Chinese cryptocurrency project GXChain has halted operations after police raided and sealed its offices in the eastern city of Hangzhou, local media reported (in Chinese) on Wednesday. The reason for the crackdown is unknown and company executives have been taken in for questioning.
Why it matters: The raid follows a stream of busts on cryptocurrency scams and Ponzi schemes in the country. However, GXChain was regarded by the cryptocurrency community as one of China’s few legitimate projects.
Details: Dovey Wan, founding partner of Primitive Ventures, first broke the news said in a tweet saying that unlike some of the recent crackdowns, authorities had turned their attention to a cryptocurrency project with a working business model.
- The case could relate to GXChain’s other business activities such as the scraping and processing of sensitive information including personal credit data, according to online media outlet Jinse Finance (in Chinese).
- At the peak of cryptocurrency activities in China, GXChain hit a market capitalization of more than $600 million. The project placed fifth in the July blockchain ranking from the Center for Information and Industry Development (CCID), an institute under the Ministry of Industry and Information Technology.
- The GXChain token (GXC) price lost more than one-fifth of its value within a day of the news about the raid.
Context: Founded in 2016, GXChain is a public blockchain that offers decentralized data exchange solutions to enterprises in industries including internet finance and banking without caching personal data for customer privacy.
- GXChain was one of China’s largest initial coin offerings (ICOs) before China issued a blanket crackdown in 2017.
- The project received investments from Zhen Fund, one of China’s biggest angel investors, and Chinese bitcoin tycoon Li Xiaolai.