates to his China knowledge. The Chinese consider him to be the most knowledgeable American to have ever served in Beijing and they say his language skills are better than many native speakers.China is very complex.JLMwww.themusingsofthebigredca…

        1. Douglas Crets

          Great. Spoken like someone who really actually knows what is going on in China, rather than sees it through the lens of a business deal.

          1. JLM

            High praise, as you know China. Thanks.I sent my #1 son to work in Shanghai before he got a real job as an investment banker. What he learned was incredible.JLMwww.themusingsofthebigredca…

    3. Cam MacRae

      That has particularly been the case in Hong Kong, where the Chinese President Xi just recently went to remind them they were part of China and that the recent “freedom riots” were not to be tolerated, whereafter they stopped.Xi certainly did as you say, but you’re misinformed if you think his visit and the sentencing of Wong, Chow, and Law has stopped anything. While the basic law holds any weight (and sadly it is being chipped away at daily), the “freedom riots”, as you put it, shall continue.

  14. OurielOhayon

    i absolutely agree. in particular that we reached peak ridicule in ICOs. i wrote about this today

  15. creative group

    CONTRIBUTORS:This may be a fair or unfair assumption, but when people who can no way be associated with financial sophistication unless by family association tweet about crypto-currency watch out.

  16. Pointsandfigures

    Bad policy. Recall when they banned shorting their stock market too. Another similarly bad policy.

  17. bubba123

    @authorYou are bias given your investments in the space.IF you could look at tokens and ICO objectively you would see this the whole thing is ridiculous. People are constructing/selling synthetic securities (derivatives) with no tangible asset underlying it. It’s a joke people are giving real USD for any of this shit.

    1. creative group

      bubba123:Do you trade in securities?How is the author culpable for discussing ICO’s space?We Daytrade so would we be considered responsible for Bernie Madoff illicit activities? It was difficult to follow your position against the author on ICO’s. What Portfolio company of USV raised a ICO? Do you realize an ICO circumvents VC’s interests and leverage.Before responding note our positions are Independent politically. We have questioned @author (Fred) on Financial positions more than any other poster when warranted. We have not allowed our support and respect for Fred’s amazing Philanthropic endeavors cloud our questioning.We could logically follow your position if @author (Fred) had a portfolio company that benefited from a ICO and he was pimping the position and financials revealed a different outlook.A person has a right to their opinion but not a right to change the facts.Could you clarify your position.

    2. creative group

      bubba123:With the Blog post of today (9 Sept 2017 Saturday) with KIK (USV portfolio company) seeking to raise via tokens we clearly understand your post.

  18. OurielOhayon

    also let s recall that sometime ago China declared Illegal buying BTC with yuans. Then regulated. Then BTC went up…i am hopeful they ll do the same here

  19. creative group

    CONTRIBUTORS:OFF TOPIC ALERT!Juicero CEO Jeff Dunn (former president of Coca-Cola North America) after shuttering the company was at Burning Man in Nevada. Is that just normal of Silicon Valley’s CEO tech culture or just bad form?This company raised more in four years than SpaceX in same time frame. We are of the view founders, Operational Managers can learn value lessons from others failures.http://www.businessinsider….

  20. john_gotts

    We started the Token Exchange Self-Regulating Body ( to help define the rules & regulations for non-security/commodity tokens and to make sure that all rules regarding any type of token is adhered to globally, locally. The response has been unanimously positive and from that feedback we will begin defining types of tokens this week and voting on which companies have clean tokens vs. those that need to clean their tokens. We will also offer guidance on self-cleaning.

  21. creative group

    CONTRIBUTORS:A not so hidden calculated bet has been made in crypto-currency. US/West contingency BTC/ETH and Asian/East contingency BCC. Playing out before our very eyes.Doesn’t even appear to be about the money anymore but power and crypto-currency legacy/history. Both sides are early speculators and appeared to have covered their initial entry 300%.Playing out right in front of those of us without a crypto-currency position. Postings say more than you think.

  22. markjeffrey

    Thank you Fred for being a voice of reason here. I’m seeing a lot of bile and disbelief from traditional venture folks regarding crypto and ICO’s — and even some ‘celebrating’ when this China ban come down. I get that a lot of VC’s (and even angels) feel threatened: and they should: this takes what was once their sole domain of influence (and gatekeeping) and democratizes it worldwide. But crypto and ICO’s are now as inevitable as the Internet once was — and the VC’s and angels who do get on board will fare far better than those who resist it. Yes, it’s a massive change — the biggest in history in the venture world. This is their Uber moment, right now. Their world is instantly different almost overnight. But you clearly have always understood that and been very vocal about it and in front of it. Just wanted to tip the cap to you for that.

  23. DigitalAndroid

    Light regulations would be less harmful than a full ban or heavy regulations, but they are still unjustified and harmful. The sole exception would be disclosure requirements, like a requirement to disclose the speculative nature of token investments. Any requirement to register a token sale with a central authority is an unjustifiable intrusion in private interaction between consenting adults.If we can’t even coordinate amongst ourselves to create agreements whereby two parties send data, representing changes in a distributed digital ledger, to a network, without the approval of a central authority, we are not free.It’s highly disturbing seeing some of the comments here by people who wouldn’t hesitate to imprison people for engaging in some commercial interaction they happen to not like or agree with, based on some absurd and fraudulent blanket characterization of all token sales being scams.

  24. Douglas Crets

    As I alluded to earlier, it’s pretty clear that the signal from China is that ICO ban is temporary and it will come back, with vetted players and a bank-friendly and China-friendly regulatory regime:

  25. Jason Xuesong Chen

    These are intelligent views about China’s Official Ban .We’ve seen increased use of sophisticated whitepaper or ICO project to defraud Bitcoin and Eth,as well as several schemes that reference the BlockChain TechnoglyWorse, they appear to have colluded in order to execute the scam.–Pyramid schemes and racketeering organizations and cryptocurrency exchanges in China.Other main reason are 500+ new shares in China’s stock market this year, and the IPO amount is 245 in 2016. It is be only Reforming state-owned businesses and supply-side reform first .

  26. Matt A. Myers

    Self-regulating as an industry doesn’t equate to doing what’s best for society — that’s why the term industrial complex exists.