One of China’s largest Bitcoin exchanges has announced the suspension of initial coin offerings, as Chinese regulators flag the possibility of a provisional ban on all crowdfunding via cryptcurrencies.
BTC China (比特币中国) announced on 3 September that it would be temporarily suspending its ICO operations, in the wake of media reports that Chinese regulators will subject cryptocurrencies to greater scrutiny in future.
The day previously Distributed Autonomous Coalition Asia (DACA) also announced that it would the temporary suspension of the 2017 DACA International Blockchain Summer, originally scheduled to be held in Beijing from 2 – 3 September.
One source close to Chinese regulators called for a ban on ICO’s as soon as possible towards the end of last week, on the grounds that they are an illegal form of fund-raising.
“ICO’s are basically illicit forms of fund-raising,” said the source to financialnews.com.cn. “[We] recommend that they be subject to a ban as soon as possible.”
Financial regulators are reportedly considering a ban on ICO’s based on 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 directed at 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.”
Some domestic analysts expect any ban on ICO’s in China to be merely a temporary imposition, giving authorities breathing space to develop a regulatory framework governing the use of cryptocurrencies for financial purposes.
“If [cryptocurrencies] can be effectively regulated within a rational, legal regulatory framework, then they can serve as a new channel for financing by tech enterprises,” said one OKCOIN analyst to www.stcn.com.
“There are definitely groups who are using ICO’s to engage in fraud…however, there is no relationship between this and the intrinsic nature of ICO’s themselves.
“Technology is just a tool, and people can use tools to engage in innovation, as well as use tools to engage in fraud. We’re waiting now for regulatory means to stymie the motivation to commit fraud.”