Chinese Lawyer Warns Not to Use “Token Issuance” in ICO
Xiao Sa, a Chinese lawyer specialized in cryptocurrency and blockchain startups, advises ICO issuers not to use “token issuance” in ICO website or whitepaper, especially for those ICOs in China. Also an oversea foundation might not exempt the entity from local legal jurisdictions.
The idea of “Cashless society” is being promoted by Alipay, TencentPay in China on a massive scale. The cashless day has been extended into “Cashless Week “ from 1 Aug to 8 Aug in 2017 by Alipay. Alipay users are rewarded in random discount when they pay via mobile Alipay wallet. However, such promotion may have harm the circulation of CNY, as per some mainstream coverage. It’s reported that PBOC subsidiary did ask some merchants to remove “cashless” wording from the promotional materials.
Promotion of “cashless week” by Alipay in Hangzhou bus station, where Alipay is based.
Xiao Sa says that the promotion of cashless payment is not friendly to the people in remote area, the elderly or those who resent to use mobile apps. Plus the rejection of accepting cash is against the law. She then advise blockchain entrepreneurs not to use “token issuance” in their promotional materials. Her warning may just come as a timely reminder as ICO are catching public attention due to its fortune-making effect. Her advice is based on the interpretation of the latest Regulation of the People’s Republic of China on the Administration of Renminbi that was first released on 1 May 2000 and later updated by the State Council in July 2014.
According to Article 29 in the Regulation:
Article 29 No entity or individual is allowed to print or sell tokens to replace Renminbi in circulation on the market.
ICO issuers should be aware that the wording of “token issuance, token sales” must not be used in whitepaper as they are ambiguous in meaning.
For example, the “circulation on the market” has a broad connotation. “Market” could be applied in a general scale or a very specific angle. Xiao also mentions that if some fraudulent ICO projects receive lots of complaints from victims or threatens the stability of social order or financial security. Then the meanng of “market” will be interpreted on a broader level, which will in turn affect the application scenario of most ICOs.
In addition, the “token issuance” may be in conflict with other legal stipulations. In the Criminal Law of China, articles concerning fiats are: Article 170 money counterfeiter, Article 171 sales, purchase and transport of counterfeit money, Article 172 holding and using counterfeit money. Please note that “money” does not refer to CNY only, it also includes currencies issued by other countries.
Therefore, the wording of “token issuance” is too big to undertake for blockchain project startups. It’s not worth the risk. Let the central banks issue money.
Finally, Xiao also points that an oversea foundation-like entities doesn’t necessarily resolve the risk of local laws and regulations.
“When in China, do as Chinese do.”
“Please delete wording like “tokens issuance” from your website or whitepaper. Stay low and stay quiet.”