China Blocks Offshore Cryptocurrency Exchanges

by Ike Obudulu Posted on August 23rd, 2018

Houston, Texas, USA : Chinese authorities will block access in China to 124 websites operated by offshore cryptocurrency exchanges that provide trading services to citizens on the mainland, the Shanghai Securities News, a newspaper affiliated with the country’s financial and markets regulators, reported on Thursday.

China is poised to block more than 120 foreign cryptocurrency exchanges as part of the government’s broader crackdown on activities related to digital money, according to state media.

It said authorities will also continue to monitor and shut down domestic websites related to cryptocurrency trades and initial coin offerings (ICOs), and ban payment services from accepting cryptocurrencies, including bitcoin. The newspaper cited people close to the Leading Group of Internet Financial Risks Remediation, which was set up by China’s cabinet in 2016 and headed by Pan Gongsheng, a deputy governor of the People’s Bank of China – the country’s central bank.

The report marks the latest effort by Beijing to intensity the clampdown on cryptocurrency activities because of concerns about financial instability.

Censors recently shut down at least eight blockchain and cryptocurrency-focused online media outlets, some of which raised several million dollars in venture capital. These entities found their official public accounts on WeChat blocked on Tuesday evening, owing to violations against new regulations from China’s top internet watchdog.

China has shut down numerous blockchain-related news accounts on the WeChat social app, and banned hotels in downtown Beijing from hosting events promoting cryptocurrencies, in a renewed crackdown on activities related to the digital money.

At least eight blockchain and cryptocurrency-focused online media outlets – some of which raised several million dollars in venture capital – found their official public accounts on WeChat blocked on Tuesday evening, due to violations against new regulations from China’s top internet watchdog.

Tencent, operator of WeChat, said in a statement that it has shut down these accounts permanently as they are “suspected of publishing information related to ICOs [initial coin offerings] and speculations on cryptocurrency trading.” It cited regulations enacted earlier this month by the Cyberspace Administration of China, which, among other things, demand content providers within chat apps comply with “national interests” and “public orders.”

Separately, Beijing’s central Chaoyang district issued a notice on August 17 banning hotels, office buildings and shopping malls in the area from hosting events promoting cryptocurrencies. The document was leaked online this week, and confirmed by the Post with the local authority. A staffer with Chaoyang’s financial authority said the notice was triggered by a local event organized by an overseas cryptocurrency exchange last week, and is restricted to the district in question.

Last September, Chinese regulators banned ICOs, describing them as an unauthorised illegal fundraising activity. During the same month, Chinese regulators also ordered Chinese cryptocurrency exchanges to cease trading.

ICOs are a form of crowdsourced fundraising by which companies exchange their newly created cryptocurrencies – called tokens – for payments in an existing currency, usually an established cryptocurrency such as ethereum or bitcoin. ICO investors profit when their tokens gain in value at a faster rate than the currency they used to pay for them.

The government crackdown prompted Chinese cryptocurrency exchange operators and ICO projects to move their operations in friendlier jurisdictions, such as Singapore.

In February, state media first reported that China will soon block all websites related to cryptocurrency trading and ICOs – including overseas platforms. Popular cryptocurrency exchanges, including Bitfinex, Bitnance, Huobi and OKEx, have since been blocked on the mainland.

Since the crackdown began last September, a total of 88 cryptocurrency exchanges and 85 ICO projects have been shut down in China, and the yuan-bitcoin trading pair has dropped from 90 per cent to less than 5 per cent of the world’s total bitcoin trades, according to Shanghai Securities News.

Pan, the central bank deputy governor, said in Beijing last December that China made the right decision to clamp down on cryptocurrency exchanges.

“If things were still the way they were at the beginning of the year, over 80 per cent of the world’s bitcoin trading and ICO financing would take place in China – what would things look like today?” he said. “It’s really quite scary.”

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