Chinese entrepreneurs who raise money through initial coin offerings (ICOs) will face harsh legal implications, including over 10 years behind bars. The country has amended its laws to now include ICOs among the illegal fundraising methods.
The Supreme People’s Court of China, which is the country’s highest court, amended the country’s Criminal Law recently to make raising money from the public through virtual currencies illegal. This amendment takes effect on March 1.
China has long banned ICOs, with the first crackdown on the sector in 2017. The People’s Bank of China (PBoC) ordered all ICO issuers to cease immediately and refund investors. However, local investors have still found ways to invest in what they deemed to be promising ICOs.
In February 2021, the Chinese government further clamped down on the sector, issuing a new decree that outlawed ICOs. It described them and other illegal fundraising methods as “acts of acquiring and absorbing funds from unspecified people and entities without the permission of the State Council’s financial management department.”
Now, the amendment on the Criminal Law further prescribes tough punitive measures for those found to be using ICOs to raise funds. They include prison sentences which will vary from three years to over 10 years depending on the amount of money raised.
Article 192 further states that any amount up to $16,000 will be considered a ‘large amount’ while anything above $79,000 will be deemed an ‘enormous amount.’
The latest crackdown comes at a time when China has reinvigorated its anti-digital currency stand. A week ago, the country’s top banking regulator warned the public about the presence of scammers in the ‘deceptive’ world of the metaverse. Prior to this, a state-owned media agency had described non-fungible tokens (NFTs) as a huge bubble.
As China doubles down on its ICO ban, another neighboring country seeks to legalize them. South Korea’s financial services regulator wants the country to reexamine its stance on ICOs and regulate them rather than ban them.
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