Overseas ICOs Are Risky, Says China’s Internet Finance Regulator

News, Regulation | January 29, 2018 By:

China’s National Internet Finance Association (NIFA), a self-regulatory organization in the field of Internet finance, has issued another cautionary note on trading in cryptocurrencies. The latest warning is related to domestic investors who participate in overseas initial coin offerings (ICO) and cryptocurrency trading.

In a public statement published on Jan 26, NIFA said at present, the relevant administrative departments have completed the clean-up and remediation of domestic ICO activities and cryptocurrency trading operations. However, it has seen local investors moving their funds to overseas platforms.

“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,” said NIFA. “Therefore, domestic investors are advised to be cautious of the risk. As there are no specific regulations, overseas ICO transaction platforms face risks in system security, market manipulation and money laundering.”

In addition, NIFA highlighted that existing over-the-counter (OTC) trading activities in China are not complying with current regulation. They have monitored and found that some institutions or individuals in the country are still organizing currency transactions and OTC transactions, which are complemented by services such as market makers and guarantors.

“Domestically, some companies or individuals are still organizing over-the-counter trading or trading between cryptocurrencies, providing services as market makers or guarantors,” NIFA said. “This is essentially [facilitating] a cryptocurrency trading venue, and is clearly not compliant with current regulations.”

NIFA said investors should be aware that these trading services all have potential risks on the policy front. It added that NIFA members should enhance self-regulation and refrain from organizing or participating in speculation of ICOs or any other cryptocurrency transactions.

Earlier this month, NIFA issued a warning against risks from the so-called “initial miner offerings” (IMO). NIFA claimed that IMOs are disguised ICOs. The association 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.