27 September, 2017
Virtual currency exchanges in China have been told to close down their operations, according to a news publisher that reports on the industry.
CoinDesk reported that Chinese authorities have called on the trading platforms to announce that they are closing before the end of 15 September, and take a range of further actions to ensure the smooth closure of operations. These include requiring the platforms to establish plans for clearing existing transactions, and to put in place arrangements for depositing customer funds and for retaining customer data, it said.
CoinDesk cited leaked documents posted on social media in China and anonymous information provided to it by executives at some of the exchanges as the sources for its story. The move had been rumoured earlier this week.
The closure of one virtual currency exchange active in China was announced on social media on Friday. BTCC said the BTCChina Exchange would "completely shut down its exchange business" on 30 September.
According to BTCC, the Chinese platform's decision to close followed careful consideration of an announcement made by Chinese regulators earlier this month. In that announcement, the People’s Bank of China (PBoC) announced a ban on all initial coin offerings (ICOs) in the country.
ICOs are an increasingly popular way for businesses to raise money.
Typically, businesses will develop a digital token, such as their own proprietary virtual currency, and look to sell those tokens to investors in a bid to raise capital in return for existing cryptocurrency, such as Bitcoin, Ether or Ripple rather than fiat currency such as dollars, euros or pounds. The trade of these tokens is recorded using blockchain.
Investors can in most cases sell on those tokens for profit on certain peer-to-peer exchange platforms should the value of the tokens increase. They are sometimes further incentivised into buying the tokens by being given the opportunity to share in profits generated from the business ventures that benefit from their investment.
Earlier this week, the UK's Financial Conduct Authority (FCA) warned consumers against investing in ICOs unless they were experienced investors who were prepared to lose their entire stake. It described ICOs as "very high-risk, speculative investments".
This article was published in Out-law here.
For further information, please contact:
Ian Laing, Partner, Pinsent Masons
ian.laing@pinsentmasons.com
