The Internet Finance Association: Risk Warning on Participating in Speculation on Overseas Virtual Currency Trading Platforms

Source: China Internet Finance Association

In 2017, the People's Bank of China, together with seven other departments including the Cyberspace Administration of China, issued the "Announcement on Preventing the Risks of Token Issuance and Financing", which clearly stated that virtual currency transactions and ICO activities are illegal financial activities, and launched a cleanup and rectification campaign.

In order to evade regulatory crackdowns, some virtual currency trading platforms register or set up servers overseas and continue to engage in related activities. These platforms often use various gimmicks to attract consumers' attention. For example, due to the recent volatility of the international financial market, some platforms began to hype the concept of "virtual currency is a safe-haven asset that surpasses gold and silver", but the actual situation is that its price has fallen sharply, causing consumers to suffer heavy losses. Not only that, these platforms also use robot programs to increase volume and tamper with data to create a false impression of "prosperity" in the virtual currency trading market. Through sampling and analysis of transaction data on some platforms, more than 40 virtual currencies have a daily turnover rate of more than 100%, and more than 70 have a daily turnover rate of more than 50%. Huge transaction volumes were generated when the unit price and market value of the currency were not high. Some platforms directly used crude means to crawl information from other platforms and completely copy and forge transaction volumes.

After inducing consumers to enter the market, the platform will use various market manipulation methods to embezzle consumers' property. First, without the knowledge of consumers, the platform embezzles consumers' property through malicious operations such as buying high and selling low, high-frequency trading, etc. Second, the platform uses technical means such as sideways trading, pulling the market, and smashing the market to manipulate transactions, and consumers are completely unaware of the actual transaction situation. Third, the platform often uses means such as downtime, unplugging the network cable, and freezing assets to suddenly stagnate transactions. Consumers participating in leveraged transactions suffer heavy losses due to the inability to actively close their positions, which leads to liquidation.

It should be noted that due to their "overseas" operations, the operators of these platforms are relatively hidden. They evade crackdowns by regulatory authorities by frequently changing website domain names and server addresses, and taking measures such as online diversion and offline transactions. The registered places, offices and business areas of their operators are often different. Consumers are often unable to determine the identity of the operators, and once property losses occur, it is difficult to recover.

To this end, the China Internet Finance Association solemnly reminds: Any institution and individual should strictly abide by national laws and regulatory provisions, and not participate in virtual currency trading activities and related speculative behaviors. Member institutions should also abide by industry self-discipline requirements, actively resist illegal financial activities, and not provide convenience for them. Consumers should take the initiative to enhance their awareness of risk prevention and self-protection, and not blindly follow the trend to participate in related speculative behaviors. If any institution is found to be involved in such illegal financial activities, it should be reported to the relevant regulatory authorities or the China Internet Finance Association in a timely manner. If any institution is suspected of illegal crimes, it should be reported to the public security organs in a timely manner.

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