Following the recent turmoil between the cryptocurrency market and the Chinese government, the latter have released a regulatory document that is focused on stopping illegal fundraising that may put investors into harm's way. The document details how the People’s Government of China will prevent and dispose of illegal fundraising schemes in order to protect the legitimate rights and interests of the public as well as maintain economic security.
The document does not directly mention cryptocurrency Initial Coin Offerings (ICOs) but defines 'illegal fundraising' as "the raising of funds for non-specific objects or specific objects exceeding the prescribed number without the permission of the law or in violation of the relevant provisions of the State and promising to pay the principal and interest or pay the return. If it is otherwise stipulated in financial management laws or administrative regulations, those provisions shall prevail.”
The document proposes harsh fines and penalties for those carrying out such illegal fundraisings and states that it is the responsibility of the representatives of the government to crackdown on such activities. Moreover, it states that accomplices and promoters of such activities are also liable to government investigation and if found guilty, penalties will be imposed.
This comes a month after the Chinese authorities cracked down on the cryptocurrency market and banned ICOs and stopped firms from trading Bitcoins. The term 'illegal fundraising' has been used however there is no direct mention of cryptocurrencies in the document. The document does state that the government will investigate and penalize the companies that carry out illegal fundraising to set up internet financial enterprises and various trading floors.
The document does not define 'illegal fundraising' but instead gives the Illegal Fundraising Disposal department a significant amount of power to investigate and take action against such firms, personnel, and other entities that may carry out the illegal fundraising activities without the proper authorization from the government.
It is too early to say how this move will impact the cryptocurrency market. In the upcoming weeks it will become clearer as to how this move will differentiate between legitimate and illegitimate ICOs and what steps the government will take to close down and penalize the illegal market.
Chinese regulations deal with illegal fundraising
Following the recent turmoil between the cryptocurrency market and the Chinese government, the latter have released a regulatory document that is focused on stopping illegal fundraising that may put investors into harm's way.