Shenzhen law enforcement authorities have identified 39 companies believed to be carrying out illegal activities with virtual currency.
According to the Shenzhen Special Zone Daily, cited yesterday on Chinese news site Sohu.com, the Shenzhen Municipal Internet Finance Risk Task Force issued a warning against some companies in the area involved in suspected illegal activities.
The task force then notified several authorities including the Shenzhen city central branch of the People’s Bank of China, the Qianhai Administration, the Economic Investigation Bureau of the Municipal Public Security Bureau, and the Municipal Communications Administration.
These entities joined forces to investigate and identify 39 “illegal” virtual currency trading places. According to a source familiar with this region of China, these companies:
“Most likely are Ponzi and crypto frauds as Shenzhen is known for being the hub of those.”
Clampdown on cryptocurrency exchanges
Whether the companies identified are involved in crypto fraud or not is still being determined. However, it’s well-known that trading cryptocurrencies is illegal in China since its ban in 2017.
Therefore, part of the main focus of the authorities will be on weeding out the presence of these types of businesses on the mainland.
Indeed, the warning issued stated that it would centre on businesses providing virtual currency trading services or opening virtual currency trading places in China.
It would also look at virtual currency companies registered overseas with presence in China, as well as those holding illegal token sales raising funds in virtual currencies.
As per the latest report, a total of 39 companies have been identified and are currently under investigation.
According to the same source, it’s not surprising that cryptocurrency exchanges are first in the firing line.
“When China gov clamps down on ‘illegal’ crypto stuff, they target exchanges first, as this is the most effective way to shut down liquidity/grab suspects all at once.”
Binance expansion plans thwarted
Coin Rivet previously reported on Binance’s plans to expand into China after President Xi Jinping’s public endorsement of blockchain technology caused stocks in Chinese blockchain A-share firms to max out at their 10% limit.
Binance CEO Changpeng Zhao (CZ) said at the time that the stock market gains would spill over into crypto and that the company was getting ready to “scale up”.
Those gains in stock markets will spill over to crypto soon… Told ours guys to scale up system capacity, waiting. https://t.co/8S0LhCXoV3
— CZ Binance (@cz_binance) October 28, 2019
However, earlier this week, news emerged that Binance had had its Weibo account suspended, while other exchanges such as OKEx still had their account intact.
Moreover, reports yesterday claimed that the Binance Shanghai office had also been raided by police and shut down. This is a claim that Zhao vehemently denies:
You can argue about the semantics of an office, who leased it, for how long, if it is empty, etc. But you can't argue about the semantics of a "police raid" that did NOT happen. Without the fake "police raid", there is no article. Pure FUD! https://t.co/o6xXwrU5WK
— CZ Binance (@cz_binance) November 22, 2019
The company stated that it does not have any “fixed offices in Shanghai or China” and that any rumours about police raids were purely to cause FUD.
“Any reports of a police raid are false,” a spokesperson for Malta-based Binance said in an email.
“We do not have an office in Shanghai.”
Whether Binance did or did not have an office in Shanghai remains to be seen. Either way, if CZ’s behemoth exchange did have plans to expand into China, they have most certainly been put on ice for the time being.
Disclaimer: We do not give advice on financial products.