Regulators in China imposed a blanket ban on ICOs over the long weekend.

A number of people have reached out to me via email and Twitter asking me what I think about this.

I think regulation of ICOs is inevitable and a good thing if done right (ie lightly).

The SEC’s comments on ICOs back in July were well done in my view.

There are all sorts of bad things going on in the ICO market right now, from outright scams to projects raising tens of millions of dollars on a white paper written in a day to celebrities getting in on the action.

We needed a cooling off period and if China’s actions are that cooling off period, then I welcome them.

However, a blanket ban on ICOs seems like bad policy to me.

The SEC is heading in the right direction by making a distinction between tokens with real utility vs tokens as a substitute for securities. The former is where the innovation lies. The latter is just a fast and loose way around the rules.

If you look back at the Ethereum token offering several years ago, it is hard to see how that was a bad thing. It provided needed funding to the Ethereum project and the result has been a wave of innovation on top of Ethereum, including the whole concept of ICOs.

If I am reading the Chinese regulators correctly, they are saying that an offering like the one that Ethereum did is not going to be allowed. That’s bad.

Many have speculated that this Chinese ban is temporary to give the Chinese authorities time to come up with sensible regulations. I suspect that is right.

However, I would not like to see the SEC and other regulators follow suit. I think a better move would be to work to rid the market of the scams and other bad actors and actions while allowing for real innovation to continue. That seems to be where the SEC is headed and I encourage them to keep going in that direction and not follow the Chinese.

The US has always been a home to innovation and innovators. We have been able to do that while applying sensible regulations (for the most part) on innovative new technologies. If we continue to take that approach we can compete and even beat China to market in areas like blockchain where they are arguably ahead of us. Naval said it well in this tweet yesterday: