Virtual currency offerings illegal, should be banned: insider

Updated 2017-09-01 17:31:02

(ECNS) -- Initial Coin Offerings (ICOs) are "basically equal to illegal financing and should be banned as soon as possible," according to a regulatory official quoted by Financial News, a Chinese-language newspaper run by China's central bank.

Commenting on Chinese media reports about a China Securities Regulatory Commission clampdown on ICO-related fraud and the Chinese central bank's meeting on supervision of ICOs, the regulatory official said joint supervision efforts by both watchdogs would be more stringent.

Some experts said ICOs involved illegal public offerings of securities and were suspected of providing channels for money laundering, illegal public deposits and conducting illicit operations. They suggest stepping up ICO risk management.

A recent report issued by the National Committee of Experts on Internet Financial Security Technology showed there were 43 platforms engaged in ICO services in China, mostly supporting Bitcoin and Ethereum, which accounted for over 90 percent of the total.

Since the beginning of 2017, ICOs totaled 63,523.64 BTC (Bitcoin) and 852,753.36 ETH (Ethereum), which equals over 2.6 billion yuan (3.4 million) based on prices on July 19, attracting some 105,000 investors. Both financing scale and user participation are on the rise, said the report.

As payments need to be made in virtual currency, ICOs led to a surge in the price of Bitcoins, which soared from 6,000 yuan early this year to about 30,000 yuan now.

On Aug. 30, the National Internet Finance Association of China issued a risk alert, saying financing in the name of ICOs grew rapidly in China, which "disturbed the normal social and economic order and posed great risks".

Some Chinese and foreign institutions misled investors and launched unlicensed ICOs, and were suspected of fraud, illegal issuance of securities and illegal fundraising, it added.

Besides, the severe lack of information disclosure in ICOs made investors vulnerable to risks, it warned. It urged members to strengthen self-discipline and boycott illegal financial activities.

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