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ICO in China is still ON. Nobody Gives a Damn About the Ban

Nobody Gives a Damn About the Ban

Recently, the Shanghai headquarters of the People’s Bank of China issued a document on the official website, saying that it will continue to guard against ICO (Initial Coin Offering) and virtual currency trading risks. In the past year, the central bank and other departments in China have cooperated to crack down on ICO illegal public financing speculation. The price of virtual currency has fallen sharply, showing remarkable regulatory effects. However, It is investigated that there are still some ICO projects under the banner of foreign foundations and try to pass the supervision.

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Over-the-counter transactions service provided by exchanges make the change between RMB and digital currency is not difficult for Chinese people

Chinese government’s attacks on ICO illegal fundraising have made great achievement. After the supervision since September last year, many domestic exchanges of virtual currency have been basically shut down and direct exchange of RMB and the virtual currency has been suspended.

Despite this, it is investigated that it is still not difficult to purchase ICO tokens in RMB. Currently, the purchase of mainstream virtual currency relies on over-the-counter transactions. Some platforms like OTCBTC, CoinCola open an off-exchange area. In those zones, users can easily buy mainstream currency such as Bitcoin through Alipay, WeChat or bank transfer. According to an industry insider, the so-called OTC transaction is similar to Taobao shopping, which is suitable for both buyers and sellers to complete transactions between RMB and virtual currency.

“It seems that the entire process platform does not violate the relevant policies, but the over-the-counter transaction has actually opened a hole in the ICO token transaction…” the source said.

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Blockchain and digital currency-related mediums in WeChat make advertisements for projects side and spur Chinese users to buy coins.

And some mediums on WeChat seem to transmit information about blockchain but in reality speculate digital currency. They are even more active than before September 4 last year when the seven ministries and commissions issued the “Announcement on Preventing the Risk of Subsidy Issuance Financing”. They even teamed up with exchanges and ICO project parties to deceive investors and make huge benefits.

According to workers in the industry, besides making advertisements for project side, these mediums public also undertake activities like writing soft text, making project interviews, organizing offline salons, indirectly promoting the development of ICO. Some soft texts provided by those mediums cost up to 100,000 yuan or at least 1 bitcoin, and some video interviews will cost 1,000 yuan for 1 minute.

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The platforms move overseas but still provide services for Chinese people.

It is investigated that some domestic virtual currency trading platforms blocked their websites in China but operated in foreign countries to provide service for Chinese users. They registered overseas registration and continued to provide trading services to domestic users. For example, some platforms go to Malta to register; some platforms seem to provide English version and Chinese version homepages; some platforms build a group on Telegram to evade supervision. Although network shielding measures are adopted by the official, it is not difficult to log in those platforms by purchasing a VPN (Virtual Private Network).

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Project side conducts ICO in a more private way.

Project side of ICO also began issuing coins in more hidden ways. An ICO project leader described a “new ecology” of launching ICO. A foundation was set up abroad to issue ICO tokens to evade supervision. Its fundraising is still mainly for domestic investors. Then the project side purchases a project white paper from Taobao which costs around RMB 40,000. The core members of the team in the white paper always are foreigners who never actually engage in the operation of the project, and people in charge behind it rarely shows up.

The project “Going out to sea” will work together with the trading platform to speculate coins.

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It is suggested that the supervision on ICO and the transaction of digital currency must be stricter.

In the face of the resurgence of virtual currency speculation, the industry calls for more strict supervision.

Mediums engaging in ICO speculation should be blocked without delay according to experts and the official. Li Honghan, a researcher at the International Monetary Institute of Renmin University of China, believes that some blockchain and digital currency-related mediums make fake advertisements, misleading investors. He mentioned that some mediums even team up with the project parties to manipulate the price of tokens to make huge profits. The official in charge of the Beijing Financial Work Bureau claimed that it is necessary to take measures such as blocking the media.

Experts pointed out that ICO supervision must adhere to international cooperation and form a joint force of supervision in response to the “going out to sea” of trading platform and the project side for evading supervision.

At present, many ICO coins are under the banner of blockchain technology, but the two cannot be simply drawn equal. Xu Zezhen, secretary of the Party Committee of the Beijing Internet Finance Industry Association, said that in the context of China’s ban on ICO, there are indeed some companies that claim to use blockchain applications to adopt the practice of “selling dog meat” and will be worthless. After the concept packaging, the money is financed to “cut the leek”.

Guo Yuhang, the head of the Chinese blockchain application research center, said that it is necessary to separate the blockchain technology from the virtual currency speculation, promoting it to solve the practical problems. “The development of the coin-free blockchain project is undoubtedly complied with the regulation and of great potential “


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