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China’s National Internet Finance Association Warns Investors of Fake Trading Volume on Exchanges

The National Internet Finance Association (NIFA) of China released a notice on April 2 to warn Chinese investors of crypto exchanges available in the current market as they have found that these exchanges manipulate transaction volumes and engage in other activities that eventually end up putting investors in disadvantageous positions.

China has been wary of cryptocurrency activity since the 2017 ban on ICO projects and fundraising, and has taken active measures to crackdown on crypto exchanges and service providers within the country. As domestic crypto firms found themselves hindered by stringent crypto regulations, a loophole seemed to provide a solution for these businesses – crypto exchanges found that they could avoid legal persecution if the firm was registered overseas in countries with more lenient laws on crypto. However, this often means that if a crypto exchange registered outside of China is found to be engaging in fraudulent activities while operating in China, investors might not be able to officially pursue legal recourse against the exchange. This has proven to be the case over the years, with the most recent case being FCoin, which abruptly tried to pull an exit scam in February.

NIFA also cautions Chinese investors against buying into the concept of Bitcoin being a safe haven asset, a status given to assets such as gold, in the current global financial market downturn. The agency alleges that crypto exchanges are marketing cryptocurrency in this manner and new or less experienced traders tend to fall for this tactic, unaware that many investors have been dealt with severe losses as the recent market turmoil extends to the crypto market as well. 

Exchanges employ various tools to give the illusion of “prosperity” and wealth, such as market-making and bot trading, along with data tampering and manipulation. Some users may find their positions hindered on the exchange platform, or suddenly have their assets frozen due to technical issues, for example, and all these may lead to unforeseen and avoidable losses.
“Institutions and individuals should strictly abide by national laws and regulatory efforts. They should not participate in virtual currency trading activities and related speculations. Institutions should also abide by industry compliance requirements, proactively resisting illegal financial activities and not providing malicious actors with opportunities to commit fraud,” the statement reads.

You may also want to read: South Korea DeFi Platforms at Risk with Possible New Ban by Financial Regulators

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