People's Bank of China (PBoC) expanded sanctions against the cryptocurrency. The central bank intends to put an end to airdrops, free distribution of cryptocurrency tokens, as stated in the published PBoC financial stability report.
The regulator is confident that despite the ban on holding the initial coin offering (ICO) in the country, they still have a place to be in the veiled form. The bank believes that in this way companies shy away from prohibiting the public sale of crypto, giving out free tokens to investors. PBoC believes that the airdrop tokens are then capitalized in a speculative market to inflate the value of assets.
Thus, the local regulator equates airdrop tokens to a masked ICO. The bank warns that such projects are increasing, despite all attempts to prevent the release of cryptocurrency tokens in the country.
It’s expected that the regulator again sharply spoke out in regards to the ICO and points to the widespread risks of financial fraud and the abundance of pyramid schemes. The PBoC report says that before July 18, 2017, 65 ICOs were held in China. More than 105,000 people participated in the placement of tokens, and the volume of investments exceeded 2.6 billion yuan ($ 377 million). At the same time, about 20% of this amount was attracted with the help of foreign investors.
PBoC also reiterates concerns about cryptocurrency companies that carry out business abroad and use foreign agents to invest on behalf of domestic customers in mainland China. The regulator also expressed suspicions regarding market manipulation and violation of anti-money laundering (AML) rules in the cryptocurrency sector. According to the bank, cryptocurrency is used for tax evasion and terrorism financing.
The ban on ICO in China was introduced in September 2017. After the ban was introduced, financial and non-bank payment organizations cannot directly or indirectly provide any goods or services, including opening, registration, clearing and settlement services related to ICO or digital currencies. Nor can they finance enterprises that are related to ICO or crypto. The regulator also called on financial institutions to train investors to jointly assist in regulating the financial market.
The new document and some statements by representatives of the regulator show that PBoC does not intend to change this position. For example, Pan Gongsheng, Vice Governor of the bank, stated that the ICO ban and the closure of cryptocurrency exchanges had a beneficial effect on the country's economy.
But many local media disagree with them. Journalists believe that attempts to prohibit ICO and restrict Chinese citizens to trade in cryptocurrency were virtually useless. And the crypto activity of the inhabitants of China continues to grow. For example, soon after the introduction of repressive measures, many crypto exchanges opened representative offices abroad and continued to work, but at the same time, they already acted as representative offices of foreign companies.
Chinese crypto trading platforms have moved to other growing markets: Singapore, Japan, South Korea, and the United States. Binance, which became one of the largest crypto exchanges in the world, after the ban moved to Japan, and then to Malta. All this led to the fact that the share of the yuan in the total volume of global transactions with Bitcoin fell from 23% to 1%.
At the same time, Chinese people are very actively using online payments for any operations and prefer digital transactions to traditional payments. Cryptocurrencies are also very popular among the local population. Considering all these factors, perhaps PBoC may in the future create a national digital currency. Back in 2016, representatives of the bank said that they would try to create their own cryptocurrency as soon as possible. For the regulator, such a move will provide an opportunity to track transactions across the national economy.
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