Chinese regulators including the central bank have issued a new joint statement condemning illegal fundraising by schemes purporting to affiliate with cryptocurrency and blockchain technology.
Issued on Friday, the warning comes as a joint statement from the People’s Bank of China – the country’s central bank, the Ministry of Public Security, the Banking Regulatory Commission, the General Administration of Market Supervision and the Central Network Information Office.
The six major government bodies and watchdogs blasted “lawless elements” claiming to issue cryptocurrency through initial coin offerings (ICOs) while soliciting funds from investors. These operators use terms like “financial innovation” and “blockchain”, the warning read, accusing them of only purporting to be based on blockchain technology while they’re really elements of “illegal fundraising, pyramid schemes and fraud.”
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First, the authorities highlighted crypto projects that rent overseas servers while relying on chat forums and online trading tools and payment gateways to collect funds from the public.
“Some individuals claim to have obtained investment quotas for overseas premium blockchain projects in the chat group, which can be used for investment, and is most likely a fraudulent activity,” a translated excerpt from the warning read.
The warning added:
“The funds for these illegal activities are mostly overseas, and supervision and tracking are very difficult.”
The watchdogs then took aim at ‘seductive’ projects that used token airdrops of free cryptocurrency to tempt investors while others roped in celebrities to endorse them.
“High returns and low risk, with strong deception<” the notice said. “In practice, the criminals illegally profited from the so-called virtual currency price movements, setting profit and cash withdrawal thresholds.”
While China moved to ban cryptocurrency fundraising through ICOs this time last year, operators have continued to offer ICOs alongside new financing methods like initial fork offering, initial exchange offering and initial miner offering, the warning added.
Today’s public warning comes at a time when China continues its crackdown against the crypto sector after moving to ban commercial venues in Beijing from hosting cryptocurrency events last week.
China’s government, known for mandating the infamous ‘Great firewall’, is also looking at blocking access to over 120 offshore exchanges’ websites in the mainland, in what could be the final nail in shuttering local crypto trading activity – at least in the mainstream – in China.
PBoC image from Shutterstock.