A bigger storm is coming: regulators are planning to ban Bitcoin trading platforms

On September 5, seven departments including the People's Bank of China and the China Securities Regulatory Commission jointly issued a document to stop the initial coin offering (ICO), which was called "China's strongest ICO supervision" by some media. However, the matter is far from over...

A bigger regulatory storm is coming: a person close to the regulator told a reporter from China Securities Journal (ID: xhszzb) on the 8th that Bitcoin trading platforms have become channels for money laundering through illegal economic activities and for market makers to manipulate prices to rob retail investors, and should be banned as soon as possible.

Key Points

A person close to the regulator said:

➤ Bitcoin trading platforms have become channels for money laundering from illegal economic activities and for market makers to manipulate prices to rob retail investors. They should be banned as soon as possible.

➤ Apart from illegal economy and extortion, there is basically no practical application of Bitcoin at present.

➤ Money laundering using Bitcoin can bypass regulations and transfer funds, especially when capital controls still exist in China. Regulatory measures should be introduced as soon as possible to target such behavior.

➤ Banning Bitcoin trading platforms does not mean banning Bitcoin. Banning platforms means canceling the channels for large-scale exchange of Bitcoin and legal currency.

Let’s talk about ICO first.

ICO (Initial Coin Offerings), the first token issuance, originated from the concept of the initial public offering (IPO) in the stock market. Investors can simply understand that: IPO raises funds in RMB, ICO raises funds in Bitcoin; IPO issues stocks, ICO issues various tokens; IPO raises funds for various production and operation activities, ICO raises "funds" for the development of various blockchain projects.

But there is a huge difference between ICO and IPO!

We know that corporate IPOs are supervised by the China Securities Regulatory Commission. Under strict listing regulations and strong supervision, the China Securities Regulatory Commission can still detect many fraudulent problems in companies. Some companies may have their IPO process suspended. Companies that successfully complete IPOs continue to be supervised after listing, and investors also have a basis for protecting their rights.

But before the seven departments issued the document, ICO was in an unregulated state. In other words, investors had no way to verify the projects issued by ICO. For a financing project that is not regulated by any department, the existence of this project needs to be questioned first; at the same time, the way investors make profits is the "tokens" raised through secondary market transactions, so you can imagine how great the risks are.

Deng Jianpeng, a professor at the School of Law of Minzu University of China, found in a survey of blockchain professionals that "currently more than 90% of ICO projects are suspected of fraud."

Some investors have realized that the project they invested in is nothing more than a Ponzi scheme, but they still hope for the best, thinking that they are not the one to take the last baton.