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Chinese Regulator Considers STO Illegal Activity

12:38 11/12/2018

Pan Gongsheng, the deputy chief of the People's Bank, claimed that security token offerings (STO) are considered illicit in China. The regulator representative reaffirmed the authorities’ negative stance on digital assets and equated cryptocurrency to crime, according to South China Morning Post.


Speaking at a forum in Beijing, Gongsheng stated that the country still witnesses "illegal financial activity" by means of STOs and ICOs, despite the clean-ups in the industry last year. He said that if the authorities did not intervene, the crypto market would harm China's financial stability.

Gongsheng stressed that the recent STO business goes against the local laws, and cryptocurrency is already an accomplice to all types of crime. The official alleges that most token sales, which took place in China, could be illegally raising funds, perform ponzi schemes or other illicit operations. It is known that initial coin offerings are prohibited across the state since September 2017.


The concept of security token offering reminds ICO, but with the difference that investors acquire assets (securities analogs) to receive dividends, voting rights or other privileges tethered to security-tokens. Meanwhile, during ICO investors are looking to capitalize on future price surges of a new token.

Previously, the Central bank of China called AirDrops of tokens “disguised” ICOs, and was about to prohibit the free distribution of coins. The regulator published a report saying that 65 ICOs were conducted in China by the middle of 2017, but even after the ban, the number of so-called disguised ICOs continues to grow.


At the same time, a recent study revealed that China is the third country by the number of crypto traders.

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