China’s regulators preparing new rules for digital coin offerings

A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture shot May 27, 2015. REUTERS/Benoit Tessier/Illustration/File Photo

Chinese regulators are preparing new regulations on digital coin offerings and may ban them until the rules are in place, the financial magazine Caixin reported on Monday, as interest in the new fundraising channel grows rapidly in a regulatory grey area.

Digital currencies, also called cryptocurrencies, such as bitcoin and a growing stream of alternatives, allow anonymous peer-to-peer transactions without the need for banks or central banks.

They are also used by companies seeking to raise capital, in the form of initial coin offerings (ICOs) or initial token offerings (ITOs).

The currencies exist in a legal grey area, however, with regulators scrambling to come up with rules that will not stifle innovative funding models while also protecting investors.

ICOs have become a bonanza for digital currency entrepreneurs, allowing them to raise millions quickly by creating and selling digital “tokens” with no regulatory oversight.

But Chinese regulators, including the People’s Bank of China and the China Securities Regulatory Commission, are now considering how to handle ICOs, including whether to ban them outright until regulations are in place, Caixin reported citing sources.

The report on China’s plans follow comments from the United States Securities and Exchange Commission (SEC) in July that the tokens can be considered securities, and therefore, may need to be registered unless a valid exemption applies.

The PBOC and CSRC did not immediately respond to requests for comment.

The popularity of coin offerings has surged in China this year, with 65 ICOs and 2.62 billion yuan ($394.6 million) raised from 105,000 individuals in the country, state-run Xinhua reported in July citing data from a government organization that monitors online financial activity.

Marketing events for an upcoming ICO held over the weekend at five-star hotels in Beijing and Shanghai saw standing-room only crowds with several hundred prospective investors at each event.

The government issued draft rules targeting illegal fundraising on Thursday, as the authorities step up a campaign to crack down on risky and illicit behavior in the country’s financial sector.

In China’s rapidly developing financial markets, regulators periodically crack down on what they deem to be illegal fundraising schemes, including online peer-to-peer (P2P) lending platforms and pyramid schemes.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.