Beijing has issued a warning about illegal activities associated with Security Token Offerings (STO), a move that underscores the Chinese government’s resolve in controlling cryptocurrency fundraising in the country.
At 2018 the Global Wealth Management Forum held on December 1, Huo Xuewen, head of the Beijing Financial Supervision Authority, said the government would crack down on STOs until it had approved the process, saying that they would be seen as illegal financial activities in the interim.
“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.
Huo’s comments show that Beijing’s financial authority is cautious of STOs, which are still in the early stage of development and have few successful cases around the world.
An STO is a form of fundraising that shares the profits or pays interest to the token holder based on an underlying asset. While initial coin offerings (ICOs) have been fraught with claims of fraud from users, an STO is often portrayed as a “safer” form of raising funds. STO tokens must be supported or backed by something tangible, including the assets, profits, or revenue of a firm.
China has been tightening its grips on cryptocurrencies over the past two years. After issuing a complete ban on ICOs last year, the country has begun enforcing a series of increasingly strict regulations. Following demands from internet regulators, WeChat permanently shut down a dozen widely followed blockchain-related official accounts in August. The National Internet Finance Association of China regulates 124 cryptocurrency trading platforms whose servers are all overseas. It has also inspected and shut down domestic initial coin offering or trading platforms, WeChat accounts, and limited their access to payments.