China tightens cryptocurrency oversight with new regulations

Sending a warning to the crypto industry, Beijing said yesterday — days before China’s new Regulations on Preventing and Handling Illegal Fundraising are scheduled to take effect — that it would pay close attention to new forms of illegal fundraising in the name of blockchain and cryptocurrency, according to Security Daily, a state-owned finance newspaper. 

Guo Shuqing, president of China Banking and Insurance Regulatory Commission and China Communist party secretary of the People’s Bank of China, led the joint video conference attended by all provincial governments.. 

The commission has added illegal fundraising in the name of blockchain and cryptocurrencies as a new form of illegal fundraising, joining private equity, wealth management and real estate. Guo emphasized that the commission will prioritize prevention of these forms of illegal fundraising. 

“This was a regular conference, not a special conference to specifically focus on blockchain and cryptocurrency,” said Zhaosheng Jiang, director of the Blockchain Research Center for 01 Finance, a Beijing-based Fintech think tank, in an interview with Forkast.News. “But it still sent a clear signal that domestic cryptocurrency regulation would be further tightened.” 

In the Boao Forum, an annual conference nicknamed the “Asian Davos” that took place last Sunday, Li Bo, deputy governor of the PBOC, made waves with his speech, in which he said that “crypto-assets should be regulated as alternative investments.”Many China watchers interpreted his remarks to mean that the PBOC was softening its stance on crypto assets. 

“This meeting just reaffirmed China’s current regulatory approach to the cryptocurrency industry has been consistent since 2013,” Jiang said. “On the one hand, China actively supports and guides the application and innovation of blockchain technology, but on the other hand it strengthens the supervision of cryptocurrencies and all kinds of tokens, and resolutely cracks down on various illegal activities such as the issuance, financing and trading of cryptocurrencies.” 

Adding to emphasis to this stricter regulatory position, China’s Premier Li Keqiang declared at the recent National People’s Congress that the nation “must resolutely crack down on those who commit fraud and illegal fundraising in the name of new forms of business.” 

The Regulations on Preventing and Handling Illegal Fundraising were approved at the 119th Executive Meeting of the State Council on December 21, 2020, and will take effect from May 1, 2021. 

According to the regulations, illegal fundraisers shall be fined an amount more than 20% and less than 100% of the funds raised. If illegal fundraisers are organizations, their business licenses or registration certificates will be revoked. If the case constitutes a crime, the offender shall be investigated for criminal responsibility.

“It is good for the overall development of China’s blockchain industry,” said Jiang. “In the current situation in which no effective supervision of cryptocurrency exists, cracking down on using cryptocurrency to illegally raise money is conducive to reducing financial risks and protecting the safety of investors’ lives and property.”

Contributed by Forkast.