A Chinese regulatory source has said to www.financialnews.com.cn that crowdfunding via cryptocurrencies should be subject to a ban as soon as possible.
Initial coin offerings and the use of cryptocurrencies for crowdfunding purposes have recently entered the spotlight in Chinese financial circles, with authorities reportedly mulling a provisional ban following moves to step up regulation overseas.
The Chinese media have just further substantiated the possibility of a ban on ICO’s, with one regulator telling financialnews.com.cn that such a move could be imminent.
“ICO’s are basically illicit forms of fund-raising,” said the source. “[We] recommend that they be subject to a ban as soon as possible.”
Many Chinese experts have opined that ICO’s involve illegal public issuance of securities and called for heightened regulation, arguing that it provides channels for illegal activity such as money laundering as well as bring excessive risk to uninformed investors.
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.”
ICO’s enjoy burgeoning popularity in China
According to data cited by financialnews.com.cn a total of 2.616 billion yuan (approx. USD$400 billion) was raised via ICO’s in China during the first half of 2017, involving the participation of 105,000 investors.
The “2017 First Half Domestic ICO Development Report” (2017上半年国内ICO发展情况报告) released by the National Committee of Experts on Internet Financial Security Technology indicates that there are a total of 43 platforms in China that offer ICO services, most of which employ a”third party operation and virtual currency transaction + ICO” model.
Bitcoin and Ethereum jointly account for over 90% of the cryptocurrencies employed in Chinese ICO’s.