China’s Xinhua News Agency Report Shows Crypto Investors Are Bypassing ICO Ban
A report by the Xinhua News Agency has shown it is possible to circumvent China’s Initial Coin Offering (ICO) ban. It shows that even though the government of China has been trying to crack down on illegal financing through ICO, investors and companies can bypass the law through foreign shell companies and other ways.
Xinhua says that after China’s crypto regulations became more stringent, domestic virtual currency exchanges went overseas for registration — while appearing to be shut down within the country — and were still able to “provide trading services to domestic users.”
The one nation they focus on is Malta as a destination of choice, noting the existence of Chinese language versions of the now Malta-based companies. Xinhua also mentioned the use of Telegram messaging groups to coordinate with domestic Chinese users.
In the report, they say: “It seems that the entire process platform does not violate the relevant policies, but the over-the-counter transaction[s] [have] actually opened a hole in the ICO token transaction.”
While authorities have attempted to block internet access to ICO projects in China, Xinhua states that most measures can be subverted by using a Virtual Personal Network (VPN).
The report goes on to mention a business incubator based in Haidian District, Beijing. In order to evade supervision, a foundation was set up abroad to issue ICO tokens. The fundraising was still mainly for domestic investors. The project white paper could be purchased on “Taobao” and the price was around RMB 40,000. When the core team in the white paper is basically a foreign face, usually paid for “filling the facade”, and the person in charge behind it rarely shows up.
The ICO project went broke making some investors lose their money. Liu Peng, an investor in Tianjin, told reporters that he started from investing in virtual currency on the coin network. After September 4 last year, he switched to a server overseas but mainly for domestic trading platforms. The initial investment of 80,000 yuan is now less than 20,000 yuan.
Earlier this month, the People’s Bank of China released a new document on its official website, stating that it would continue to guard against ICO and cryptocurrency related trading prospects.