Existing ICO market
Key points


On September 2 2017 the Internet Financial Risk Special Rectification Work Leading Group Office, established by the State Council, issued the Notice to Carry Out Clean-Up Rectification Work on Tokens Issuance Financing (2017/99), which applies to all provincial and municipal financial offices. On September 4 2017 a joint announcement on the prevention of financial risks associated with token issuance was issued by:

  • the People's Bank of China;
  • the Office of the Central Leading Group for Cyberspace Affairs;
  • the Ministry of Industry and Information Technology;
  • the State Administration of Commerce and Industry;
  • the China Banking Regulatory Commission;
  • the China Securities Regulatory Commission; and
  • the China Insurance Regulatory Commission.

Following issuance of Notice 99 and the joint announcement, initial coin offerings (ICO) are now an illegal and unregulated method of raising money.

Existing ICO market

ICOs are an unregulated crowdfunding method for cryptocurrency projects or companies. The method was created in order to give investors access to a future cryptocurrency project or company by selling a percentage of the cryptocurrency as ownership rights or royalties.

ICOs are gaining popularity in China. However, as they bypass the authorities' supervision, to date, most projects have involved financial fraud or had no legitimate basis for raising funds through public channels. As such, they have caused serious financial risk and disrupted the social and economic order.

According to Notice 99 and the joint announcement, in China, ICOs are essentially considered illegal public financing schemes that are suspected of involving:

  • illegal fundraising;
  • the illegal issuance of securities;
  • the illegal offering of tokens to raise funds;
  • financial fraud;
  • pyramid schemes; and
  • other criminal activities.

Key points

Under Notice 99, each local authority had to provide information on the ICO trading platform located in its jurisdiction to the relevant provincial supervisory authority before September 4 2017. In order to enable supervisory authorities to gather specific information regarding ICO financing platforms and entities, the report had to include:

  • the names of the financing entity and its senior management personnel; and
  • the financing amount and time.

In accordance with Notice 99, the National Rectification Office has provided a list of 60 ICO platforms on which the local financial regulatory authorities will conduct further detailed inspections and report accordingly.

In addition, under Notice 99:

  • all new ICO financing activities must be ceased;
  • completed ICO projects must be examined on a case-by-case basis. Where necessary, investigations must be undertaken and illegal activities must be punished; and
  • various measures – such as undertaking monitoring (including account monitoring) of the tokens issuance platform – must be implemented in order to protect investor interests and prevent mass incidents and financial risks.

For further information on this topic please contact Wu Jiejiang at Jingtian & Gongcheng by telephone (+86 10 5809 1000) or email ([email protected]). The Jingtian & Gongcheng website can be accessed at‚Äč