China Cracks Down on ICOs With New Decree Against Illegal Fundraising
It’s been no secret that the Chinese government has slowly been cracking down on the development of the crypto industry in the country. And while the first several efforts to stifle the growth of cryptocurrencies, namely the banning of crypto trading, were said to be done to protect private investors, it’s since been revealed that the reason behind the massive crackdown was the upcoming digital yuan.
However, this has done little to prevent people from launching new cryptocurrency projects and companies in China, finding ways to bypass regulations, and offer customers access to digital assets.
But, all of this will come to an end on May 1st, when the latest decree signed by the Chinese Vice President Li Kequiang will come into effect.
According to the latest report from Chain News, a local crypto news outlet, the Chinese State Council has unveiled a new decree that’s set to prevent “illegal fundraising in the country.” While signed by the Vice President at the end of January, the decree was published on February 11th, detailing the new laws set to promote “healthy economic development and maintain social stability.”
The decree defines “illegal fundraising” as the act of acquiring and absorbing funds from unspecified people and entities without the permission of the State Council’s financial management department. Any type of fundraising that promises to pay out interest or give out other types of investment returns is also deemed illegal by the new decree.
To stop illegal fundraising, which by definition includes initial coin offerings (ICOs), initial exchange offerings (IEOs), and security token offerings (STOs), the government will focus mostly on prevention. According to the official document, the baseline of the government’s prevention efforts will be to conduct extensive investigations that would enable them to crack down on illegal fundraising acts while they’re still in their very beginnings. To do that, the country will establish a comprehensive management system that will enable it to track and monitor both the traditional financial markets and the digital asset industry.
However, the crackdown efforts will not be centralized. When the State Council adopted the draft regulation in late December last year, it was decided that governments at the provincial level will be in charge of working against illegal fundraising in their respective administrative areas. The State Council will provide guidance, as well as financial and technical support needed to conduct these investigations.
To further enhance prevention efforts, the State Council also set out a plan to strengthen the infrastructure needed to support the legality of the market. Among other things, the administrative deposition will be strengthened and improved, with more efforts made to provides businesses and individuals with early market registration. Funds will also be invested in advertisements promoting timely registrations for businesses and individuals looking to receive permission from the State Council to conduct fundraisers.
Under the new decree, illegal fundraising constitutes a criminal act and will be prosecuted under the standing criminal law.