At the end of 2017, regulators in the People's Republic of China launched a crackdown on individuals raising funds through initial coin offering (“ICO”). The ban was reportedly the result of Chinese authorities' concern about fraud, corruption, and the possibility of social unrest following any losses from unregulated financial activities.  Shortly thereafter, China effectively brought an end to all forms of activities related to virtual currencies, in what was, at that time, the world's biggest market for bitcoin and other virtual currencies.

The South China Morning Post reported that “the central bank, the People's Bank of China, stated in a report that 90 percent of the ICOs launched in the country were fraudulent. It pronounced ICOs illegal and ordered operators to return money to investors. As well as fears that fraud could lead to social problems, authorities were wary of virtual currencies and coin offers being used by corrupt officials to transfer money out of the country.”

On August 17, 2018, in addition to this nationwide ban on ICO activities, the Chinese government went one step further by preventing all cryptocurrency-related events in Beijing's financial district. Authorities have banned hotels, malls, office buildings and other commercial properties from hosting events that talk about or promote cryptocurrencies. The government statement, loosely translated from Chinese, stated: “We now order every shopping mall, restaurant, hotel and building not to provide venues for any events that promote or talk about cryptocurrency, and must report to the authority if such activities were found.”  

On August 21, 2018, the city of Guangzhou issued a similar ban mandated by the authorities in Beijing.  One of China's earliest special economic zones that was installed specifically to encourage and foster businesses with less-restrictive laws, the Guangzhou Development District issued a notice forbidding cryptocurrency events in the district.  

One year after its ban on ICOs, China does not show any signs of slowing down its cryptocurrency ban.  On August 24, 2018, five major government bodies (the People's Bank of China, the Ministry of Public Security, the Banking Regulatory Commission, the General Administration of Market Supervision, and the Central Network Information Office) issued a joint statement condemning illegal fundraising schemes affiliated with cryptocurrency and blockchain technology. As a result, Baidu, Alibaba, and Tencent—the three largest technology companies in the country—have all banned cryptocurrency-related activities on their platform. According to the Southern China Morning Post, so far at least 8 blockchain and cryptocurrency-focused online media outlets--some of which raised several million dollars in venture capital--found their official public accounts on WeChat (a Chinese multi-purpose messaging, social media, and mobile payment application developed by Tencent) have been blocked due to violations against the new regulations from China's top internet watchdog.

If China continues its crackdown on cryptocurrency, it is reasonable to assume that additional cities and companies will continue to issue bans on cryptocurrency-related activities.

If you have any questions regarding this blog, feel free to contract Courtney at courtney.west@anallp.com

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(photo credit: inwage.com)