China’s Central Bank adds regulatory scrutiny to crypto ‘airdrops’
According to the 2018 financial stability report published by China’s central bank, the People’s Bank of China (PBoC), Initial Coin Offerings (ICOs) have been characterized as “disguised.” The bank went even further and defined ICOs as “illegal” fundraising, pointing to the widespread risks of financial fraud and pyramid schemes.
PBoC ‘justified’ the scrutiny by allegations that the so-called ‘airdrops’ are evading regulation around the public token sale model through ‘issuing free assets’ to investors. Further in the report, the People’s Bank of China called for “early detection” of airdrops, due to their significant increase in number. They’ve called for regulators to be more vigilant, and even insisted on the international cooperation.
Additionally to the aforementioned statements, the bank shared their concerns of manipulation and violation of anti-money laundering (AML) systems in the crypto sector, even alleging the negative impact the cryptocurrency poses ‘evading’ capital controls and international sanctions.
However, the PBoC doesn’t provide a lot of factual arguments. One of the points brought up in the report is the number of ICOs that were completed in China. According to the report, as of July 18, 2017 – before China’s ICO ban took effect – 65 ICOs were completed, out of which five were launched prior to 2017. A total number of ICO participants rose over 105,000, with cumulative funding hitting 2.6 billion yuan, which equals $375.4 million. According to PBoC, this is roughly 20 percent of ICO financing globally.
While the report does point outright that ICOs are not welcome, there’s no law or regulation that currently bans to hold cryptocurrencies in China. In fact, by the ruling of the Shenzhen International Court of Arbitration, “digital assets of Bitcoin are legally protected due to their economic value.”