Why are STOs illegal in China?

Initial Coin Offerings (ICOs) were banished from the mainland of Chinese in September 2017. Security Token Offerings (STOs) are also currently facing the same fate.

The deputy governor of Beijing said should they have not taken actions to ban the illegal activities arising from digital currency, a turmoil digital assets market will impact the country’s overall financial industry.

Pan Gong Sheng, Vice President of People Bank of China (PBoC): “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.”

What is the main difference between ICOs and STOs? STOs allow token holders to have a stake in the company; similar to the features of a company shares.

Pan said most of the money raised through ICOs or STOs had become an accomplice of crimes like illegal fundraising, pyramid sales schemes and other financial fraud.

Huo Xuewen, chief of Beijing’s Municipal Bureau of Finance, has warned business against launching security token offerings (STOs).

Apart from banning digital assets, Beijing has regulated against illegal peer-to-peer lending operations. As a result, dozens of the P2P operations shut down and affecting thousands of investors.   

 “The regulators will continue to strengthen regulation in the financial technology market to ensure financial stability,” said Cao Hua, a partner with private equity group United Asset Management to South China Post. “New business models in the financial technology sector are not welcome in China now.”

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