January 29, the central bank (PBOC)-sponsored media Financial Times published a headline news:  Keep an Eye on the Virtual Currency Trading Platform and Overseas ICO Activities, Governance Still Needs to be Strengthen in the New Situation. Yang Dong, director of the Fintech and Internet Security Research Center of China People’s University, further listed 6 administrative measures that should be taken to regulate the booming market. 

A large number of overseas ICO projects, are still involved in illegal issuance, financial fraud, pyramid schemes and other criminal related activities and when it goes abroad, that’s even harder to recover losses. The situation for financial consumer protection is even more severe. At this time, the central bank, the CSRC and other financial regulatory agencies, based on the leitmotiv of protecting financial consumers, should and must take measures to regulate this capital market, no matter the project is domestic or international.

According to Yang’s six regulatory measures. First of all, Chinese regulatory authorities should resolutely crack down on vicious crimes. For those ICO projects suspected crime, criminal responsibility of their legal representatives shall be investigated in accordance with the law according to the personal principle and the principle of protection of the Criminal Law.

Secondly, strengthen account regulation. Relevant financial and payment institutions should cooperate with each other to strengthen the supervision over virtual currency accounts.  Regulatory data should be identified and be obtained access to by supervising accounts. Supervision over the offline illegal transfer should also be strengthened.

Thirdly, strengthen supervision of foreign exchange. Regulatory authorities should strengthen foreign exchange risk management and transaction management, monitoring foreign exchange directions and check the actual use of foreign exchange especially for overseas ICO projects.

Fourthly, strengthen penetration regulation. ICO projects that share characteristics with “security” should be regulated according to relevant regulations of the securities regardless of their external expressions.

Fifthly, conducting cross-border regulatory cooperation. Many countries in the world have brought virtual currency trading and ICOs into the their legal supervision system. China should conduct extensive cross-border cooperation with these countries to take joint measures to protect the legitimate interests of financial consumers.

Finally, establishing a blacklist system. For those overseas ICO scams, no matter what their subjects of operation are and what nationalities of responsible persons are, their operations and the persons in charge should be blacklisted and their domestic business activities should be prohibited or partially prohibited.