Shanghai launches a survey and rectification of virtual currency activities, and Inner Mongolia cleans up the mining industry

1. Virtual currency speculation is on the rise, and Shanghai is conducting a survey and rectification of virtual currency activities;

2. The People’s Bank of China: has not issued legal digital currency (DC/EP) and has not authorized any asset trading platform to conduct transactions;

3. Chongqing issued the "Notice on Further Promoting the Healthy and Rapid Development of the Blockchain Industry";

4. The Inner Mongolia Autonomous Region issued a notice on the cleanup and rectification of virtual currency mining companies.

1. There were 11 financing events in the blockchain field last week, with a total financing amount of nearly 273 million yuan;

2. The United States rebounded strongly, with a total of 6 blockchain financing events;

3. Projects in the field of digital assets are most favored by capital, and the exchange track remains hot;

4. DeFi lending protocol Compound received US$25 million in investment.

1. Tongcheng Holdings' stock name will be changed to "Huobi Technology" from November 18;

2. Canaan updates its prospectus: plans to raise US$100 million, and the lead underwriter Credit Suisse withdraws;

3. Weibo restricts the posting of content containing both the words "blockchain" and "cryptocurrency speculation";

4. Zhejiang Blockchain Technology Application Association released the "2019 Zhejiang Blockchain Industry Analysis Report".

1. The Monetary Authority of Singapore is developing a blockchain-based foreign exchange payment prototype;

2. Facebook launches payment service Facebook Pay, which is completely independent of Calibra wallet;

3. The Thai government uses blockchain technology to simplify the VAT refund process for foreign tourists;

4. JPMorgan Chase collaborates with Baton Systems to develop new blockchain derivatives solutions.

According to incomplete statistics from Zero One Think Tank, there were a total of 11 blockchain-related financing events last week (November 11-November 17, 2019), of which 7 disclosed the specific financing scale, with a total financing amount of approximately RMB 273 million (based on the opening exchange rate on November 18, 2019).

From the perspective of regional distribution, the United States rebounded strongly last week and led the world in the number of blockchain financing projects (a total of 6). Apart from the United States, only China had 2 blockchain financing events last week, and other countries (including Switzerland, South Korea, and Australia) had no more than 1 event.

In terms of rounds, strategic investment, seed/angel round and A round were evenly divided last week. Five blockchain projects received strategic investment, and another three projects each received seed/angel round and A round financing.

In terms of scenarios, according to Zero One Think Tank's classification standards for the blockchain industry, blockchain companies/projects related to digital assets (including digital currencies, exchanges/platforms, mining, digital asset management, etc.) were still the most popular last week, with a total of 7 financing events, including 2 events each in the digital currency exchange/platform and digital currency wallet tracks. Projects in the digital assets, blockchain hardware (mining) and this year's popular DeFi fields have all received investment.

The project worth noting last week was the decentralized finance (DeFi) lending protocol Compound Finance. The project completed a $25 million Series A financing last week, led by a16z, with participation from Bain Capital Ventures, Polychain Capital, and Paradigm, becoming the project with the highest investment amount last week. Thanks to this latest financing, Compound will work with cryptocurrency exchanges, brokerages, and custodians in the future to help these companies expand their business scope to the cryptocurrency lending field and use the Compound lending protocol to develop products to meet market demand.

The following is the specific situation of blockchain project/company financing last week (November 11-November 17, 2019):

Figure: Blockchain project/company financing details in the third week of November

Source: Zero One Think Tank

Shanghai launches campaign to investigate and regulate virtual currency activities

On November 15, under the leadership of the Shanghai Internet Finance Regulation Office, the Shanghai Financial Stability Joint Office and the Shanghai Headquarters of the People's Bank of China jointly issued the "Notice on Conducting a Survey and Regulation of Virtual Currency Trading Venues" (hereinafter referred to as the "Notice") to conduct a survey and regulation of virtual currency exchanges within their jurisdiction.

The Notice states that recently, with the promotion of blockchain technology, virtual currency speculation has shown signs of rising. In order to prevent a resurgence, according to the relevant arrangements of the National Internet Finance Regulation Office, each district regulation office is requested to conduct a survey of the following three virtual currency-related activities within its jurisdiction:

First, organizing virtual currency transactions within the country;

Second, under the pretext of "blockchain application scenarios landing", virtual currencies in the form of "xx coin" and "xx chain" are issued to raise funds or virtual currencies such as Bitcoin and Ethereum;

Third, provide publicity, traffic generation, agency buying and selling and other services for ICO projects, virtual currency trading platforms, etc. registered overseas.

