Chinese State Media Accuses ICOs and Exchanges of Defying Crackdown

Chinese state media outlet, Voice of China, has published reports criticizing the efforts of Chinese cryptocurrency exchanges and initial coin offerings (ICOs) to continue operations in spite of the central government’s 2017 crackdown.

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State Media Criticizes Cryptocurrency Exchanges’ Defiance of Crackdown

Voice of China’s reports state that “On September 2017, seven ministries and commissions of the Central Bank issued the ‘Announcement on Preventing the Risk of Issuance of Coinage Offerings’, requiring that any institution not engage in the interaction between legal currency, tokens, and ‘virtual currency’.”

One of the reports states that despite the official ban, companies operating in the cryptocurrency sector sought “to take advantage of the rising tide of rising bitcoin prices,” and alleges that many of China’s cryptocurrency exchange “platforms immediately set up overseas websites and continue to provide digital currency services to mainland users as overseas companies.”

Voice of China Targets Okex

The Voice of China reports pays considerable attention to Okex, accusing the company of using shell companies to obfuscate its Chinese operations, in addition to offering unlicensed securities.

The report states that “After the national ban was issued, OKCoin transferred all user data and digital currency to the OKEx Exchange, which was established outside China.” Voice of China also quote an Okex customer who believes that the company “is only nominally moving the company overseas, claiming to be headquartered in Belize, and the team is Hong Kong, but in fact, still operates the entire company in Beijing, and the users are almost all Chinese.”

State Media Claims Number of Chinese ICOs Increasing Despite Ban

Voice of China also published a report focusing on initial coin offerings that accuses many Chinese ICOs of operating in clear defiance of the central government’s directives.

The report states that the September document issued by various Chinese government institutions declared the “issuance of tokens is essentially an unauthorized and illegal public financing.” The document accused many ICOs of violating financial laws through “illegally issuing tokens, [the] illegal distribution of securities, and illegal fundraising,” in addition to “Financial fraud, pyramid schemes and other illegal and criminal activities.”

Professor Criticizes “One Size Fits All” Cryptocurrency Regulations

Despite the critical description of ICOs, the report quotes Deng Jianpeng, a professor at The Law School of the Central University for Nationalities who is purported to possess extensive experience in observing and analyzing cryptocurrencies. Mr. Jianpeng advocates for a dynamic, global. and flexible regulatory apparatus that caters to the fostering of innovation, and criticizes “one size fits all” and prohibitive legislative proposals regarding cryptocurrencies.

According to a rough translation, Deng Jianpeng stated: “digital currency has a very typical global character, resulting in a simple prohibition of no effect in the physical space. Therefore, if we think about fine-tuning the regulatory rules, it is absolutely not allowed to do public offerings. Fraud is absolutely necessary to crack down on criminal law, but if it is private equity is also true entrepreneurship. Is it possible to have some special channels, such as approval by a specific agency, to avoid the embarrassing situation of supervision? This thing is worth rethinking.”

Do you think that China will be able to crackdown on the continued operation of cryptocurrency platforms that are based offshore yet target Chinese investors? Share your thoughts in the comments section below!

Images courtesy of Shutterstock, Okex

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