China’s central bank is reportedly reviewing a possibility to halt ICOs in the country if regulators find substantial risk for investors.
According to a report by local news website Tencent Finance, the People’s Bank of China (PBoC), the China Banking Regulatory Commission, the Securities and Futures Commission, and other government officials conducted a number of meetings earlier this year to discuss current ICO market in the country. The move is targeted at preventing illegal activities in the country’s financial sector.
The interest in ICOs as a new funding channel has significantly increased in China this year. According to a study by Xinhua, 65 projects launched their crowdsales, raising 2.62 billion yuan, or $394.6 million. Amid the growing popularity of token sales, the risk of fraud has surged as well, raising investor concerns.
The regulators, Tencent reported, are developing new regulatory measures, including control over the size of ICOs, more stringent data disclosure requirements, and issuing public investment risk warnings. If a large risk found for consumers, all activities related to ICOs will be suspended. The PBoC and CSRC did not provide any comments.
Meantime, the startups running ICOs argue that tokens just offer the right to use the product and do not guarantee future profit as stock or bonds. Besides, they do not provide equity rights for investors and therefore should not be treated as securities.
The latest news follows the China’s move to strengthen control over local bitcoin exchanges earlier this year. The PBoC suspended trading on major digital currency platforms to ensure they comply with financial rules, including anti-money laundering, foreign exchange management and other regulations. The suspension, which lasted for more than three months completed in the end of May, with exchanges resuming their services.
Other governments are also working on tightening control over ICOs. The US Securities and Exchange Commission announced last month that digital tokens could be considered securities and therefore need to be registered in advance. The organization has recently halted trading in the securities of Canadian firm First Bitcoin Capital, citing concerns about the accuracy of publicly available data about the company. The SEC has recently warned investors about potential risks of trading stock offered via ICOs.
A few days ago, Canada unveiled plans to treat tokens offered via crowdsales as securities. The Canadian Securities Administrators published a statement, saying that certain ICOs will be required to comply with Canadian securities laws.
Also, Singaporean central bank issued a warning this month about the risks of participating in token sales.