The "Notice" requires the rectification offices of each district to complete the investigation work before November 22. Once an Internet company engaged in the above-mentioned virtual currency-related activities is found, the rectification offices of each district in Shanghai must immediately report to the Shanghai Financial Stability Joint Office (Shanghai Local Financial Regulatory Bureau) and the Shanghai headquarters of the People's Bank of China, and urge the company to immediately rectify and withdraw, and strike early and small.

Prior to this, Beijing had already taken relevant measures. On November 14, the Beijing Local Financial Supervision and Administration Bureau (hereinafter referred to as the "Beijing Financial Supervision Bureau") issued a "Risk Warning on the Unapproved Operation of Trading Venue Branches". Beijing regulators stated that Beijing has not approved any trading venue to set up branches. If branches of foreign trading venues (mainly financial asset exchanges) conduct business activities in Beijing, it is an illegal operation.

According to the Beijing Financial Regulatory Bureau, in accordance with the "Implementation Opinions of the General Office of the State Council on Cleaning Up and Rectifying Various Types of Trading Venues" (Guobanfa [2012] No. 37) and the relevant requirements of the Inter-ministerial Joint Conference on Cleaning Up and Rectifying Various Types of Trading Venues on cleaning up trading venue branches, the establishment of trading venue branches must be approved by the provincial people's government where the trading venue is located and the provincial people's government where the proposed branch is located before they can carry out business activities.

In recent years, virtual currency speculation has grown like wild grass, and prices have soared and plummeted like a roller coaster, causing chaos in the normal financial market order and seriously disrupting the economic, financial and social order. In particular, ICO is essentially an illegal public financing behavior, mixed with illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities.

The attitude of domestic regulatory authorities towards virtual currency speculation has always been very clear. On September 4, 2017, the central bank and seven other departments took action to stop ICO. On September 18, 2018, the Shanghai headquarters of the central bank issued a risk warning, saying that it would strengthen monitoring of virtual currency trading platforms whose servers are located overseas but actually provide trading services to domestic residents, implement blocking, and continue to strengthen rectification from the payment and settlement end.

As a result, virtual currency trading platforms have turned to "overseas", that is, by setting up companies and servers overseas, the actual operation team and audience are still mainly domestic. Since virtual currency trading platforms do not have compliant legal currency deposit channels in China, an over-the-counter trading model has been derived, that is, the legal currency is converted into virtual currency through point-to-point transfer models such as Alipay and bank cards.

In August 2018, Ant Financial issued a statement saying that for personal accounts suspected of virtual currency transactions, Alipay will take measures such as restricting the account's payment function or even permanently restricting payment depending on the circumstances. Alipay and Ant Financial will continue to closely monitor and investigate over-the-counter transactions involving virtual currencies, and establish a patrol system for key websites and accounts.

Not only that, Tencent also stated that in terms of payment channels, measures against virtual currency violations include "limiting the payment function of the platform's payment account" and "limiting the payment amount of individual seller accounts". Currently, the cleanup of all virtual currency transactions using merchant numbers has been completed.

Regarding the rectification of trading venues in Shanghai and Beijing, Xiao Sa wrote that in the face of potential public legal risks, China's law enforcement agencies tend to "strike early and strike small" to eliminate hidden dangers. Virtual currency exchanges, project parties, traffic diversion parties, and those who knowingly provide assistance should understand the intentions of law enforcement agencies and not commit crimes against the wind. They should not take advantage of the advocacy of blockchain technology to try to issue coins to raise funds to fill their "small treasury" or provide assistance for the issuance of coins and financing. They should understand that their actions lack legitimacy and are illegal. Serious circumstances may constitute a crime . Xiao Sa emphasized that the "small spring" of policies will not whitewash the gray status of the currency circle, but may lead to "suppression of bandits" before the regular army enters the mountains.

Yu Luping, a lawyer at Zhonglun Law Firm, said in an interview with Babbitt that the trading and issuance of virtual currencies in my country has always been strictly prohibited from the perspective of legal connection. Previously, the document of the 18th collective study of the Political Bureau of the Central Committee mentioned blockchain and emphasized that it is a technology. Although it is mentioned that it can be used in the field of digital asset trading, it has nothing to do with the issuance of virtual currencies. This investigation and rectification "can be seen as a continuation of past policies and actions."

According to the official WeChat account of the People's Bank of China, there have been recent rumors online that the People's Bank of China has issued legal digital currency, and some institutions have even impersonated the People's Bank of China and traded related digital products on digital asset trading platforms under the name of "DC/EP" or "DCEP".

