Quick Take: Official Says Initial Coin Offerings to Stay Banned

The head of Beijing’s finance bureau said China will not legalize initial coin offerings (ICOs), crushing any hopes that the country might relax its ban on the fundraising method.

Speaking at China’s Finance Museum on Friday, Huo Xuewen said that moves in the U.S. to cover ICOs in securities regulations will not be replicated in China, where they are defined as a kind of illegal public financing.

Guo Dagang, secretary-general of the Beijing Internet Finance Association, said fraud under the guise of blockchain has moved beyond ICOs to include tax evasion, cross-border money laundering and cross-border multilevel marketing, which is a kind of pyramid scheme.

On Sept. 4, the People’s Bank of China and six other regulatory agencies issued a joint statement declaring ICOs illegal. ICOs were “giving rise to speculation and inviting suspicion of illegal financial activities,” the statement said. “These activities have disrupted the economic and financial order.”

Unlike initial public offerings (IPOs), which require auditing and regulatory reviews that can last for months, ICOs do not need to go through a lengthy approval and registration process. Most of the new virtual coins issued via ICOs are purchased with other cryptocurrencies such as bitcoin and ether. The coins give the holders rights to predetermined benefits such as goods and services offered by the issuer.

Contact reporter Ke Baili at gabriel@caixin.com