China launched a new wave of fighting against ICO and cryptocurrencies. Just the day before yesterday WeChat, the most popular messenger in the country with an audience of more than a billion users blocked a number of accounts spreading the news about crypto and Initial Coin Offerings. Yesterday, the Chinese authorities, which calculated a total of 124 foreign crypto exchanges, were given the green light to ban them as they were providing their operations for the China-based IP-addresses.
Today, August 24, the Сhinese authorities spread a joint warning on the "illegal fundraising" of cryptocurrency funds under the schemes that involve the use of cryptocurrency and blockchain. The letter, published on the website of the People’s Bank of China- the state’s central bank, includes the concern of four other regulators such as the Ministry of Public Security, the Banking Regulatory Commission, the General Administration of Market Supervision, and the Central Network Information Office.
The letter states that during the joint work the bodies managed to eliminate the "lawless elements" who were claiming to issue cryptocurrency through ICOs, classifying it as an extortion of funds from investors. Regulators also use such terms as "financial innovation" and "blockchain", at the same time blaming ICO companies for speculating on these topics, because in fact, they are an "illegal fundraising, financial pyramid scheme, and fraud". They agree that many popular projects "are not based on blockchain technology, but use the excitement around this phenomenon for illegal fundraising, acting as financial pyramids.”
Representatives of the Bank of China noted that some companies advertise their products with such slogans as "the cost will only grow" and "high profit, small risk," which are the scam’s attributes.
The People's Bank of China identifies three features of such fraudulent schemes:
- Most of them operate on an international scale, relying on the Internet and social networks. To collect funds, they use Internet payments. Some of these scammers create sites by renting servers located in other countries and manage their products from abroad.
- Scammers resort to deception and manipulation. They use so-called airdrops, social network marketing, and other tricks to get the public to believe that the value of the token will only grow.
- They promote the ideas of "passive income" and "dynamic income", luring small investors.
WHY IS IT IMPORTANT?
- Although last year China passed a ban on collecting cryptocurrency funds through the ICO, companies continued to promote the initial coin offering along with new financing methods, such as initial fork offering, initial exchange offering and initial miner offering.
- Last week, the Chinese Communist Party issued a blockchain manual for government employees. The appearance of the document, entitled "Blockchain – A Guide for Officials," shows that the authorities do not treat this technology with hostility.