- Voice of China Criticizes Crypto Exchanges & ICOs of Defying Crackdown.
- Majority of these exchanges have moved offshore but yet targets Chinese investors.
China: Voice of China (VOC), a Chinese state media outfit, has published several reports accusing Chinese crypto exchanges and firms offering ICOs of continuing with operations despite the central government’s crackdown in 2017.
According to one of the reports from the Voice of China: “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’.”
Another report states that in spite of the official ban, firms operating in the crypto sector sought “to take advantage of the rising tide of rising bitcoin prices.” The report alleged that a number of China’s crypto exchange “platforms immediately set up overseas websites and continue to provide digital currency services to mainland users as overseas companies.”
VOC’s reports, which cited the case of OKEx, criticized OKEx for using shell firms to obfuscate its Chinese operations, in addition to offering unlicensed securities. One of the reports 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.” A customer of the exchange stated that OKEx:
“is only nominally moving the company overseas, claiming to be headquartered in Belize, and the team in Hong Kong, but in fact, still operates the entire company in Beijing, and the users are almost all Chinese.”
The reports also focus on Chinese ICOs, accusing them of operating in clear defiance of the central government’s directives. The report added that the document issued in September by several Chinese government institutions declared the “issuance of tokens is essentially an unauthorized and illegal public financing.” The document accused 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.”
Deng Jianpeng, a professor at The Law School of the Central University for Nationalities, criticized “one size fits all” and prohibitive crypto regulations.
Professor Deng Jianpeng stated [rough translation]:
“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’s move to crack down on crypto exchanges that are based offshore yet target Chinese investors can be successful? Tell us your view in the comment box below.