China’s ICO Ban: Understandable, Reasonable and (Probably) Temporary

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Noelle Acheson is a 10-year veteran of company analysis, corporate finance and fund management, and a member of CoinDesk’s product team.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to our subscribers.

Nine months after issuing warnings to bitcoin exchanges, China’s central bank again sent the cryptocurrency markets tumbling last week.

This time, its focus was on initial coin offerings (ICOs). On September 4, the People’s Bank of China (PBoC) issued a sharp statement labelling token sales “illegal and disruptive to economic and financial stability.” Analysts blamed this blanket ban for the subsequent sharp decline in cryptocurrency markets, which saw almost $35 billion wiped off of total capitalization in just four days (it has since rebounded somewhat).

While drastic, the ban is understandable and reasonable. And, like the market reaction, probably temporary.

Understandable goals

China’s financial market is huge, sprawling and difficult to control. What’s more, the rapid growth of innovation and reach has given rise to bubbles in a wide range of asset classes, some more shadowy than others.

This is potentially a very big problem.

Take trillions of dollars-worth of opaque financial products with little regulation, add

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