It will take more than a government ban on ICOs to keep issuers away in China.

Both investors and issuers in the country have found a way to circumvent the laws that were implemented last year by Chinese regulators, according to a report in local publication Caixin Global.

Despite the fact that ICO demand largely stems from Asia, China in September 2017 infamously cracked down on the market, making token sales illegal and inspiring South Korea to do the same. Meanwhile, Asia is where most of the bitcoin mining has occurred, and investors were keen to often reinvest their profits in ICOs.

Despite the ban, investors continue to gain access to newly issued tokens, which can be highly speculative in nature, while issuers have been dancing around the ban by domiciling their projects abroad. Another workaround for issuers has been to offer their digital tokens for no charge.

Bitcoin Exchanges in Focus

Regulatory pressure has not abated, and overseas cryptocurrency exchanges boasting some Chinese presence, such as on social media, are currently on the radar of Chinese officials. Someone close to the government agency in China that regulates internet finance risk told Beijing-based Caixin that officials are moving to block the IP addresses of such exchanges.

Risk management experts say that closing off access to regulated cryptocurrency exchanges is a bad idea, as such access gives regulators a chance to monitor transactions. Without it, they’re in the dark, which is an undesirable outcome.

ICO Workarounds

The effectiveness of China’s ICO ban is comparable to that of a parent telling their rowdy children to quiet down. The volume may have been turned down a notch or two, but the activity is still happening in veiled attempts, such as airdrops, IMOs and redomiciling.

Companies have been able to bypass the ICO ban by orchestrating airdrops in which tokens are distributed for zero cost. Meanwhile, issuers behind the tokens benefit from the marketing prowess that such events provide, as projects gain momentum among community members.

Initial miner offerings, or IMOs, are another workaround. These deals supposedly give investors the opportunity to back the mining of new coins, but a self-regulatory agency in China warned they have all the features of an ICO.

For instance, take the Xunlei IMO. Participants in the IMO lent their computer bandwidth in exchange for Lianke coins. The regulator said it qualified as a fundraising event.

For all their innovation, ICO issuers are also using the oldest trick in the book. They’re moving their corporate headquarters abroad and soliciting Chinese investors by what’s known as “export for domestic sale,” as the Caixa article points out. In these instances, third-party intermediaries act in proxy of Chinese locals in these ICO projects, many times at a discount. Communication about the projects unfolds on popular messaging apps.

Whether China will ever loosen its grip on the cryptocurrency market including ICOs remains to be seen. But for now, it appears that the ICO market is alive and well in China.

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