Seven agencies, including the People’s Bank of China, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the State Administration of Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission, promulgated the Announcement on the Prevention of ICO Funding Risks (the “Announcement”) on September 4, 2017. The Announcement sets a definition for virtual coins and specifically sets rules prohibiting entities from engaging in unlawful initial coin offering (ICO) funding activities. The Announcement is highlighted below:
- The Announcement stresses that since “virtual coins” used in ICOs are not issued by the state monetary authority and do not possess the characteristics of a currency such as compulsory legal tender, they cannot and should not be circulated and used as currencies in the market.
- The Announcement indicates that there have been unlawful financial activities in the current surge of speculative investing in financing via ICOs, which have seriously undermined the normal economic and financial order.
- On the promulgation date of the Announcement, all kinds of ICO-based financing activities shall stop immediately. Meanwhile, all so-called ICO financing platforms shall halt all exchanges of legal currency and virtual coins or tokens; they shall not transact or act as a middle man in transacting tokens and virtual coins, and they shall not provide pricing or intermediary information services for tokens or virtual currencies. In addition, financial institutions and non-banking payment institutions shall not develop business relating to ICO financing transactions.
4. According to the Announcement, ICO financing and trading involve multiple risks, investors must bear such risks on their own, and it is hoped that they would be cautious and wary of fraud. Meanwhile, the public should be highly vigilant about potential risks associated with ICO financing and trading.