Chinese Finance Association Cautions on Overseas ICOs

A self-regulatory association in China is warning citizens against participating in overseas initial coin offerings (ICOs) and cryptocurrency trading.

In a public statement published on Jan 26, the National Internet Finance Association (NIFA) writes that, after China issued a ban on ICOs last September and ordered closure of cryptocurrency exchanges, it has seen investors moving their funds to overseas platforms.

NIFA states:

"Recently, as worldwide governments are tightening regulations on cryptocurrencies, some overseas ICO and trading platforms may also face the risk of being forcefully closed due to compliance issue. Therefore, domestic investors are advised to be cautious of the risk."

Although a self-regulatory organization and not a regulatory authority, NIFA was first initiated in 2015 by the People's Bank of China (PBoC) and approved by the State Council. The warning comes just weeks after the association sent out another warning on activities that offer the substance of ICOs, but marketed in different forms.

In addition, NIFA highlighted that existing over-the-counter (OTC) trading activities in China are not complying with current regulation. Some domestic social networks have served as a marketplace to facilitate peer-to-peer trading and some non-banking payment tools are also offering services to support the finance, the association states.

As reported, following the closure of domestic cryptocurrency exchanges, Chinese investors have largely moved to OTC platforms that operate over messaging applications such as WeChat and Telegram. Payment methods such as WeChat Pay, AliPay and bank transfers are still available for OTC traders to push through transactions.

Citing details from central bank's ban on ICOs, the association pointed out that all these activities still fall within the scope of cryptocurrency trading, which may be subject to regulatory oversight.

"Investors should be aware that these trading services all have potential risks on the policy front, and be advised to stay away from these illegal financing activities," NIFA writes.

Just last week, the PBoC's Beijing branch reportedly issued a notice to local payment services requiring them to investigate and stop serving cryptocurrency traders in the country.

Chinese currency image via Shutterstock

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