Legal News: China’s Crypto Crackdown

By Robert Noens, Fall 2017 IAC Student Intern

A September 5, 2017, Law360 Article by Tom Zanki brought attention to a growing problem with cryptocurrencies – the online currencies/investments that appear to be popping up all over the place after the notable success of Bitcoin. As Zanki’s article points out, the money going into cryptocurrencies has grown substantially over recent months. In the first quarter of 2016, Initial Coin Offerings, or “ICOs,” raised $40 million. By the end of the second quarter in 2017, that number increased to $900 million. The issue here, however, is not getting your money into these cryptocurrency investments, the problem is getting your money back out. As readers of my last article – ICO(s)! Initial Coin Offering or Investor Conning Organization? – are well aware, this newly developed investment frontier of cryptocurrencies is plagued by fraudsters and scams. That is why, as of September 5, 2017, China has banned all ICOs for the foreseeable future. Additionally, the Chinese government informed those that have already made ICOs that they should begin to make arrangements to give their raised capital back to investors! China is not the only government entity cracking down on cryptocurrencies either.  Hong Kong decided that they will begin to regulate ICOs under their securities laws. Korea announced that they would also be strengthening their regulations over cryptocurrencies. Additionally, Canada, Singapore, and the SEC recently weighed in with comments regarding their regulation of cryptocurrencies. What these new regulation will be and where they will leave this new cyber industry, I do not know. One thing is relatively clear, however, there is a growing trend towards the regulation of ICOs and cryptocurrencies, and that trend does not appear as though it will be slowing down anytime soon.