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Chinese Government Set to Crack Down on Blockchain Scams as Speculative Fever Returns

China is looking to crack down on cryptocurrency trading again as they notice the speculative fever returns following president Xi Jinping’s laud for blockchain technology.

Of late, financial regulators in Shanghai has issued a notice to combat illegal cryptocurrency trade in the region. It reads that regulators in each district of Shanghai must search and investigate local crypto exchange-related services before Nov.22 and report to the central bank for further actions.

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The notice, circulated online since Friday, reminds many of the ICO ban in 2017. Chinese financial publication Caixin later confirmed its authenticity, saying the effort is led by the Shanghai government’s finance bureau.

The promotion of blockchain in China inevitably gives cryptocurrency-related activities a leg up after President Xi Jinping personally endorsed the promising technology. According to the notice, the move is to prevent speculations on cryptocurrencies which have seen a rise because of the recent blockchain fever.

As per the notice, three types of companies are their investigation focus – firms providing cryptocurrency transaction service in the country; firms issuing cryptocurrencies in the name of blockchain application and raising funds or cryptocurrencies such as Bitcoin and Ethereum; firms providing promotion, brokerage and other services for ICOs and cryptocurrency trading platforms that are registered out of the country.

In the meanwhile, China’s social media platform Weibo (Twitter equivalent) has banned accounts from publishing any posts that contain “blockchain” and “cryptocurrency” at the same time. On Nov.13, the official Weibo account of Binance was blocked and later Tron’s was blocked for “being reported for violating laws and regulations”.

The serial actions soon raise crypto investors’ concerns that it is an escalation of the country’s ICO ban issued two years ago and forecast another round of crackdown on cryptocurrencies. While some suggest that it is those scamcoins, instead of bitcoin-like cryptocurrencies, that are targeted. As a local banker commented

“Cryptocurrencies, like bitcoin, are fine. However, illegal fundraising (ICOs, scam coins, air coins, etc.), cryptocurrency trading and speculation in the name of blockchain are definitely against the general direction of the country’s development of blockchain. The notice, jointly issued by the Ministry of Public Security and other departments, is an effort to crack down on scams under the disguise of blockchain, just like the cleanup of illegal P2P lenders.”

Earlier this month, Xinhua Daily, a Communist party-controlled media, has taken a balanced approach toward bitcoin in a front-page article, describing bitcoin as the first successful application of blockchain technology.

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