China Moves to Crack Down on Digital Currency Pyramid Schemes

NEWS
Stan Higgins
Jan 22, 2018 at 17:00 UTC

China's public security ministry said on Friday that it will take aim at pyramid schemes in the country, including those that purportedly involve cryptocurrencies.

In a Jan. 19 statement, the Ministry of Public Security disclosed its plan to crack down on pyramid scams, or financial schemes in which participants are encouraged to sell some kind of product while also soliciting others to create sales networks of their own. Some of the more well-known digital currency pyramid schemes include OneCoin, which as reported last week is the target of an international, multi-agency crackdown.

The ministry said in a translated statement:

"The public security organs and industrial and commercial departments of the country will continue to carry out special rectification in key areas and...concentrate on destroying the pyramid selling organizational system, severely punishing the members of the pyramid selling field, annihilate and destroy the network pyramid selling and criminal activities, [and] earnestly safeguard the legitimate rights and interests of the general public as well as the economic and financial order."

The statement doesn't make clear to what degree it will focus on schemes that claim to involve a cryptocurrency, versus pyramid schemes involving other types of products.

That said, the mention signals that officials will apply scrutiny to some of the schemes involved. In the past, scams such as Gemcoin have resulted in thousands of Chinese citizens being defrauded, and OneCoin has been known to have a presence in China as well.

It also remains to be seen whether China will move toward more forceful edicts, as shown in the case of the ICO ban last year. As reported by CoinDesk at the time, officials in China banned the blockchain funding model, deeming it to be an illegal form of fundraising.

Editor's Note: Some of the statements in this report have been translated from Simplified Chinese. 

Chinese yuan image via Shutterstock

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