In the Shandong province of Eastern China, the port city of Welhai has taken a strict stance, warning investors to make sure they are really investing in the blockchain innovation and not cryptocurrency masquerading as blockchain.
According to a recent statement from the authority, the Weihai Local Financial Supervision and Administration said Friday investors should be more cautious because illegal crypto issuance and trading are on the rise.
Since 2017, Crypto trading and ICOs have been illegal in China after it defined them as “authorized fundraising.” By the end of October 2017, two of the largest cryptocurrency exchanges in China, OKCoin and Huobi, were totally shutting down all trading options between bitcoin and the yuan.
A notice issued by China’s seven government agencies, led by the People’s Bank of China, in August 2017, was the death sentence for ICOs and the centralised trading of cryptocurrencies in China.
“For China’s central bank, the cryptocurrency market is a hot potato,” said financial technology expert Cai Kailong, the founder of Destoned Asset Management, a private equity fund. “They need to guard against risks from bitcoin speculation and any illegal activities such as money laundering.”
Despite the severe crackdown on all things cryptocurrency till date, blockchain technology on the other hand, has had it all good as it has been encouraged by the Chinese President Xi Jinpin. However, the government has begun to see it differently as it claims that some companies claiming to be blockchain startups were actually cryptocurrency oriented, launching crypto exchanges and raising money through centralized token sales.
In a statement to the public, Weihai authority sadly noted that;
“As the country is promoting blockchain technologies, people start to hype virtual currencies again and some of the related illegal operations have come back to life,”
Apart from endorsing the statement, other local authorities, including the police department and the Weihai branch of the central bank and China Banking and Insurance Regulatory Commission, also plan to inspect illegal ICOs and crypto exchanges.
“Some companies set up servers outside China and promote their products among Chinese investors on social media,” they continued. “They usually process transactions via online payment applications, therefore many of these funds are hard to retrieve as they floating abroad.”
The authority also revealed that some crypto exchanges used the lure of celebrity endorsements and popular yet complex technological concepts to trap investors, while making off profits them by manipulating crypto prices and cash withdrawal limits.
Other illegal operations also pointed out were Ponzi schemes and the use of false information to convince customers of high value appreciation in crypto. As a result of these and more, the Welhai authority has sounded high warning to the public the difference between cryptocurrency and blockchain in order to protect their investments.