The Chinese government is not a fan of initial coin offerings (ICOs) and it has made this very clear in the past. Now, in its latest move, it has signed a new decree that further clamps down on the sector. The decree outlaws ICOs, describing them as illegal fundraising.
China first banned ICOs in September 2017, a period in which they were extremely popular. At the time, the People’s Bank of China ordered all ICO issuers to cease immediately and refund their investors. However, as local news outlet 8btc reports, Chinese investors have found ways to still invest in ICOs.
With its new decree, the government is further seeking to stamp out cryptocurrency token sales completely. According to local reports, a State Council adopted the decree in a December 21, 2020 executive meeting. Premier Li Keqiang then signed the decree in late January, before unveiling it mid-February.
The decree outlaws ‘illegal fundraising’ which it defines as “the act of acquiring and absorbing funds from unspecified people and entities without the permission of the State Council’s financial management department.” It also deems illegal any fundraising that comes with a promise to pay out interest. This will include ICOs, initial exchange offerings (IEOs) and security token offerings (STOs).
The decree revealed that the government intends on cracking down on such illegal fundraising campaigns in their early stages. To do this, the government will establish a comprehensive system that monitors the digital asset industry and the traditional financial markets. Provincial-level governments will be in charge of cracking down on illegal fundraising campaigns in their jurisdictions.
Illegal fundraising constitutes a crime under the new decree, prosecutable under the standing criminal law.
Back in 2017, when China clamped down on the digital currency industry, it was believed to be a move to protect investors. However, some now believe that the government had the digital yuan in mind. The new decree also comes at a time when the digital yuan development is at high gear, further building on this belief.
In October 2020, the Chinese government passed a law that legalized the digital yuan but banned all rivals. Making or issuing any yuan-backed digital token is illegal in China, and could attract a fine equal to five times the proceeds.
China’s regulations have been emulated in other countries, further casting a shadow over the future of ICOs globally. One of the countries taking after China is India. It recently proposed a bill that bans all “private cryptocurrencies” while setting the stage for a digital rupee.
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