Chinese entrepreneurs who raise money through initial token offerings (ICOs) face tough legal repercussions, including more than 10 years in prison. The country has changed its laws to now include ICOs among illegal fundraising methods.

The Supreme People's Court of China, which is the highest court in China, recently amended China's criminal law to make it illegal to raise funds from the public through virtual currencies. This amendment took effect on March 1.

China has long banned ICOs, cracking down on the industry for the first time in 2017. The People's Bank of China (PBoC) ordered all ICO issuers to immediately stop and refund investors. However, local investors are still finding ways to invest in what they see as promising ICOs.

In February 2021, the Chinese government further cracked down on the industry by issuing a new decree banning ICOs. It describes these and other forms of illegal fundraising as "the act of collecting and absorbing funds from unspecified individuals and units without the permission of the financial management department under the State Council.

Now, amendments to the criminal code further provide for stiff penalties for those found to have raised funds using ICOs. These include imprisonment, ranging from three to ten years depending on the amount of money raised.

Section 192 further provides that any amount up to $16,000 will be considered a "large amount" and any amount in excess of $79,000 will be considered a "large amount".

The latest crackdown comes as China revives its anti-digital currency stance. A week ago, the country's top banking regulator warned the public of fraudsters in the "deceptive" world of virtual worlds. Before that, a state-run media outlet had described the irreplaceable token (NFT) as a giant bubble.

As China ramps up its ban on ICOs, another neighboring country is trying to legalize them. South Korea's financial services regulator wants the country to revisit its stance on ICOs and regulate them, rather than ban them.

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