China’s financial regulators are considering a ban on crowdfunding by means of cryptocurrencies, as authorities in other leading economies step up their scrutiny of initial coin offerings.
The US Securities Exchange Commission recently announced that ICO’s would be included within its regulatory purview, while Singapore’s financial authorities have also issued warnings of in relation to ICO risk.
Chinese financial authorities are now following suit by signalling their concern over ICO’s, as well as the possibility for an outright ban prior to the development of adequate regulatory systems.
Sources at regulators told Caixin that the Chinese central bank and the China Securities Regulatory Commission are currently in the process of investigating whether or not they should place ICO’s under a provisional ban.
The statutory basis for the proposed ban would be the “Measures on Banning Illicit Financial Institutions and Illicit Financial Activities” (非法金融机构和非法金融业务活动取缔办法) issued by China’s State Council back in 1998, which defines illicit financial activity as “any illicit fund-raising direct any unspecified social targets under any name that hasn’t received lawful approve, or illicit financial activity as specified by the People’s Bank of China.”
The announcement followings the issuance of the “Regulations for the Disposal of Illicit Fund-raising (Draft for Solicitation of Opinions” (处置非法集资条例（征求意见稿）) by the State Council on 24 August, which raised concern within China’s Bitcoin circle with its mention of “other illicit conduct for acceptance of funds,” and the issue of whether or not the cryptocurrencies raised via iCO’s are funds or commodities.
ICO’s have taken off internationally following the first token sale by Mastercoin in July 2013. Bloomberg reports that over 90 ICO’s have taken place thus far in 2017, raising USD$1 billion in total.
ICO’s in China are commonly made via crypto currency exchange Yunbi.com, headed by leading Chinese Bitcoin entrepreneur Li Xiaolai. The platform draws earnings from ICO’s in the form of procedural fees as well as a share of cryptocurrencies raised.
According to Caixin the sector remains severely under-regulated in China, with no set procedures for issuers, and many issuers even lacking status as registered companies.