Fraudulent Blockchain Offerings
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  • Shanghai’s PBoC warns people against illegal funding offerings that encompass digital currencies.
  • Since 2014, China’s central bank has been developing a digital yuan which is yet to launch and has begun trialing.

A new upsurge of cryptocurrency activity is being seen in China as many firms have begun to use digital assets in ways that the official bank has deemed as fraud. The People’s Bank of China has issued a warning over fraudulent schemes making false claims with respect to the central bank digital currency and the proposed digital currency.

The bank published a post consisting of common FAQ’s that explain the signs of a securities fraud and detailed how one can spot a financial scam stressing on virtual currency and blockchain.

The article included explanations for traditional fraud mechanisms as well, however it particularly seemed to warn the public to be wary of dealing with “virtual currency” and “blockchain.”  Many fraud methods include “investment funds established through the Internet” and “illegal fundraising in the form of ‘electronic gold investment,’” the article said.

“The use of virtual products constructed with modern electronic network technologies, such as electronic shops, electronic department stores, investment entrusted operation, and repurchase due to illegally raise funds,” are also methods used by frauds, it added. 

The post urged the people “to heighten its risk awareness, not be credulous, and prevent losses.” The officials warned against more traditional fundraising schemes as well, including profit sharing, rebates, and membership cards.

While China has been suspicious of using crypto, it has accelerated the testing of its new digital currency. More recently, PBoC even announced that it has begun the trial for the digital currency yuan. 

While PBOC regurgitated a warning it issued earlier this year where it announced that it had “not released a statutory digital currency or authorized any assets transaction platforms to engage in transactions of it,” it has launched pilot programs for the digital currency.

The program will trial its digital yuan and American chains namely Starbucks, McDonald’s, and Subway were named in its list of firms that will test the digital currency along with 19 local businesses.

“The digital currency itself is under a trial run. It’s time to move on to the second phase, which is product development – the central bank’s payment instruments like Alipay and WeChat Pay,” Chen Bo, director of the Finance Research Center at the Institute of Finance and Economics at the Central University of Finance and Economics told the Global Times