The relevant information is hereby announced as follows: 1. The People's Bank of China has not issued legal digital currency (DC/EP) and has not authorized any asset trading platform to trade. The People's Bank of China began researching legal digital currency in 2014 and is still in the process of research and testing. "DC/EP" or "DCEP" traded on the market are not legal digital currencies, and the online rumors about the launch time of legal digital currency are inaccurate information. 2. The current online rumors about the issuance of so-called legal digital currency, as well as the behavior of individual institutions impersonating the People's Bank of China to launch "DC/EP" or "DCEP" on asset trading platforms, may involve fraud and pyramid schemes. The general public is requested to raise their risk awareness, not to be credulous, and prevent their interests from being damaged.

On November 15, the Chongqing Municipal Economic and Information Commission issued the "Notice on Further Promoting the Healthy and Rapid Development of the Blockchain Industry", stating that it will establish a blockchain industry public service platform by increasing efforts to introduce and cultivate blockchain companies, promoting the demonstration and application of blockchain technology in key areas, etc., to provide blockchain companies with one-stop services such as investment and financing, and supply and demand matching.

On November 11, the Department of Industry and Information Technology of the Inner Mongolia Autonomous Region issued a notice on the joint inspection of the cleanup and rectification of virtual currency "mining" enterprises. The inspection period lasted from November 11 to November 25, 2019. Based on the analysis of materials reported by various leagues and cities and relevant data held by the autonomous region, the inspection focused on identifying virtual currency "mining" enterprises that have nothing to do with the real economy, evade supervision, consume a lot of energy, and use the "big data industry" as a package to enjoy local electricity prices, land and taxation preferential policies.

The Monetary Authority of Singapore (MAS) is working with JPMorgan Chase and Temasek Holdings to develop a blockchain-based foreign exchange payment prototype that enables payments to be made in different currencies on the same network. Industry testing is currently underway to determine its ability to integrate with commercial blockchain applications.

At the "Defining the Future of Digital Currency" forum of the 4th Singapore Fintech Festival, Mu Changchun, deputy director of the Payment Department of the People's Bank of China and director of the Digital Currency Research Institute, said that the Chinese version of the central bank digital currency is neither aimed at cross-border payments nor used for wholesale funding services like the "Morgan Coin", but to provide more redundancy for China's already very advanced electronic payment system. Mu Changchun pointed out that the two giants, Alibaba and Tencent, have already occupied 96% of the domestic mobile payment market. Now Chinese people go out without wallets, but payment is the country's infrastructure, and regulators must prepare for any possible bad situation. In addition, China's payment system also has market segmentation and friction. Mu Changchun said that he hopes to establish a more smooth and universal payment method through the future central bank digital currency. In addition, it can also cover remote areas and promote financial inclusion.

On November 13, Pantronics Holdings (01611) announced that in order to reflect the change of the company name, the stock name of the shares traded on the Stock Exchange will be changed from "PANTRONICS HLDG" to "HUOBI TECH" (English) and from "Pantronics Holdings" to "Huobi Technology" (Chinese), effective from 9:00 a.m. on November 18, 2019. In addition, the company's stock code on the Stock Exchange remains unchanged.

At 6 a.m. on November 14, Canaan updated its prospectus again, confirming that it would issue 10 million ADSs, priced at $9-11 per share, and raise between $90 million and $110 million, which was lower than the initial outside belief of $200 million or $400 million. At the same time, the prospectus showed that Credit Suisse, the top-ranked lead underwriter, had withdrawn from the ranks of underwriters, and Haitong International Securities was added. This was the last update of the prospectus before the listing on the 21st.

Baton Systems, a blockchain post-trade solution provider, and JP Morgan have collaborated to develop an automated solution for margin payments for financial derivatives that transfers cash and collateral to multiple clearing institutions for near real-time management. This new service aims to solve the problem of integrating excess funds in the clearing workflow by integrating settlement instructions from custodians and other funding sources into existing optimized fund management systems without dismantling any technical infrastructure.

Weibo restricts the posting of blogs that contain both the words "blockchain" and "cryptocurrency speculation", with the reason being "the content contains information that violates relevant laws and regulations or the Weibo Community Convention, and the current operation cannot be performed". After investigation, it was found that posting content containing both the words "blockchain" and "cryptocurrency speculation" is not restricted and can be posted normally; however, posting content containing both the words "blockchain" and "cryptocurrency speculation" cannot be posted.

Facebook announced on November 12, Eastern Time, the launch of a payment service called Facebook Pay, saying it will provide people with a secure, convenient and consistent payment experience across the four major social media platforms of Facebook, Messenger, Instagram and WhatsApp, making payment transactions between these Facebook platform apps easier while continuing to ensure that payment information is secure and protected. In the announcement, Facebook pointed out that Facebook Pay is built on its existing infrastructure and partnerships, and is a completely independent entity from the upcoming cryptocurrency-based Calibra wallet.

Note: This report is intended for information transmission and does not constitute any investment advice.