Servicing Domestic Users From Overseas
The Shanghai Head Office of the People’s Bank of China provided an update on the bank’s risk prevention measures for cryptocurrencies and initial coin offerings (ICOs) on Tuesday, Sept. 18.
“In recent years, speculation related to virtual currency has prevailed, prices have skyrocketed, and risks have accumulated rapidly, seriously disrupting economic, financial and social order,” the bank proclaimed. “In order to maintain financial stability,” the central bank referred to the announcement in September last year which shut down all crypto exchanges in the country.
Consequently, the bank emphasized that the country’s “global share of domestic virtual currency transactions has dropped from the initial 90% to less than 5%.” However, through tracking and monitoring the activities of crypto exchanges that left the country, the bank found:
Some virtual currency trading platforms originally set up in China have left, registered overseas and continue to provide [service] to domestic users.
In addition, the bank noted that other methods of token issuance have emerged. “Another issue is initial coin, fork and exchange offerings (ICOs, IFOs and IEOs) and cyber currencies that are hyped up under the guise of a sharing economy,” Yical Global quoted the bank.
In response to the consequences of shutting down crypto exchanges in the country, the PBOC has deployed the National Internet Financial Risk Special Remediation Leading Group and adopted a series of targeted measures.
The first is to “strengthen the monitoring of virtual currency trading platforms” that provide trading services to domestic users from abroad. The publication detailed:
China’s central bank has blocked 124 cryptocurrency trading platforms that targeted Chinese residents while using overseas servers to sidestep local laws.
The second is to strengthen the clean up of crypto-related payment and settlement services, including efforts to “guide the relevant payment institutions to strengthen payment channel management, identify customers and provide risk warnings, establish a monitoring and inspection mechanism, and stop providing payment services for suspicious transactions.” The bank disclosed:
Currently, the relevant payment channels have been checked and about 3,000 accounts engaged in virtual currency transactions have been closed.
The third measure the PBOC described relates to ICOs and similar products. The bank aims to strengthen the research and evaluation of these instruments in order to “fight early…prevent problems…and transmit clearer regulatory signals to the market.” As part of this plan, the bank wants to ramp up censorship efforts, including “the disposal of domestic ICOs and virtual currency transaction related websites.”
In conclusion, the central bank reminds consumers and investors to increase awareness of the risks of ICOs, their issuers, and individuals and organizations that facilitate crypto transactions “for domestic residents through the deployment of overseas servers.” The bank also urges citizens to report suspicious activities relating to cryptocurrencies and ICOs to the authorities.
What do you think of the PBOC’s efforts to stop domestic crypto and ICO activities so far? Let us know in the comments section below.