It is no secret that China is not a fan of anything that is unregulated, this is also one of the reasons why initial coin offerings are currently banned in China. When looking outside of the crypto world we can clearly find examples on how China is currently regulating and protecting themselves.
China has a lot of different business registrations of which the two most common registration for foreign companies are: WFOE (Wholly Foreign-Owned Enterprise) and Joint Venture. When China first opened up and allowed foreign companies to enter China, it was mainly done through a joint venture. Foreign companies had to first look for a suitable partner before they could operate within China, this type of joint venture contains a lot of risks especially for the foreign company. If you are for example, an already well-established company and you take a lot of risk on entering a new market, you would want to be in control of everything and manage potential risks. With a joint venture however, you are sharing control over your foreign-Chinese entity and risks with a potentially unsuitable partner. This is why a WFOE type of registration might be better, especially if you want to have more control.
WFOE refers to a company in China that is solely controlled and established by foreign parties. In order to do so, you need to meet certain requirements. One of these requirements is a registered capital, depending on which industry you are in the amount varies between 100,000 RMB – 500,000 RMB. This is quite a lot especially when you are just starting out.
Now what does all of this have to do with ICO’s you might wonder? Especially when you consider that blockchain is supposed to be unregulated and decentralized. Yet it is reasonable to believe that China is considering an ICO registration that has similar characteristics as business registrations in China. When China first opened up they forced joint venture registrations upon foreign companies entering China, we might see the same happening for foreign ICO’s or ICO’s in general that are looking to make use of the Chinese market. NEO might be used as the main joint venture blockchain in China, this will put China in a much stronger position when it comes to the future of crypto.
It will however still be extremely difficult to regulate this market, but when it comes to China it should not be a surprise to anyone that the government is in full control of what is and what is not allowed, especially online. With online blockades, it can most likely force any future ICO or foreign crypto project to enter a joint venture. This is not necessarily a bad thing, it is a way for China to adopt. When looking at ICO’s and block-chain technology on a global scale, adaptation is still something that needs to be worked on and this might be the way China is showing adaptation.
On the 18th of October, the National Congress of the Communist Party of China will take place in Beijing. This congress might give a more conclusive announcement on the future of block-chain technology in China, a joint venture type of regulation is very likely.