Security Token Offering (STO) is still illegal in the country, reminds China

The many recent attempts by projects to raise money with a Security Token Offering (STO) triggered China to remind projects about the legal implications of Security Token Offerings. Huo Xuewen, the chief of Beijning’s Municipal Bureau of Finance has reminded many projects considering doing a Security Token Offering, that it’s still considered an illegal form of fundraising in Beijing.

Security Token Offering is currently replacing the most popular crowdfunding method – Initial Coin Offerings and Xuewen addressed upcoming projects at the Wealth Management forum last Saturday. His warning was straight and simple:

“I want to warn everyone who are currently in Beijing and want to conduct a Security Token Offering. Do not do it here.”

Security Token Offering is replacing Initial Coin Offerings

Security Token Offerings basically tokenize assets into digital tokens. This allows investors to purchase shares of the profits gained from the assets. Initial Coin Offerings on the other hand, had to carefully distance themselves from this approach. They insisted that tokens did not represent a share in profits. Security Token Offerings basically present international investors with the best of both worlds.

They combine the liquidity of Initial Coin Offerings with the much needed regulatory compliance of more traditional investment vehicles. The new concept, despite how appealing to investors it seems, will be treated the same way as Initial Coin Offerings, according to Beijing. The People’s Bank of China (PBoC), banned ICOs last year and in the process shut down many crypto exchanges.

Last month, the PBoC announced that they are beginning to go after all forms of crypto airdrops as well. Pan Gongsheng shared that the bank is already planning to take down Initial Coin Offerings based abroad which continue to solicit Chinese investments. He said:

“Any new financial product or phenomenon, which is not authorized under the current laws, will be crushed as soon as it surfaces”

Hardcore measures against Cryptocurrencies are nothing new in China. Back in August, a Chinese district strictly forbid for local businesses to host any events which promote or involve Cryptocurrencies. The harsh stance will most likely not change for the foreseeable future.

Initial Coin Offerings suffered a huge reputation blow this year and it’s more likely that this form of fundraising will keep decreasing. Security Token Offerings on the other hand, are gaining speed and companies like Indiegogo are hosting Security Token Offerings. ICOs owe their current downfall to the huge influx of scams, failed projects, lack of funding and regulation.

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