This past week the Chinese National Committee of Experts on the Financial Security Technology issued a report highlighting fraud in the cryptocurrency marketplace. The government sponsored group pointed to 421 “fake virtual currencies coming from overseas.”
China has effectively banned cryptocurrencies and initial coin offerings. The government ban has forced crypto trades to move off shore or to take place in an OTC market that is rumored as being very robust. Prior to the ban, China was the largest crypto market in the world. China has repeatedly warned both operators and investors of the risk of purchasing digital currencies.
This most recent report points to telltale signs of crypto-fraud, including:
- A pyramid type business model promising very high returns. Early investors benefit by bringing in later investors.
- The fake virtual currency has no real code.
- The fake coins cannot be traded on cryptocurrency exchanges
In a separate government action, the China’s Ministry of Industry and Information Technology reportedly produced a report that ranked Ethereum as the number one blockchain.
SCMP quoted Leonhard Weese, President of the Bitcoin Association of Hong Kong, who said the government report made no sense;
“So it is very difficult to follow the ministry’s reasoning and quantification of a far more complicated criteria, like ‘innovation’ or ‘application.”’
The Chinese government is expect to release regular reports as it establishes its own blockchain standard – something that is expected to be announced at some point in 2019.