Weihai, a port city in eastern China’s province of Shandong, has asked investors to take caution and ensure they are truly investing in blockchain technology and not cryptocurrency taking on the appearance of blockchain.
The Weihai Local Financial Supervision and Administration stated on December 13 that investors should be vigilant because unlawful crypto issuance and trading are becoming prevalent, as per an announcement from the office.
Cryptocurrency trading and ICOs have been illicit in China since 2017; however, blockchain has been supported by the Chinese President Xi Jinping. Notwithstanding, the administration guarantees more organizations, most taking on the appearance of blockchain startups, have launched cryptocurrency exchanges and secured funds via centralized token sales.
“As the country is promoting blockchain technologies, people start to hype virtual currencies again and some of the related illegal operations have come back to life,” the Weihai authority stated in the announcement.
Other local authorities, including China Banking and Insurance Regulatory Commission, the police department, and the Weihai branch of the central bank have supported the announcement and plan to complete an examination of unlawful ICOs and cryptocurrency exchanges.
“Some companies set up servers outside China and promote their products among Chinese investors on social media,” the authority stated. “They usually process transactions via online payment applications, therefore many of these funds are hard to retrieve as they floating abroad.”
As indicated by the announcement, some cryptocurrency exchanges use celebrity endorsements and well-known but complex innovative ideas to draw in investors, while making profits by manipulating cryptocurrency costs and cash withdrawal limits.
Other illicit activities to pull in investments include Ponzi schemes and promising a high increase in value in crypto with false data, as per the announcement.