Chinese ICOs Move to the Shadows

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China’s blanket ban on initial coin offerings may have made it illegal for startups to hold initial coin offerings (ICOs) and for investors to contribute to them, but it has not quashed excitement among investors for crypto token investments. Chinese ICOs continue to operate, but now they do so from the shadows.

ICO investing seminars hosted in mainland China used to attract hundreds of investors. Concerned — at least purportedly — that the nascent funding model was being exploited to commit fraud, the People’s Bank of China (PBoC) declared the practice illegal and ordered the cessation of all Chinese ICOs. The PBoC also required startups who had previously completed ICOs to return all funds to contributors. Not long after, domestic bitcoin exchanges began “voluntarily” shutting down, citing the PBoC guidance on ICOs.

But, as the Wall Street Journal reports, ICO investing seminars have not ceased on the mainland. They continue to operate in secret and target wealthy investors willing to meet investment minimums as high as $100,000. It’s impossible to measure the extent of these schemes, but anecdotal evidence suggests they remain quite common.

“You can close the exchanges, but you can’t shut off the demand for such investment products,” BitKan CEO Leon Liu is cited as saying. “The government doesn’t have any way of policing offline sales” of cryptocurrencies and related investments.

The Journal describes one such underground sales pitch, held at a Beijing golf club just days after Chinese ICOs were outlawed. A Ms. Zhang delivered a sales pitch to a group of six affluent investors, urging them to invest in a “wealth currency” called REC that included a subsidiary cryptocurrency called R-coin. Investors could realize 40-fold profits in just two to three years, she said. Cryptocurrency “only rises, does not fall,” a video presentation added.

The Journal was unable to verify the existence of R-coin or the legitimacy of REC’s operations, highlighting one of the inherent problems with blanket bans. Whereas regulatory agencies in other areas of the world — such as the SEC in the U.S. — have thus far relegated their interventions to projects believed to be scams, the Chinese have made no attempt to distinguish between legitimate — albeit risky — investments and schemes that are outright fraud.

As Leon Liu stated, China’s ICO ban will not eliminate demand for cryptocurrency investments. And though it may be marketed as a way to protect investors from scams, it appears it will have the opposite effect.

Featured image from Shutterstock.

Last modified: May 21, 2020 9:12 AM UTC

Josiah Wilmoth @Y3llowb1ackbird

Josiah is the U.S. Editor at, where he focuses on financial markets. His work has also been featured on Yahoo Finance and He lives in rural Virginia. Connect with him on LinkedIn or Muck Rack. Email him directly at josiah.wilmoth(at)