At a meeting for the Internet Finance Rectification Working Group on 9 July 2018, the Vice Governor of the People’s Bank of China (PBoC), Pan Gongsheng, had harsh words for foreign initial coin offerings (ICOs) that are targeting Chinese investors. He said, “Any new financial product or phenomenon that is not authorized under the existing legal framework, we will crush them as soon as they dare to surface.”
China banned ICOs and trading cryptocurrency for Chinese yuan (CNY) in September 2017, causing almost all cryptocurrency companies to flee the country including top exchanges Binance, Huobi, and OKCoin. Hong Kong has become a haven for cryptocurrency activity since that time since it has an autonomous government that has decided on more favorable cryptocurrency regulations.
According to Pan, individuals and organizations that are now “running abroad” are still doing business with Chinese residents, which is illegal and prohibited. The Internet Finance Rectification Working Group is tasked with enforcing decisions of Chinese regulators. Clearly, they are being pushed by Pan to use their full power to combat investment in foreign ICOs.
It is unclear how the Working Group will crackdown on ICOs. Due to the decentralized nature of cryptocurrency, even if cryptocurrency is fully banned there is no way to stop Chinese residents from using it, including the use of cryptocurrency to invest in ICOs. It appears one tactic Chinese regulators are using is monitoring messaging apps like WeChat to spot cryptocurrency traders, and WeChat has limited the amount of money that can be sent through their payment service. Also, popular online forums like Zhishi Xingqiu have become an access point for ICOs to reach Chinese residents, and these are being monitored as well.
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