ICOs* represent a real opportunity for the Chinese to invest in a simple and fast way in a project. This certain enthusiasm since 2014 for the digitization of the investment, facilitated the flow of transactions and allowed many investors to make money quickly. In 2016, 48% of the venture capital was financed via ICO.
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Government regulation in terms of investment abroad
Since the end of 2016, the Chinese government has taken several measures to regulate and reduce investments made by Chinese people abroad. Indeed, the main objectives of these regulations are to maintain the yuan’s price, which has declined sharply in the current year and also to contain the flight of capital. The sectors that will mainly be affected by this regulation are real estate, hotels, entertainment and sports clubs.
ICOs a disruptive factor in terms of investment
The ICOs address a problem that many companies looking to raise funds face. Indeed, to obtain these funds, companies call on investors who can support their projects. However, by using this process, they must resolve to give up a share of their own funds and give up some of their equity and ownership. To offset this approach, there was previously only one solution for companies, making it public. And for this, companies wanting to raise funds had to hold what is called an IPO.
The IPO of a private company is the public offering of shares in the company. The aim is to buy low-priced shares and make them grow so that they are financially attractive over time. Very quickly the question arose whether the use of a similar concept for a blockchain environment was feasible. This disruption of the environment made it possible to reveal the ICO.
It is important to differentiate an ICO from an IPO since they have similar but different characteristics. An ICO, unlike an IPO nr has no central authority and is decentralized, it does not need heavy administrative management and is not originally regulated.
However, the question arises. Just like the IPOs that exchange capital, give shares of the company, which can give in exchange for capital, a company focused on blockchain technology. This is where the notion of token appeared.
Today, ICOs are strongly criticized for the importance of the risk they represent. ICOs are generally perceived as attracting many scammers and cat it would be based solely on speculation
However, this digitization of trade and financial and transactional flows also bring many advantages in order to satisfy all parties:
- This gives opportunities for attractive projects
- Does not require heavy tasks and administrative management
- Establishment of a community: having a community strongly credibilizes the project of a company.
- Coverage of the project
- Incentives for innovation
What is ICO in China ? “an easy way to make money”
Initial Coin Offering is a simple tool for startups to raise investment funds without having to go through an intermediary. The ease for these small businesses to raise money would never have been possible by remaining within the framework of traditional investment since they generally do not have large income streams and user bases.
Moreover, ICOs allow to increase the number of investors on the proposed projects since anyone can participate
Chinese are fond of ICOs
The growing success of ICOs in the world has not left indifferent the Chinese market that is particularly fond of this type of financing. In the first half of 2017, 64 new Initial Coin Offering issues were issued, representing over $ 400 million in total. We refer more than forty platforms offering services to Chinese companies.
One example that we can take into consideration in the Middle Empire is Qtum, a platform that combines the Bitcoin and Ethereum cryptocurrency systems. It sold more than 50 million Qtum token in less than a week. The exponential growth of the price of its token is surprising moving to its initial offer at 2 yuan up to 66. This fundraising allowed the startup to work on its platform to provide a more intuitive user interface.
ICO investors in China represent a large cross-section of the population passing through housewives to retired people convinced of making significant profits by investing in such projects. Guangdong, Shanghai and Beijing are the three areas covering the majority of the country’s ICO platforms (60%).
This opportunity to make investments simply and effectively is frowned upon by the government, which has recently introduced new measures aimed at reducing the contribution of ICO. China is not the only government to ask the question at present, it is interesting to follow the future of this market and its sustainability in the near future.
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