The regulation was issued by the headquarters of the Central Bank of China in Shanghai. Apart from ICOs, other cryptocurrency crowdfunding models will now be illegal.
The headquarters of the People’s Bank of China (PBOC) in Shanghai published last November 22nd an update to its rules to restrict cryptocurrencies in the territory. A few days earlier, in Beijing, local financial authorities had indicated the illegality of cryptocurrency exchange operations.
According to the information, the PBOC’s authorities in Shanghai, a municipality that is considered the main commercial and financial center of China, hold that they have observed the resurgence of cryptocurrency-related operations. For that reason, they decided to take tougher measures to strengthen regulation and control and reduce cryptocurrency trading.
In a statement, the PBOC stated that the issuance, financing and trading of virtual currencies involve multiple risks, so they ensure that they will take measures to rectify and withdraw these activities.
In his Twitter account, Dovey Wan, founding partner of Primitive Ventures, a firm focused on crypto assets, explained that the measures involve the illegalization of different forms of cryptocurrency crowdfunding models, similar to initial coin offerings (ICOs), which have been prohibited since 2017
Wan highlighted that, in addition to ICOs, figures such as initial futures offerings (IFOs), initial exchange offerings (IEOs), and initial security token offerings (ISTOs), are now banned in Shanghai. The PBOC considers them “unauthorized illegal public offering and securities issuance, potentially illegal fundraising, financial fraud, pyramid schemes and other crimes,” as written by the specialist.
Additionally, the Chinese financial authority says that it will immediately withdraw cryptocurrency trading platforms currently serving the Chinese market that are registered abroad. According to Wan, this implies greater regulation on exchange houses whose servers are located outside the continent but provide services to Chinese residents. Likewise, they will continue to strengthen “the cleaning of fiat payment and settlement channels and gateways,” said Wan.
Reinforcing the “Blockchain, not Bitcoin” speech held by the Chinese government, the document issued by the headquarters of the PBOC warns investors that they should be careful not to confuse “blockchain technology with cryptocurrencies.” Wan said that the information had been known since the weekend of November 16th and 17th and Chinese investors had expected a statement like this.
In 2017, China banned cryptocurrency operations in its territory; however, following President Xi Jinping’s recent declarations in favor of blockchain networks, interest in crypto assets increased significantly. As reported, the Chinese president’s public statements at the time boosted the actions of Chinese technology companies, and even the price of Bitcoin.
Another announcement released by Beijing’s local financial authorities takes a different direction, according to Melody He, who identifies himself on Twitter as co-founder and partner of The Spartan Group. He stressed that the entity, instead of a frontal prohibition as in Shanghai, chose to state that it had “never actually approved any branches of exchange houses.”
Melody He indicated that, despite this statement, OKEX and Huobi are headquartered in Beijing and their operations are fully monitored by the regulator, which suggests that they are “approved by Beijing.”
It should be noted that Bitcoin trade in China, using the anchored cryptocurrency or stablecoin Tether as a vehicle, had a rebound towards the end of the third quarter. According to data from Chainalysis, Chinese traders get access to Bitcoin through OTC (over-the-counter) cryptocurrency markets, in which Tether was used in 99% of China’s Bitcoin trade, displacing the yuan almost completely.
By Willmen Blanco