New ICO Halted in China, Platforms and Projects Facing Regulatory Scrutiny
A regulation document on cracking down ICO has been confirmed authentic by Caixin on 4th Sep. ICO is termed as unauthorized illegal public financing, suspected of illegal fundraising, illegal securities issuance, illegal token issuance and activities involving financial fraud and MLM. According to the official link from PBOC, the document is jointly released by seven ministries and commissions. Currently all ICO are halted in China. A list of 60 ICO-related platforms is provided for local regulators. Existing projects and platforms will face scrutiny.
No.99 Document on Preventing risks of Token Issuance. Source: PBoC
“ICO is unauthorized illegal public financing”
Background of the document is the wild growth of ICO projects in China. 65 projects has raised 2.1 Billion CNY on 43 platforms by July 2017.
“ICO has disturbed the economic and financial order seriously.”
The regulation paper is titled “The Notice On Rectifying Financing Through Token Issuance” and labeled as No.99 . The document is issued by the Internet Financial Risk Rectification Office, which is under the direct leadership of the State Council.
8btc has been tracking progress on ICO regulation for a while. The latest is the direct warning from lawyer “Not to use token issuance in ICO”. It’s said that the detail of document has been mostly specified in the non-public meeting hostd by the OKCoin CEO in Beijing. It’s easy to find that two of the “Big Three” bitcoin exchanges, Huobi and OKCoin are both based in Beijing and close to the center of power. BTCChina is based in Shanghai.
As per the conclusion drawn by the regulatory authorities along with a legal panel:
“ICO is financing in its nature. Currently the conducts in ICO like: public offering to over 200 people, no threshold for legal(qualified) investors and illegal bidding transaction, has constituted illegal fundraising, illegal securities activities and illegal financial activities in a disguised form.”
This is by far the harshest definition of ICO by Chinese regulatory authorities. It links ICO directly to “illegal” activities, among which illegal fundraising is punishable by death in China.
“Many ICO projects are actually not related to blockchain development and more like a contract fraud.”
The “illegal bidding transaction” refers to the exchange trading and is obviously the major concern. It’s said that market value of secondary market has been scaled up to “100 billion yuan”. Once the bubble bursts, many investors would suffer heavy loss and the angry mass may march on street, leading to social disturbance.
New ICO halted in China
The document has made specific requirement that:
“New financing activities through token issuance must be suspended in general and a monitoring system must be set up to prevent reoccurrence”.
It’s basically a death sentence or stay of execution to new ICO projects.
In line with the requirement, BTCC has announced trading suspension of ICOCOIN on its platform on 2 September.
“BTCChina will suspend ICOCOIN trading and stop accepting ICOCOIN deposits starting today, Saturday, September 2nd, 2017.”
Notice of BTCC to Suspend ICOCOIN Trading
ICO.info announced suspension of ICO on 30 August and now has emptied display of ICO projects among all categories like finished, ongoing and upcoming.
ICO.info emptied display of all ICO projects
As the first blockchain-based ICO platform in China, Bizhongchou announced suspension of new ICO to comply with regulatory requirement on 4 September.
Bizhongchou suspend new ICO
Other ongoing and upcoming ICO projects announced refunding or suspension.
ICOAGE announced refunding plan
60 ICO platforms and existing projects facing scrutiny
At the same time, the Rectification Office also provides a list of 60 ICO-related platforms for local authority to conduct on-site checking. For the region that has no such platform, local authority must also submit a “zero found” report.
The document has made specific requirement that
“New financing activities through token issuance must be suspended in general and a monitoring system must be set up to prevent re-occurrence”
What about the existing ICO?
“A case-by-case analysis would be conducted on projects that have finished ICO by local regulatory authorities. “
The No.99 document says.
“All relevant departments shall cooperation to crack down illegal activities following the current guidelines on illegal securitization, illegal trading venues and illegal fund-raising.”
Blockchain-based ICO has inject much-needed funding to blockchain startups but also lure uninvited scammers. A regulation storm may help identify the true innovations.