This chapter considers how distributed ledger technologies and blockchain can contribute to the creation of new foundational infrastructure for financial services, including crypto-assets and smart contracts. We classify the new business models, analyse the opportunities, and highlight the regulatory challenges.

The term initial coin offerings (ICOs) refers to a new fundraising tool which allows organizations, mainly entrepreneurs or start-ups, to launch a business based on distributed ledger or blockchain technology to raise operating funds. The development trajectory of the ICOs in China is broadly similar to that of online P2P lending, or more accurately, the former presages the latter. Specifically, the ICOs underwent a period of explosive growth in China since the second half of 2016 and then were banned in September 2017. The outright ban on ICOs may hamper revolutionary technological developments and dampen the growth of this potentially beneficial market in China. Hence, by completely stifling technology innovation and market development, the Chinese regulatory approach needs to be reconsidered in light of international experiences. Indeed, the ICOs can be broadly divided into five categories, namely pre-sale of products or services, offering of shares, issue of debentures, issue of derivatives, collective investment schemes and crowdfunding. Instead of a blanket ban, China should adopt a flexible and targeted regulatory approach according to the particular category of the ICOs.