Well, China’s love-hate relationship with cryptocurrency and blockchain seems to be choosing a side. Speaking at East Tech West in November last year, Edith Yeung, head of 500 Startups’ China unit, described how the China is investing in blockchain technology, but not endorsing in cryptocurrencies. She made it quite clear that though China wants to be a front-runner in blockchain tech, the country wants nothing to do with cryptocurrencies.
In August last year, authorities in China sent warnings to the public about the risks involved from illegal fundraising activities hiding behind cryptocurrencies and Beijing even banned promotional crypto events, including domestic Bitcoin-Yuan trading. About a month later, the Chinese authorities stepped up their pressure on domestic crypto activity. All this is of course as a result the increased level of regulatory scrutiny.
The Battle Continues
Today, China’s clamp down on crypto coins continues. Yesterday, 21st March 2019, the Beijing Internet Finance Industry Association (BJIFIA) released a warning against investing in all crypto funding activities, including Initial Coin Offerings (ICOs), Security Tokens (STOs) and Stable Coins. According to BJIFIA, crypto startups camouflage behind terms such as ‘’financial innovation’’ so as to lure in financial investors.
According to the warning;
“Recently, there have been organizations using the concept of “financial innovation” to raise funds illegally. They hold online and offline events to promote projects related with ICO, IEO, STO, Stablecoin. Such activities have nothing to do with blockchain technology, but only disturbing the normal financial order.”
The release strictly reminds ‘’all relevant financial institutions and individuals in Beijing that all financial business and activities need to be included in the scope of national supervision. Take “STO” as an example, STO, Security Token Offering, which is a solicited illegal financial activity. Groups involved in such activities will be severely punished by eviction, closure of the website platform and mobile APP, and revocation of business licenses.’’
BJIFIA warned against the following major risks;
- All relevant institutions be inspected and residents in Beijing to abide by the laws, resist and prevent the use of virtual currency, ICOs, STOs, Stable Coins and other related activities. –illegal fundraising activities are also restricted.
- Residents to be cautious of fraudsters who issue tokens in the name of Initial Exchange Offerings (IEOs) or Income For Operations (IFOs), or use banners such as “shared economy”, “pass-through economy”, “crowd funding”, “consensus economy” to conduct virtual currency in IMO mode as camouflage.
- That the public should treat blockchain rationally and carefully watch out for risks before investing in the technology.
These warnings begun way back, in 2017 when the People’s Bank of China together with seven other joint ministries issued an announcement on ‘’Preventing the Risk of Subsidy Issuance Financing”. This basically referred to the illegal sale and circulation of the financing entity through crypto currencies.