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China’s Tech Hub Shenzhen Kicks off Cleanup of Crypto-Related Companies

China has recently renewed its hard-line approach to cryptocurrency trading and crypto exchanges, with the People’s Bank of China (PBoC) announcing that any crypto-related activities discovered would be “disposed of immediately”.

After China’s President Xi Jinping made a public endorsement of blockchain technology this October, the country’s official media has been cautioning the public to remain “rational” to the crypto speculation and lashing at those frauds or speculation under the name of blockchain.

According to PBoC’s Bluebook on Blockchain, only 4,000 out of the 28,000 blockchain enterprises based in the country are engaged in pure blockchain technology, while as many as 25,000 have tried to issue their own cryptocurrency or token via illegal fundraising or financial fraud.

In response to Beijing’s rigid anti-crypto stance, local governments at all levels have been intensifying the clampdown on crypto-related activities with new regulations rolled out.

Following financial hub Shanghai and capital Beijing’s move to investigate local cryptocurrency marketplace, the country’s tech capital Shenzhen also issued a warning against illegal activities involving cryptocurrency last month.

In the latest development, Shenzhen Financial Regulatory Bureau, local financial regulator directly under the government, announced that local law enforcement has already identified 39 enterprises suspected of conducting illegal crypto activities and a cleanup would kick off soon. Eight enterprises have already been under inquiry at the Dec.18 rectification meeting held by the bureau along with other 10 local regulatory organs, of which two companies are suspected of involving in crypto trading service and the other six are associated with initial coin offering (ICO) with their cryptocurrencies being KAN, VSC, HOB, BST, MCC.

1Notice on Convening a Special Rectification Meeting on Illegal Activities Involving Cryptocurrency issued by Shenzhen Financial Regulatory Bureau

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Appendix: List of Companies Suspected of Carrying out Illegal Activities involving Cryptocurrency

“We conducted investigation online in the early stage, and then we investigated offline in some other ways. It doesn’t mean that the companies that have not been inquired have no problem, and that those that have been questioned today at the meeting have troubles.” staff of Shenzhen Financial Regulatory Bureau said.

According to an insider at one of the inquired companies, the regulators asked about the company’s situation and business scope, and made it clear that companies shall not be engaged in ICOs and crypto financing.

On the same day of Shenzhen’s investigation into the eight enterprises, China’s state-owned television broadcaster CCTV has again lashed at cryptocurrency trading and frauds under the disguise of blockchain, and reported that the crackdown has been escalated.

As part of the crackdown efforts, at least six Chinese cryptocurrency exchanges have suspended or chosen to terminate operations in response to Beijing’s rigid stance last month; cryptocurrency ads and price tracker have been removed from social media, social media forums related to cryptocurrencies keep silent as sensitive words like cryptocurrency trading or crypto speculation detected would trigger immediate bans; in addition, a number of crypto-related social media accounts of local crypto influencers and KOLs (key opinion leaders) have been blocked, including crypto exchange Binance cofounder He Yi’s and Tron founder Justin Sun’s weibo accounts.

Some reports claim that the recent developments represent “the biggest cleanup” of the cryptocurrency sector since Beijing’s ICO/crypto ban in Sept. 2017.

Coming on the heels of the country’s president’s great push for blockchain, some comments go that the official army’s first move is to kill the unofficial ones. According to previous reports, the country’s state-backed digital currency dubbed DCEP is ready to roll out and will be piloted in Shenzhen in 2020.

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