Beijing’s director of Municipal Bureau of Finance Huo Xuewen has cautioned domestic crypto startups against launching security token offerings (STOs), Caijing.com reported December 1.
During last Saturday’s wealth management forum led by Beijing’s Finance Bureau, director Huo stressed that crowdfunding initiatives involving STOs are deemed “illegal” in the Chinese capital. As such, Huo “will issue a risk warning to those who promote and issue STO tokens in Beijing.”
As Huo stated:
“My advice is to only engage in such offerings when the government has legalized them.”
Akin to Initial Coin Offerings (ICOs), STOs are also fundraising projects that involve selling cryptocurrencies to the public. What sets it apart from ICOs is that the company’s generated profits are also shared with token holders according to the underlying asset.
Since September 2017, the Chinese government and regulators have been imposing a series of crackdowns on such crowdfunding initiatives, most notable of which include the previously implemented blanket ban by the People’s Bank of China (PBoC) against ICOs, prompting digital currency trading platforms to halt operations. In November, the PBoC has also declared a crackdown on airdrops, a method of distributing free digital assets.
In July, PBoC vice-president Pan Gongsheng has also disclosed plans of going after ICO startups that have previously migrated overseas but still provides services to local investors currently domiciled in China.
As Pan stated at the time:
“Any new financial product or phenomenon that is not authorized under the existing legal framework, we will crush them as soon as they dare to surface.”
Earlier in August, Chinese finance department Guangzhou Development District has also issued a notice prohibiting domestic businesses from hosting events that promote crypto-related projects.