Beijing’s Bureau of Finance Labels Security Token Offerings (STO) Illegal, to Issue Risk Warnings

The chief of Beijing’s Municipal Bureau of Finance, a man called Hup Xuewen, has recently warned companies in the country against the idea of having Security Token Offerings (STOs). According to what he said in a recent financial forum hosted by the bureau during the weekend, activities like the STO, which is just like an Initial Coin Offering (ICO), are illegal in China.

The man affirmed that he would issue a risk warning for any companies or people promoting and issuing STO tokens in Beijing and that they believe that investors should only engage with these practices after they have been properly legalized in the country.

The Difference Between ICOs and STOs

In fact, STOs are very similar to ICOs. The main point is that ICOs are sold by a company to the public in order to raise the funds that they need to run their operations and kickstart their business. STOs also allow their holders to get profits based on how much of them the user holds.

The main issue that the government has with STOs is that they are too alike. In fact, some STOs were basically made in 2017 and called ICOs because nobody knew how to define what was a security or not back then.

So, basically, both ICOs and STOs are sold to people to get money but STOs gives the holders the ability to share the profits of a company because it is like they are “real” old-school securities.

Now, it looks like more companies and startups are abandoning the old ICO mania and starting to go to STOs, although they are not necessarily very regulated. Even companies that had ICOs are now planning STOs.

The Ban

When the People’s Bank of China has banned ICOs from the country, STOs were naturally banned as well. Now, the government is trying to hit ICOs even harder than it did before as some projects have moved overseas but are still targeting mainland investors, which affects China.

Pan Gongsheng, the vice president of the People’s Bank of China, has affirmed that the country will go after any unauthorized product that is not under the existing legal framework of the country will be “crushed as soon as it dares to surface”.

While China’s stance is certainly very hardcore and one could say that it is unproductive, STOs have caused serious concerns after some market specialists as many companies who had ICOs last year are planning and they basically flushed a lot of money down the drain when the price of the tokens created by ICOs fell apart, so some caution is definitely needed.