China’s Regulatory Authority Warns About Risks of Initial Miner Offerings

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China's Regulatory Authority Warns About Risks of Initial Miner Offerings

Announcements

National Internet Finance Association of China (NIFA) this Friday announced that IMOs (Initial Miner Offerings), represented by the token Wankebi and issued by Xunlei (NASDAQ: XNET), are ICOs in disguise and have emerged as a potentially risky model that warrants vigilance.

Also Read: Exchange Problems Mount at Kraken and Coinbase but Bitfinex Reopens Registrations

Risk Alert on Disguised ICO Activities

NIFA today released an announcement on its website warning about the risks of disguised ICO activities. The warning is in compliance with the Notice on ICO issued by seven ministries last September. It points out that ICO activities are suspected of “Three Illegals” —— illegal fundraising, illegal issuance of securities, and illegal sale of notes and bonds. It reads:

All institutions and individuals should immediately stop engaging in ICO activities. With the gradual phasing out of ICO projects nationwide, Initial Miner Offerings (IMO), represented by the token Lianke (formerly known as Wankebi) issued by Xunlei, has emerged as a potentially risky model that warrants vigilance.

Xunlei’s shares dropped over 27% in reaction to the announcement.

China's Regulatory Authority Warns About Risks of Initial Miner Offerings

The regulator believes that a series of “virtual digital assets” launched since last October are ICO tokens in disguise. These tokens include Lianke, LLT (Literally traffic coin), and BFC Points. Lianke issued by Xunlei is cited by NIFA as the primary example:

“Lianke issued by Xunlei, the issuing company in effect substitutes Lianke for the duty to pay back project contributors with legal tender, making it essentially a financing activity and a form of disguised ICO. In addition, with frequent promotional activities and publishing of trading tutorials, Xunlei has lured many citizens without sound discernment into IMO activities.”

Once Found, Can Be Reported

NIFA calls on consumers and investors to recognize the nature of relevant models and make rational investments, instead of “blindly following speculation and hype”. It clarifies that crypto exchanges and related projects are not necessarily “a foreign company” by simply deploying a foreign server:

Any illegal financial activities in the form of IMO, ICO activities targeting domestic residents through deployment of foreign servers, and exchange services for “virtual currencies”, once found, can be reported to relevant regulatory agencies or NIFA,”  warned NIFA. “Any such activities suspected of violating criminal laws can be reported to the police.

NIFA went on, asking its members to enhance self-regulation, resist illegal financial activities, and to refrain from participating in any activities involving ICO or speculation in “virtual currencies”.

The post featured a number of negative comments.

China's Regulatory Authority Warns About Risks of Initial Miner Offerings

“I’m fully aware of the risks, mind your own business,” wrote one user. “Hmmmm, bitcoin surged more than 1000 percent since China’s ban in September.”

What do you think of NIFA’s announcement? Are IMOs actually ICOs in disguise? Leave your comments below.


Images via Shutterstock, Cailian Press.


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