People’s Bank of China Bans Security Token Offeringsbr>
The People’s Bank of China (PBoC), the country’s central bank, has officially banned security token offering (STO) businesses.
An STO is an alternative to private equity and venture capital financing for companies globally. Unlike their utility token counterparts, security tokens are tied to real securities, which may represent tokenized assets. In certain cases, these tokens can represent actual equity, acting as “digital shares” of a company.
Local news outlet South China Morning Post (SCMP) reported that PBoC deputy governor Pan Gongsheng told an internet finance forum in Beijing that “illegal” financing activities through STOs and ICOs were still rampant in the mainland despite a crackdown on cryptocurrencies and ICOs in September last year.
“The STO business that has surfaced recently is still essentially an illegal financial activity in China,” Gongsheng said. “Virtual money has become an accomplice to all kinds of illegal and criminal activities. Most of the financing operations conducted through ICOs in China were suspected of being illegal fundraising, pyramid sales schemes and other financial fraud.”
The central bank deputy governor added that if Beijing had not taken action to eradicate illegal behaviour arising from crypto transactions in 2017, a chaotic cryptocurrency market could have hurt the country’s overall financial industry.
Last week, Huo Xuewen, chief of financial watchdog Beijing Bureau of Financial Work, issued a warning against STOs, stating that STO fundraising is currently illegal in Beijing.
“I want to warn those who are promoting STO fundraising in Beijing,” said Xuewen. “Don’t do it in Beijing. You will be kicked out if you do it.”