In what must come as a blow to champions of cryptocurrency and the pioneers of the new decentralizing technologies like blockchain, China’s Internet Finance Reporting Information Platform has recently added what it calls “Token Financing”, that is financing through the issue of cryptocurrency, to its list of illegal activities that it encourages others to report.
The scope of the platform, already quite large, has been further engorged with token finance, focusing in particular on six key areas of content to be carefully monitored and regulated:
- Those engaged in exchanges between legal tender and cryptocurrencies
- Buying/selling or acting as an intermediary in the sale of cryptocurrencies
- Anyone setting prices for cryptocurrencies and related fields
- Directly or indirectly providing token/cryptocurrency financing, as well as opening/registering accounts, liquidation, settlement etc.
- Offering and issuing insurance with token/cryptocurrency or including these items in an existing insurance policy
- Other illegal financing activities that include the term “token”
Other areas the platform covers includes online lending, equity crowdfunding, online insurance, online payments, cross-border transactions, online fund sales, cash loans and more. What the addition of token financing amounts to is an outlawing of the practice, which sets back key areas of development for cryptocurrency, blockchain and other areas of emerging fintech. This new industry’s development relies heavily on the ability of enterprises to explore fully the potential of the technology, which includes the ability to issue tokens and finance using them.
A further concern, given the highly technical nature of the sector, is the potential number of reports submitted about activities that are wholly innocent, but to the untrained eye seem dubious or suspect. The resulting backlog and public worry could lead to further obstacles being put in place that will hinder innovation and even halt progress. It is a big concern for a global sector that relies on being the ahead of the competition. Chinese enterprises hoping to take advantage of this kind of fintech may struggle against international competitors.