The National Internet Finance Association of China (NIFA) issued a warning to its members about the dangers of initial coin offerings (ICOs). The warning stated that ICO projects are a threat to the stability of China’s financial sector.
NIFA, a self-regulatory organization established by the People’s Bank of China (PBoC), said that ICOs are “disrupting [the country’s] socioeconomic order” and creating “greater risk” for the public. The group warned its members that ICOs might use misleading information and fraudulent tactics to increase their fundraising totals. The statement advised investors to make “sober” judgments before becoming involved with an ICO and NIFA members to “resist illegal financial behavior” associated with these funding mechanisms:
China Internet Finance Association members should take the initiative to strengthen self-discipline, to resist illegal financial behavior.
This ICO guidance from NIFA parallels that released by the U.S. Securities and Exchange Commission earlier this week. In its statement, the SEC warned investors about publicly-traded microcap companies using the lure of cutting edge technology like ICOs to manipulate their stock prices. In August alone, the SEC temporarily suspended securities trading for at least three public bitcoin firms.
Based on previous comments the PBoC has made about cryptocurrency and ICOs specifically, this statement is not surprising. Last month, a senior aid to the PBoC claimed that “moderate regulation should be applied” to token sales, although he added that it “should not stifle innovation.” Earlier this year, the PBoC cracked down on Chinese bitcoin exchanges, stating that they “can’t work without regulations.” Regulators have even begun conducting on-site inspections at exchanges located within the country.
That said, the PBoC is very interested in FinTech–as long as they can control it. The bank established a digital currency research institute and has begun early-stage testing for a national digital currency that would exist alongside the Chinese Yuan (CNY). Just last week, officials from the PBoC attended a presentation on blockchain technology hosted at Ripple’s San Francisco headquarters.
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