China’s Internet Finance Regulator Warns On “ICOs in Disguise”

ICO News, Investing, News, Regulation | January 15, 2018 By:

China’s National Internet Finance Association (NIFA), a self-regulatory organization in the field of Internet finance, has issued a warning against risks from the so-called “initial miner offerings” (IMO).

In a statement, NIFA claimed that IMOs are disguised initial coin offerings (ICO), the latter completely banned in the country. The warning is in compliance with the Notice on ICO issued by the Chinese government in September, 2017.

The group cautioned investors that IMOs may be using misleading ‎information as part of fundraising campaigns aimed at selling hardware for ‎cryptocurrency mining. The concept touts generating a particular cryptocurrency or token that can be awarded to investors. NIFA cited the Lianke token issued by Chinese firm Xunlei as the primary example.

“All institutions and individuals should immediately stop engaging in ICO activities,” the group said. “With the gradual phasing out of ICO projects nationwide, Initial Miner Offerings (IMO), represented by the token Lianke (formerly known as Wankebi), issued by Xunlei, has emerged as a potentially risky model that warrants vigilance.”

The group said that a series of “virtual digital assets” have been issued since the ICO ban last year, including Lianke, LLT, and BFC Points. NIFA claimed that these projects are “disguised ICOs.”‎

“In the case of Lianke issued by Xunlei, for example, the issuing company in effect substitutes Lianke for the duty to pay back project contributors with legal tender, making it essentially a financing activity and a form of disguised ICO,” the group said. “In addition, with frequent promotional activities and publishing of trading tutorials, Xunlei has lured many citizens without sound discernment into IMO activities.”

The group advised consumers and investors to gain a clear understanding of the nature of relevant models and refrain from blindly following speculation and hype. The NIFA also calls on its members to enhance self-regulation, resist illegal financial activities, and refrain from participating in any activities involving ICOs/IMOs.

“Any illegal financial activities in the form of IMO, ICO activities targeting domestic residents through deployment of foreign servers, and exchange services for “virtual currencies,” once found, can be reported to relevant regulatory agencies or NIFA,” the group said. “Any such activities suspected of violating criminal laws can be reported to the police.”