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29 September 2017
On September 2 2017 the Internet Financial Risk Special Rectification Work Leading Group Office, established by the State Council, issued the Notice to Carry Out Clean-Up Rectification Work on Tokens Issuance Financing (2017/99), which applies to all provincial and municipal financial offices. On September 4 2017 a joint announcement on the prevention of financial risks associated with token issuance was issued by:
Following issuance of Notice 99 and the joint announcement, initial coin offerings (ICO) are now an illegal and unregulated method of raising money.
ICOs are an unregulated crowdfunding method for cryptocurrency projects or companies. The method was created in order to give investors access to a future cryptocurrency project or company by selling a percentage of the cryptocurrency as ownership rights or royalties.
ICOs are gaining popularity in China. However, as they bypass the authorities' supervision, to date, most projects have involved financial fraud or had no legitimate basis for raising funds through public channels. As such, they have caused serious financial risk and disrupted the social and economic order.
According to Notice 99 and the joint announcement, in China, ICOs are essentially considered illegal public financing schemes that are suspected of involving:
Under Notice 99, each local authority had to provide information on the ICO trading platform located in its jurisdiction to the relevant provincial supervisory authority before September 4 2017. In order to enable supervisory authorities to gather specific information regarding ICO financing platforms and entities, the report had to include:
In accordance with Notice 99, the National Rectification Office has provided a list of 60 ICO platforms on which the local financial regulatory authorities will conduct further detailed inspections and report accordingly.
In addition, under Notice 99:
For further information on this topic please contact Wu Jiejiang at Jingtian & Gongcheng by telephone (+86 10 5809 1000) or email (email@example.com). The Jingtian & Gongcheng website can be accessed at www.jingtian.com.
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