The Regulation of Initial Coin Offerings in China: Problems, Prognoses and Prospects

As a new form of the FinTech industry, initial coin offerings (ICOs) underwent a period of explosive growth in China since the second half of 2016 and were banned in September 2017. However, the outright ban on ICOs may hamper revolutionary technological developments and dampen the growth of this potentially beneficial market. In quest of a solution to meet the regulatory challenges rather than completely stifling the innovation, a comparative analysis has been conducted in some advanced economies, including the US, Canada, Australia, Singapore, Hong Kong, the UK and the EU in order to propose a regulatory framework for ICOs in China. After a thorough analysis of relevant experiences and regulatory measures in overseas jurisdictions, this paper provides a non-exhaustive classification of the legal status of ICOs, namely pre-sale of products or services, offering of shares, issue of debentures, issue of derivatives, collective investment schemes and crowdfunding, as well as a possible regulatory reform of the current ICO ban in China. It is then concluded that except for ICOs that can be regarded as pre-sale of products or services, the other five types of ICOs are highly likely to be considered as financial securities and thus should be subject to securities laws.