STOs Flout Laws in Beijing, Municipal Finance Bureau Chief Warns

The head honcho of Beijing’s Municipal Bureau of Finance warned during a weekend conference that security token offerings are illegal, at least in Beijing.

Huo Xuewen, the head of Beijing’s Municipal Bureau of Finance, has cautioned that security token offerings (STOs) fall foul of the law in the capital city of China, local media agency Caijing reports. He urged startups and companies to stay away from this form of fundraising, at least until the authorities devise a legal framework for STOs and give them the green light.

In a speech on Saturday at the 2018 Global Wealth Management Forum, Xuewen noted:

“Recently, initial coin offerings (ICOs) have become abandoned, and a new concept, called STO, is currently advertised. I will make a risk warning to those who are promoting and issuing STO tokens in Beijing. If you do it in Beijing, you will be taken away for illegal financial activities.”

An STO is a form of capital raising that can be placed between ICOs and initial public offerings (IPOs). It operates with ICO-like tokens, but they are backed by real-world assets, such as company stock, commodities, or real estate.

China has adopted a tough stance on ICOs, banning any related activity in September 2017. The People’s Bank of China (PBoC), which acts as the central bank, has forbidden any form of ICO-based crowdfunding and ordered local cryptocurrency exchanges to halt operations.

Now that STOs seem to be turning into a promising fundraising alternative, China is showing intention to stick to its narrative and claims those also represent illegal financial activity.

A year after imposing the ban, the central bank released another warning, reminding investors of the risks they take with cryptocurrencies and ICOs. The PBoC alluded to “illegally selling securities,” which might be somehow pointing to STOs. The document reads:

“[ICOs are] suspected of illegally selling tokens, illegally issuing securities, illegal criminal activities, financial fraud, pyramid schemes, and other illegal and criminal activities.”

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