Chinese stock exchanges are apparently cracking down on firms that are issuing misleading information with the intention of driving hype around the blockchain technology. The companies are allegedly associating themselves with the so-called “distributed ledger technology” (blockchain) to, possibly, increase their market share prices.

The crackdown, led by China’s Shenzhen and Shanghai Exchanges, seems to be in response to a recent spike in Zheijiang Enjoyor Electronics Company Ltd.’s share price after the firm made a blockchain-related announcement through Wechat about a week ago. In the announcement, Enjoyor Electronics claimed that one of its affiliated companies had struck a partnership with one forensic sciences center that is based in Zhengjiang. The announcement further suggested that the partnership would soon see the launching of what Enjoyor Electronics termed as “the globe’s first ever blockchain-based electrical data forensics certificate. This announcement led to an immediate increase in Enjoyor Electronics’ stock price, reaching its 10 percent trading limit.

When Shenzhen Exchange insisted that the Enjoyor Electronics divulges more details on the said partnership such as the shares it owns, the date when investments were made in the purported affiliate company, evidence of the suggested blockchain-based forensic procedure, and the financial records of the said business, the Electronics Company deleted the announcement.

Stock Exchange will monitor the companies purporting Blockchain affiliations

Over the past recent months, various businesses have driven share price spikes through cashing-in on the increasing hype around blockchain and crypto technology. For instance, in December 2017, one U.S beverage firm called Long Island Iced Tea Corp saw an increase in its share price by more than 400 percent after the company changed its name to Long Blockchain Corporation. Another Hong Kong-based company, Skypeople Fruit Juice, doubled its share price value by changing its name to Future Fintech.

This trend of businesses making false claims of having embraced the blockchain technology, or having affiliations with purported blockchain companies in order to improve stock prices, seems to have started in mainland China. China Money Network reports that “the Shanghai and Shenzhen exchanges have questioned over twenty listed companies about suspicious speculations on the blockchain technology.”

The Shenzhen Exchange has said that it is going to very closely “monitor the disclosures and stocks of relative companies in the secondary markets. Companies which use blockchain technology for speculation and misleading investors will have disciplinary actions taken against them.” Further, the exchange has stated that it will report severe violations to the Chinese Securities Regulatory Commission.

Following the announcement released by the Shenzhen Exchange, the Shanghai Exchange gave a similar announcement, saying that 20 firms that are listed on it seem to be speculating and misleading potential investors on the blockchain technology. The Shanghai Exchange has pointed out that it has stopped trading activities in several instances and asked companies to produce information showing proof of ties to the cryptocurrency and blockchain industry.

The announcement by the Chinese Exchanges is among the many measures the local authorities are taking to curb crypto-related scam activities that have been on the increase over the past few months.