China: Beijing Financial Regulator Calls Security Tokens as “Illegal”

An independent Beijing-based media outlet Caijing reported that the chief of Beijing’s Municipal Bureau of Finance, Huo Xuewen has given a red flag to project raising funds through Security Token Offerings (STOs), calling them as “illegal”. 

Xuewen was addressing all the attendees at the "2018 Global Wealth Management Forum” held last Saturday. “I will issue a risk warning to those who promote and issue STO tokens in Beijing. My advice is to only engage in such offerings when the government has legalized them,” he said.

An STO is quite similar to ICO, wherein the crypto tokens are sold by a company to the investors as part of the fundraising process. However, STO is a more of regulation-friendly approach where-in the token holders share the profits of the company depending on the underlying asset.

Hence it is like getting a share in a business, or possession of security. Thus the STO tokens are more like tangible assets. Last year in September 2017, China introduced a blanket ban on ICOs as well as trading of cryptocurrencies in the country.

In a big hit to the STO market, Xuewen said: “Recently, ICOs have been abandoned, and a new concept called STO has been advertised. With today’s platform, I will make a risk warning to those who are propagating in Beijing and want to issue STO. Don’t do it in Beijing. If you do it in Beijing, you will be taken away from illegal financial activities. When we have the authority to approve you to do an STO, we will say.”

Over the last year, the Chinese government and regulatory bodies are actively hunting down crypto and blockchain related projects influencing Chinese investors to buy or hold crypto tokens. Last month itself, Peoples Bank of China (PBoC) - warned of “bubbles” in the blockchain related investments and financing. It also asked the Chinese government to strengthen its supervision of “speculation, market manipulation and other irregularities”.

Later in the month itself, the central bank published a paper with the title “What Blockchain Can and Cannot Do”. Earlier this year in July, PBoC started hunting down overseas ICOs trying to lure Chinese investors.

PBOC vice governor Pan Gongsheng issued a stern warning that time saying: "Any new financial product or phenomenon that is not authorized under the existing legal framework, we will crush them as soon as they dare to surface”.