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China Will Escalate Regulation on ICO and OTC Activities Soon

Cryptocurrency and ICO have become the most popular emerging investment way since last year. However, many scam projects also occur in ICO market in China. Due to the financial risk issue, ICO was banned in September 2017. After that, majority of the domestic token trading platforms were closed down but there are still some engaging into overseas OCT exchange activities. Some scholars predict that these OCT trading platforms would be strictly regulated by China’s regulatory authorities in the near future.timg

China’s finance watchdog is formulating relevant policies to build a healthy development for cryptocurrency market and the whole blockchain industry. The substantial regulatory initiatives may focus on the aspects of account supervision, foreign exchange supervision, penetrating supervision and blacklist system to prevent cross-border criminal risks and to protect the interests of financial consumers as well as uphold financial stability.

However, some investors still want to make a profit through new ICO projects although many financial authorities has already announced risk warnings. According to Coindesk, about $3.2 billion USD have been raised through ICO in the fourth quarter of 2017, about 16 times the VC financing.

“Now a new token wants to go public in mainstream platform such as Binance, needs more than 100 million RMB.” A senior cryptocurrency investor said, “In August 2017, ICO became the most popular, the monthly income of an ICO team with only 3 members was more than 40 million yuan ($ 6.3 million USD).”

Great fortune attracts more and more crazy investors and also causes bubbles. Some of the ICO investors are more concerned about the token’s price instead the project itself. Good blockchain projects ‘die’ because they are lack of money while some ‘high yielding’ ICO projects are involved in illegal fund-raising, illegal issuing of securities, illegal issuing of token voucher and other criminal activities.

Some scholars suggest Chinese authorities could improve the provisions of internet virtual property in the civil law to protect the legitimate interests of blockchain virtual asset holders.

Yang Dong, vice president of Law School of China People’s University and director of the Center for Financial Technology, suggested that, based on the development of latest fintech including big data, blockchain and cloud computing, a financial risk prevention system on the basis of financial compliance, scenario supported and technology-driven should be established. This risk prevention system could highlighting the importance of technology-driven regulatory initiatives in financial regulation accordingly to strengthen the supervision of fintech and then guide fintech to serve the real economy.

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