People’s Bank of China warns against blockchain investment scams

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The People’s Bank of China has published fresh warnings aimed at would-be investors, urging them to avoid illegal fundraising schemes involving digital currencies and blockchain.

The Shanghai office of the central bank published an article detailing the common features of digital currency and financial scams, in a bid to warn investors of the risks of unregulated investment schemes. The article is framed around 16 common questions investors can ask before parting with their money to determine whether a digital currency investment scheme could be a scam.

Dubbed a “cheat sheet” for investors, the article also looks at common frauds including regular securities and pensions, as well as those concerning virtual currencies and blockchain.

Much of the article focuses on “illegal fundraising”, and explains how investors can avoid falling foul of these schemes.

While not mentioning ICOs directly, which were banned in China back in 2017, the document identifies methods similar to common digital currency use cases.

This includes “the division of property […] in equal shares and the illegal collection of funds by selling the right to dispose of their shares”, which is similar to tokenization of real estate and other assets.

Other frauds referenced in the document include “investment funds established through the Internet” and “illegal fundraising in the form of ‘electronic gold investment.”

The document is the latest attempt by the central bank to warn investors not to get involved with digital currency scams, part of the country’s ongoing restrictive approach to digital currency.

It comes in stark contrast to their support for blockchain technology and central bank digital currencies (CBDCs), with the People’s Bank of China known to be at an advanced stage of developing its own digital currency, a so-called “digital yuan”. Trials of the CBDC are already underway, and thought to involve large retailers locally including McDonalds and Starbucks.