About The Author:
Zhang LiWei is a businessman and experienced crypto investor. A Beijing native, he has experience working with multiple blockchain startups and believes that cryptocurrencies are the future of the global economy. LiWei is constantly on the lookout for new ICOs to invest in, and he prides himself on his ability to pick out the winners from a crowded space.
ICO Alarm in China – Winners and Losers
The recent ban of ICOs by 7 Chinese regulators, making it very hard to solicit or engage in the process of ICOs in China, came off as a surprise to most investors. At the same time, such a harsh ruling was not unanticipated given the combination of little regulatory framework coupled with the remarkable amount of capital being raised via this new crowdfunding venue.
While many investors might be concerned about the legality of joining yet another promising blockchain startup, it is important to realize the real perspective of Chinese regulators. Fortune does a great job summarizing some of the reasons behind such draconian measures. On top of that, investments into ICOs are typically untraceable due to the fact that the majority of ICOs do not enforce Know-Your-Customer (KYC) or Anti-Money Laundering (AML) protocols.
Despite cryptocurrencies showing temporary weakness on this news, additional regulations are a great way to separate safe and reliable ICOs from less developed projects. Projects with solid business models, proven teams, and proven track records will be receiving more capital and more qualified investors, which will only result in an improved blockchain ecosystem.
On the other hand, alternative investments should be on the radar of every investor. Mature as well as emerging markets are overbought. Inflation-adjusted rates are low and commodities are weak. Many real estate markets are at near historical highs, as the only source of physical asset investments. Of course, crypto markets showing abnormal returns backed up by significant expansion of the underlying blockchain networks serve as a great way to diversify a portfolio and add uncorrelated asset classes.
I reached out to AxionV, a AI crypto fund that is launching their ICO on September 16, curious to see how they are going to be handling newer regulations coming out not only from China, but also from the U.S. and Singapore. As it turns out, AxionV is resolving regulatory hurdles in a very straight-forward fashion. A number of in-house protocols for AML/KYC and SAFT (Simple Agreement for Future Tokens), compliant with the best practices inherited from more traditional asset managers and venture capital firms, will make it possible to collect funds from accredited investors (including China). Their team has also found a smart way of limiting risk in the ERC20 protocol by cutting out the transfer function and making the protocol more secure and safe for investors, which allows AxionV to control the flow of funds and trace every single investment back to the client.
Utilizing the proposed SAFT framework is another development that may continue to evolve as an alternative to direct public and retail investments. Analogous to a futures contract for accredited investors, the agreement functions in place of on-demand coins to offer the investor protection based on the parent company and assurance of suitability via accreditation. It appears AxionV not only implements this, but has taken the extra steps by limiting all resale options to be extra secure and compliant while regulators try to better understand the cryptocurrency economy.
From the way things are shaping up, it looks like by planning ahead and pre-vetting their investors, AxionV is a good use case of how proper planning can allow you to jump regulatory hurdles such as this. While a number of other ICOs were looking for the quick way, AxionV preempted this problem and allowed accredited investors, including the Chinese investors who feel left out in the cold, to participate all within the bounds of the law. Going forward, other ICOs are likely to follow in AxionV’s footsteps in order to enable Chinese investors to participate, but for now, Chinese Investors will likely flock to ICOs like AxionV which are safe, secure, and allow them to take advantage of the expanding and lucrative crypto market space.