The People's Bank of China issued a statement on September 4th banning Initial Coin Offerings (ICOs) entirely, calling them "illegal public financing". However, a deputy director later clarified that the suspension is merely a temporary halt targeted at illegal ICOs, with the goal of protecting investors from speculative investment until the technology matures. The document also outlines six points of guidance for Chinese regulation of ICOs and virtual currencies, including banning currency exchanges, prohibiting financial institutions from involvement, and warning of investment risks. It remains unclear if the ICO ban will be made permanent.

1. September 2017
China Bans Initial Coin Offerings, “Illegal
Public Financing”
On September 4, 2017, the People’s Bank of
China issued a statement banning Initial Coin
Offerings (ICOs) entirely. However, On
September 6, 2017, Dr. Hu Bin, Deputy Director-
General of the Institute of Finance and Banking
(IFB) issued a statement on national Chinese news
that the suspension of ICO’s in China is merely a
“halt” specifically targeted at illegal ICO’s. The goal
is to safeguard investors from “speculative
investment” with the understanding that when
the technology has “matured” it should be
released to the public for ICO’s.
This brief addresses the People’s Bank of China’s
decision to ban ICOs and six points of guidance
regarding the regulation of financing initiatives. As
of the date of China’s announcement, it is unclear
whether the ICO ban will be permanent, or if it is
a temporary measure until the Chinese
government determines how to permanent
regulate ICOs. With the statement of Dr. Hu Bin,
it appears China is attempting to safeguard
investors from this fast moving area of investment.
1. China identified a need for an accurate
understanding of the essential properties of
ICOs.
China announced that Bitcoin and other virtual
currencies transactions are “unapproved” illegal
activities. Individuals or organizations caught
engaging in the sale or circulation of virtual
currency will be transferred to the Chinese
judiciary. Most importantly, China states that
virtual currency is not issued by its Monetary
Authority and has no legal or monetary
properties, no legal equivalence to money, and
cannot and should not be circulated in the market.
2. No organization or individual may engage
in unauthorized financing activities.
As of the date of this announcement, all types of
currency issuance financial activities shall
immediately cease. China took a hard stance on
this issue, stating that all organizations and
individuals who have financed of the token should
make arrangements for repatriations and seriously
investigate and deal with associated issues.
3. Token exchanges must cease operation in
China.
As of the date of this issuance, financing or trading
platforms shall not engage in the exchange of legal
currency for tokens. Any legal issues arising on a
token trading platform, the Financial Management
Department will direct Telecommunications
Authorities to close the token exchange’s website
and mobile application, request the relevant App
Store remove the application, and have the
Business Administration revoke the company’s
business licenses.
4. Financial institutions and non-bank
institutions shall not conduct business
related to token sales.
Financial institutions and non-bank payment
agencies may not directly or indirectly provide
token financing, products, or services to
individuals or organizations. If any financial
institution or non-bank payment agency discovers
any token related transaction, they should
promptly report that transaction to the relevant
authority.
5. China warns the public be aware of the
risks associated with trading tokens.
China details that the public should be aware of
the risks associated with token transactions.
Namely, false asset risk, risk of business failure, and
risk of investment speculation. China reminds
investors that they bear the associated risks of
investing and should strengthen risk awareness,
recognition, and prevention skills.
6. The Industry should self-discipline.
China advised all financial institutions and
organizations to carefully review policy, and
advise their member units from participating in
virtual currency transactions. Financial institutions
were also advised to strengthen investor

2. 2
education and maintain financial order.
Gagnier Margossian LLP advises its clients on
navigating the legal challenges associated with
Initial Coin Offerings.
Learn more about
Gagnier Margossian LLP’s
ICO Advisory Services.
Questions? Contact GAMALLP
Christina M. Gagnier
gagnier@gamallp.com
+909.493.6447
Stephanie Margossian
margossian@gamallp.com
+415.692.1202