As China gets serious about encouraging legitimate blockchain projects, its regulatory bodies are stepping up against projects that may still be up to fishy stuff. The Shenzhen Financial Bureau invited eight firms in for questioning on December 18, reports Chinese outlet BBT News.
Each of the eight companies invited are alleged to have operated in crypto activities that need to be regulated. Two were reportedly involved in trading venues, while the other six are alleged to have offered initial coin offerings (ICOs). “We conducted our investigation through an initial online screening and subsequent offline questioning,” a Shenzhen bureau staff member said.
BitKan, one of the firms brought in, was founded by Chinese mining company Bitmain. It initially offered over the counter (OTC) trading, but has since shifted to providing content to subscribers after China made ICO offerings illegal. BitKan claims it no longer works with the partner that provided OTC services, but Shenzen may still be looking into them over concerns that some companies may have simply shifted their Chinese facing services underground.
Authorities stressed that the questioning did not automatically indicate the companies were at fault, though. “Just because we haven’t questioned some companies doesn’t mean that they have no problems,” the staff member said. “The companies we questioned today are not necessarily problematic. We are still verifying their situations.”
Not everyone is happy with being questioned, though. There are still many scams in Shenzhen, admitted Bitfwd founder Daniel Barr in an interview with The Block, but he’s afraid the investigation could scare away legitimate projects. He explained:
“For people who conduct OTC deals, for example, if someone that they’re receiving an Alipay, Wechat Pay, or bank transfer from got flagged because of the government’s suspicion, it means that they can also get flagged and have their bank accounts frozen.”
That worry can easily be addressed though. Serious cryptocurrency outfits have come to embrace Know Your Customer (KYC) regulations and apply them to their own services. Companies that don’t, and may be accepting transactions from potential criminals, run the risk of violating the law and could have their funds seized for legitimate reasons. Bitcoin creator Dr. Craig Wright has warned about this reality for some time.
Shenzhen is perfectly within their rights to question and ensure local blockchain companies are adhering to the law. By doing so, it guarantees their corner of China will be ready for regulated blockchain space of the near future.
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