Chinese individuals and organizations have been banned from raising funds through initial coin offerings (ICO), reports said.
After a period of proliferation and breakneck surge, China’s ICO sector is now in the tight grip of supervision. The National Internet Finance Association of China (NIFAC) released an announcement warning investors and individuals to be wary of fraud and possible money laundering crimes related to ICOs. The announcement also said that new projects aiming to raise cash or other virtual currencies through crypto currencies will be banned. Reports of investigations have also been released by China Securities Regulatory Commission. Fraudulent practices will be cracked down, according to reports.
The announcement described ICOs as illegal fundraising tools, which could be used in activities like financial scams.
ICOs experienced a speedy popularity because large sums of money could be quickly accumulated through the process built on blockchain technology. Companies and startups create and issue digital tokens, which can be used to purchase goods and services in their platforms. In the offering, people buy those tokens using crypto currencies, such as bitcoin or ethereum. The offering’s popularity in China was also caused by the convenient and easy method in which it provided another type of investment opportunity in a country where options were not a lot. Additionally, ICOs could be done without any regulatory oversight.
This year, a figure that is higher than a billion dollars has been raised through digital coin sales around the world. In China, local media reported a figure amounting to at least 2.62 billion yuan, which has been raised through ICOs.
The committee ordered 60 major platforms for regulatory inspection. As a result, some Chinese ICO platforms have already halted services.
ICOINFO, a platform for ICO projects, stated on its website its voluntary, though temporary, suspension of “all ICO-related functionality on the site.” It said that it is waiting for the clarification of the shifting regulatory environment.
BTCC, a bitcoin exchange platform located in Shanghai, also stopped all its services related to ICOs. In July, BTCC’s chief executive officer Bobby Lee expressed his support for the regulation of crypto currencies, saying it should be regulated before it goes out of control due to the growing number of people investing to digital assets.
A local media report also said that authorities have shut down a certain blockchain conference over the weekend.
“The number of projects that have been launched in the name of ICO has grown rapidly in the country, disrupting the socio-economic order and creating a greater risk of danger,” said NIFAC in its statement released on August 30. It enumerated the issues of “misleading propaganda” to pull financial activities without being regulated, and consequently criticized the unclear dealings and intents of the organizations involved. NIFAC also urged ICO investors to report any suspicious ICO-related activities to authorities.
A joint statement from the People’s Bank of China and other departments said that individuals and organizations that have already finished ICO fundraisings should arrange the return of its acquired funds.
The same intense scrutiny in the growing ICO space has been exhibited in other countries as well. Both the United States and Singapore have raised concerns about the imminent risks embedded in the purchase of digital tokens, citing possible money laundering schemes and fraudulent activities that come together with the investment.
On the other hand, experts stated that the space should be studied more extensively and carefully by regulators so that innovation would not be hampered.
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