An STO is an initial coin offering backed by tangibles such as assets, or profit or revenue of a company
Pan Gongsheng, a deputy governor of the People’s Bank of China, said that digital currencies are “an accomplice to all kinds of illegal and criminal activities”. Thus China officially banned security token offering (STO) businesses, in another blow to digital currencies in mainland China.
An STO is an initial coin offering (ICO) backed by tangibles such as assets, or profit or revenue of a company. An ICO is fundraising activity that allows digital currency start-ups to raise funds through the creation and sale of digital “tokens”.
Beijing launched a crackdown on ICOs in September last year
According to state-owned China Central Television, Pan said: “The STO business that has surfaced recently is still essentially an illegal financial activity in China. Virtual money has become an accomplice to all kinds of illegal and criminal activities”.
Pan added that most of the financing operations conducted through ICOs in China were suspected of being illegal fundraising, pyramid sales schemes and other financial fraud. Huo Xuewen, chief of financial watchdog Beijing Bureau of Financial Work, said: “I want to warn those who are promoting STO fundraising in Beijing. Don’t do it in Beijing. You will be kicked out if you do it”.
In 2017, a chaotic cryptocurrency market could have hurt the country’s overall financial industry
“The regulators will continue to strengthen regulation in the financial technology market to ensure financial stability,” said Cao Hua, a partner with private equity group United Asset Management. “New business models in the financial technology sector are not welcome in China now.”
China’s decision to ban the first coin offerings was made, in particular, for concern over the country’s financial and social stability.
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