No Coins for You! Beijing Says Security Token Offerings are Illegal
Beijing’s Municipal Bureau of Finance chief, Huo Xuewen, has advised projects considering a security token offering as a means of fundraising, stating that security token offering (STO) fundraising is currently illegal in Beijing.
At a wealth management forum on Saturday, he commented on the replacement of ICOs with the new concept of STOs, saying they were still out of bounds.
He said (according to a rough translation):
“I will make a risk warning to those who are…in Beijing and want to issue STO. Don’t do it in Beijing.”
STOs tokenize assets and allow investors to purchase a share in the profits gained from those assets, something which ICOs had to carefully sidestep around by insisting that tokens did not represent a share in profits but were “utility tokens,” etc. For many international investors, security token offerings offer the best of both worlds by combining the liquidity of the ICO method with the regulatory compliance of more traditional investment vehicles, but for now, it seems that STOs will be viewed in the same light as ICOs, as far as Beijing is concerned.
China’s Stance on Token Fundraising
The People’s Bank of China previously banned ICOs outright in September 2017 and shut down many cryptocurrency exchanges in the process. The PBoC stated last month that there would be a crackdown on crypto airdrops as well (free cryptocurrency token giveaways).
A PBoC vice president named Pan Gongsheng said earlier this year that the bank had plans to take down ICOs based abroad that continued to solicit Chinese investment, stating:
“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.”
In August, a Chinese district also forbade local businesses to participate in hosting events or having any kind of promotions involving cryptocurrency.
While Chinese authorities are retaining their hard stance on crypto-fundraising, other governments are more open to STO fundraising, leading to many blockchain forms to abandon the somewhat disgraced ICO method for its legally compliant relative. With major companies like Indiegogo hosting STOs, the method is perhaps destined for more longevity than the ICO approach, which was fraught with disaster through scams, failed projects, and bad press.
CCN.com previously covered the legal aspects of STOs in this interview with a blockchain lawyer.
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