ICO was characterized as suspected of illegal fund-raising, overnight rich dream broken

A blockchain event that was supposed to take place on September 2 was called off by the relevant authorities (Beijing Financial Bureau). Behind the suspension of the conference, the regulator has already made a judgment on ICOs, and relevant regulatory documents will be issued soon. Caixin was informed of the matter by sources familiar with the matter.

The “2017DACA blockchain international summit forum” sponsored by the Asian DACA blockchain association and the government of wuhai city, Inner Mongolia, was supposed to be held in Renaissance hotel Beijing on September 2. However, caixin learned from sources close to the organizers that the conference was suddenly suspended on September 1, the day before it was scheduled to be held.

Wuhai city in Inner Mongolia has rich coal resources and has become one of the mining areas for bitcoin after the rise of bitcoin. Wuhai has even set up a big data industrial park, which it says will focus on blockchain technology and chip research and development.

The conference was attended by guests from wuhai municipal government, legal experts, financial institutions such as Pricewaterhousecoopers partner, well-known investor Xue Manzi, and nearly 30 entrepreneurs in the bitcoin industry.

These entrepreneurs are from Huobi, OKCoin, BTCC, Taiyi Cloud, Yilaiyun, Block Treasure, Achain, security network, coin, coin Duobao, ETChain, Xingyun movement, NEM… Yes, they are all the darlings of ICOs, many of which have their own tokens. For example, Achain ended its ICO in just 1 minute and 01 seconds more than a month ago, raising 21,890.47BTC and 10,436.34 ETH.

Thanks to the boom in digital currency and blockchain research, ICO is booming. Data show that in the first half of this year, a total of 65 ICO projects have been completed in China, with a total financing scale of 2.616 billion yuan and a total of 105,000 participants.

Icos, crowdfunding by issuing virtual tokens, can be easily understood as ipos in the digital currency community, but there are still big differences between the two. Simply put, an IPO is the purchase of equity with fiat currency; An ICO, on the other hand, turns shares or earnings rights into cryptocurrencies and sells them publicly — you’re buying virtual currency and you’re buying equity without “decision rights.”

“Icos are not like Bitcoin, which is a blockchain experiment; Now with icOs, bitcoin has become a victim.” “Said an industry insider.

That has alarmed Chinese regulators. After learning lessons from the increasing illegal fund-raising in the past two years, the regulator decided to take action soon after in-depth study and analysis.

According to Caixin reporter, August 18, a number of ministries and commissions have been ICO discussion, but the attitude was relatively mild; On August 21, the headquarters of the central bank received the relevant emergency report, which made it clear that icOs are illegal fundraising in disguised form in terms of the penetrating regulation of substance over form.

People familiar with the matter told Caixin that the People’s Bank of China studied a large number of ICO white papers and concluded that “90% of ICO projects are suspected of illegal fundraising and intentional fraud, and actually less than 1% of ICO projects raise funds for investment.”

Some senior Bitcoin investors pointed out to Caixin reporter that a large number of ICO project sponsors or founders of related trading platforms, most of which failed in the wave of blockchain projects in 2015, “turned around and came to ICO”.

Icos were once thought to have cleverly circumvented the Securities Law and the Regulations on The Handling of illegal fund-raising. The regulator’s discussions with several senior legal experts concluded that ICOs were merely legal cloaks, essentially disguised as illegal fundraising, the person said. In addition, even though ICOs can get rid of the suspicion of illegal fundraising, they also involve obvious contract fraud.

That means ICOs will no longer be allowed to go public, and their activities will wither and go underground. The stock of ICO projects is absorbed by the trading platform itself. At the same time, according to the division of responsibilities for handling illegal fund-raising, local financial offices (bureaus) will perform supervision functions.

From August 28 to 31, ICO companies concentrated in active cities such as Beijing, Shanghai, have related industry associations issued relevant risk alerts. For example, the Beijing Internet Loan Association pointed out that ICO project sponsors and institutions may be suspected of illegal business operations. At the same time, related PE/VC institutions were suspected of raising funds from the public in the process of participation, which violated the law.

As a result, it is not impossible for ICOs to be banned. The ban on ICO is conducive to the precise attack on the “first sheep”, and for blindly follow the trend, brave when the “leek” “sheep” has a certain exemption. “Participants are bound to some extent.” “The person said.

As Caixin previously reported, the legal basis for the move comes from The State Council’s Order 247, measures for outlawing Illegal Financial institutions and Financial Business Activities, issued in 1998. The measures make it clear that illegal financial activities include: illegal fund-raising from unspecified people in any name without legal approval; Or other illegal financial business activities as determined by the People’s Bank of China. (See caixin website “ICO rich Illusion heats up, Illegal Fundraising Risks gather And Alert Regulators”)

At present, Internet technology is still in constant iteration and evolution. Sandbox supervision is everywhere. How to prevent risks and promote development? According to Caixin, through the discovery of ICO risks to make decisions, the experience of the regulatory authorities is that it is difficult to see the advantages and disadvantages of new things, but this does not mean that the supervision can not act, but to carry out a “penetrating observation”, see the essence, take measures under the framework of existing laws and regulations.

Furthermore, some senior regulators also suggest that the law should follow suit to raise the cost of breaking the law and change the environment in which bad money drives out good money. For example, the Supreme People’s Court should also make judicial interpretations of relevant provisions in existing laws and regulations on new things in a timely manner. In addition, the government should also show its position and attitude as soon as possible. “It should not study left and right, but implement the responsible person immediately after penetrating supervision.”

(See “ICO Creates Rich Dreams” in this issue of Caixin Weekly for more details.)