Chen Yunfeng, Senior Partner of Zhong Lun Wende Law Firm, shares his view on ICO regulation. As Director of Internet Finance Professional Committee, Chen specializes in Internet Financial Law Business. He suggest that government, industry association, ICO issuer, investor, social media and judiciary authority should undertake responsibilities accordingly to form a healthy ecosystem.



1. Government and regulatory authority: setting of principles, policies, regulations and determine the specific enforcement sector.

First of all, it is recommended that the SFC should issue ICO guidelines, clarify the ICO regulatory principles, limit the scale of crowdfunding, the amount of issuance, the proportion of pricing and the frenquency of crowdfunding. Also it should be made clear that tokens issued doesn’t involved securities, stocks or backed stakes, otherwise it will fall under the regulation of securities.

Secondly, guidelines should be established in the following fields: blockchain industry management, third-party custody system, information disclosure, risk tips and qualified investor system, consumer rights protection, network and information security, anti-money laundering, financial crime prevention, blockchain industry self-discipline, regulatory coordination, data monitoring and other aspects.

Finally, ICO issuers and projects should be properly registered. Exchanges that engage in digital assets trading must have a license. Trading institutions shall pay certain funds in proportion to their size as the investor protection fund. Also the management system of the investor protection should clarify compensation recipient, compensation settlement, proportions and so on.

2. Industry Associations: information disclosure, discipline supervision, disciplinary discipline

Blockchain-related enterprises should set up the blockchain technology association, which shall develop the corresponding admission standard, disciplines and regulations. Entities that are compliant with the standard are admitted as a member. Members should follow an agreed standard in terms of project whitepaper, project operation, business information disclosure. The association shall penalize entities or project that breach the rules and disclose information accordingly.

3. ICO issuer: be innovation-driven, honest and compliant with disclosure requirement

On the one hand, blockchain enterprises should actively explore the innovative, solving the pain point of industries, pushing social development forward. On the other hand, ICO issuer should consciously get third party’s institutions involved. Asset custodian, accounting firm, technical evaluation institution and legal adviser team could be hired to evaluate the authenticity, feasibility and transparency of the project and give independent third party opinions.

4. Community (investors) shall take the initiative to get involved, supervise the development and help each other.

Because ICO involves a large number of investors, a management committee allow the investors to participate in project management activities, thus impose supervison on the development of the project and funds allocation.

5. Social media: policy interpretation, supervision and disclosure, risk reminder

As the majority of the community are generally lacking in-depth understanding and rational judgments of ICO markets. Therefore public media shall convey timely interpretation of global regulatory policies on ICO, watch closely on disclosure of project issuer and fundraising scale. On the one hand, the public could learn more about ICO and its development. On the other hand, some pyramid schemes or fraudulent projects could be reported to policy authority in a timely manner.

6. Judiciary authority: be strict law enforcement, protection of legitimate rights and interests

Judiciary authority should establish comprehensive protection and sanctions rules. An efficient and convenient legal channel can provide legal relief to investors. Meanwhile strong regulatory measures should be in position to punish illegal fundraising, illegal business and pyramid schemes.