"Bloodbath" in Shenzhen's currency circle: Tencent joins the real-name crackdown on virtual currency

Recently, the Shenzhen cryptocurrency circle has fallen into panic, and all of this is inseparable from Tencent's Internet financial monitoring tools. Lingkun, a tool developed by Tencent's security anti-fraud laboratory, has identified 39 companies suspected of engaging in illegal virtual currency activities through artificial intelligence analysis of government data, public information, reported information, social media information, etc., basically covering the vast majority of large cryptocurrency-related companies in Shenzhen.

Industry insiders pointed out that Shenzhen does have a large number of pyramid schemes and Ponzi schemes, but there are also many virtual currency institutions with branches overseas, and their businesses are relatively compliant. Bitcoin and mining in China are not considered illegal, but in the current crackdown, how to define the boundaries of compliance and avoid "killing with one regulation" is a difficult problem for virtual currency supervision.

Security capabilities cover all Chinese netizens

In 2018, Shenzhen Municipal Financial Office and Tencent established the Lingkun Financial Security Big Data Platform and Regulatory Technology Laboratory. Shenzhen Municipal Party Committee Secretary and Tencent Chairman Ma Huateng both attended the unveiling ceremony.

According to Tencent, Lingkun has fully leveraged Tencent Security's security capabilities that cover almost all Chinese netizens, nearly two decades of experience in combating QQ's illegal activities, as well as its unique AI advantages, the world's largest illegal knowledge graph, and a world-class security big data team, to successfully overcome and solve the problems of insufficient "data, algorithms, and computing power" in the existing regulatory industry.

Tencent owns China's largest social software, WeChat and QQ, with more than 1.1 billion monthly active users on WeChat. Currently, most virtual currency activities in China are conducted on social media such as WeChat and QQ, but there is also a tendency to shift to better encrypted software such as Telegram.

At the 2018 WeChat Open Class, Tencent released a WeChat data report, which included the emojis, sleep time and video call habits of netizens. Some netizens questioned whether WeChat "monitored" chat data. Tencent responded that all data has been anonymized and desensitized, and does not involve the privacy of specific users.

Tencent is actively moving closer to the Chinese government's blockchain strategy. Tencent has been paying attention to blockchain technology and conducting independent research and development since 2015, actively promoting the application of blockchain technology in industrial development. Last August, Tencent issued the country's first blockchain electronic invoice in Shenzhen, and more than 10 million invoices have been issued in more than a year since it went online.

Previously, there were rumors that the central bank’s legal digital currency would be issued to seven institutions, including the four major banks, Alibaba, Tencent and UnionPay, but the official rumor was later denied. However, according to Wu Blockchain, Tencent is indeed in the legal digital currency group.

The partners of Tencent Lingkun Supervision Technology Platform also include Guangdong Financial Bureau, Beijing Xicheng Market Supervision Bureau, Shenzhen Financial Bureau, Hebei Financial Bureau, Tianjin Financial Bureau, Jilin Industry and Commerce Bureau, Xuchang Industry and Commerce Bureau, Shenzhen Market Supervision Bureau, Shenzhen Economic Investigation Bureau, Xi'an Economic Investigation Bureau, Guangzhou Financial Bureau, Xi'an Industry and Commerce Bureau, Guiyang Industry and Commerce Bureau, Shanghai Economic Investigation Bureau, Shanghai Minhang, Shanghai Huangpu, Shangrao City, etc. Official information shows that through in-depth cooperation with Beijing Financial Bureau and Shenzhen Financial Bureau, more than 800 high-risk financial platforms such as Ponzi schemes and more than 200 virtual currency pyramid schemes have been controlled.

Can analyze government data from more than 40 departments

According to the Shenzhen Special Zone Daily, on November 21, the Office of the Leading Group for Special Rectification of Internet Financial Risks in Shenzhen issued a risk warning on preventing illegal activities involving "virtual currency", and notified the rectification offices of various districts, the Qianhai Authority, the Shenzhen Branch of the People's Bank of China, the Economic Investigation Bureau of the Municipal Public Security Bureau, the Municipal Communications Administration and other units to jointly carry out inspections and rectifications of virtual currency trading venues.

It is reported that this operation will focus on investigating three types of activities: one is to provide virtual currency trading services or open virtual currency trading venues within the country; the second is to provide service channels for overseas virtual currency trading venues, including traffic diversion, agency buying and selling services, etc.; the third is to sell tokens under various names to raise funds or virtual currencies such as Bitcoin and Ethereum from investors.

The latest information shows that the Shenzhen Local Financial Regulatory Bureau has identified 39 companies suspected of engaging in illegal virtual currency activities through the Lingkun system. It is reported that these 39 companies basically cover the vast majority of large virtual currency companies in Shenzhen.

According to the China Times, Lingkun was developed by Tencent Security Anti-Fraud Lab and later launched in cooperation with the Shenzhen Financial Supervision and Administration Bureau. The platform can provide effective early warning for illegal fundraising and crowd-related financial risks. Tencent Security belongs to Tencent's "Cloud and Smart Industry Group" (CSIG).

The platform was officially launched on July 2, 2018. It comprehensively monitors active quasi-financial platforms on the Internet from four directions: "platform identification based on artificial intelligence, multi-dimensional information association based on data mining, platform risk index calculation based on knowledge graph, and early warning based on abnormal scale of growth in the number of people involved."

During the trial operation last year, the platform scanned more than 250,000 companies engaged in financial business in Shenzhen, conducted in-depth analysis on 11,354 of them, identified 790 risky companies, and issued warnings and transferred 19 of them for disposal.

At the same time, Lingkun can also use the government data of more than 40 administrative units in Shenzhen integrated by the Shenzhen Financial Office, and use multi-source data fusion technology to identify and calculate risk indexes for more than a dozen financial categories such as P2P, investment and financial management, and foreign exchange transactions. It can promptly issue early warnings to relevant government departments for high-risk platforms discovered, so as to achieve comprehensive identification of financial platforms and rapid early warnings, and achieve "early" and "small" strikes against illegal financial activities.

In the view of Tencent insiders, the traditional institutional regulatory model can no longer meet the regulatory requirements of "scientific prevention, early identification, early warning, early detection, and early disposal". It is necessary to strengthen functional supervision, introduce Internet technology, pay more attention to behavioral supervision, and use intelligent technology to follow the penetrating concept. At the same time, a cross-departmental joint discovery, warning, and disposal mechanism should be established to effectively and proactively prevent and control financial risks.