China crypto risk warning: Dilemma for STOs?

March 28, 2019, | AtoZ MarketsChinese authorities have released a new risk warning for the investors to reaffirm their position against STOs. The government has specifically addressed such activities which are not really based on blockchain technology, but most of the companies take the opportunity to speculate on the concept of the blockchain, which seriously disrupts the normal financial and economic conditions and brings social risks.

China Crypto Risk Warning

On 4 September 2017, the People’s Bank of China and other seven ministries jointly issued a warning to prevent the risk of subsidy issuance financing, which told that financing of issuance of the token refers as an illegal sale. Moreover, circulation of the financing entity through the token is an unauthorized illegal public financing, suspected of illegally selling tokens.

Again, in August 2018, the governing bodies issued risk tips on preventing illegal fundraising in the name of digital currency and blockchain. In there, they remind all the financial institutions and users in Beijing that all financial business and activities need to be included in the scope of national supervision.

Chief of the MBF, Huo Xuewen, said just last month:

“The ICO (initial coin offering) model is getting left behind for a new concept called STO. I want to issue a warning to anyone considering running an STO in Beijing…Don’t do it in Beijing – it is illegal. You can only engage in such activities with the approval from the government.”

China also believes that the Security Token Offering (STO) is a solicited illegal financial activity and the groups which were involved in such activities will be severely penalized.

Word of caution

To create a positive and healthy financial environment and protect the legitimate rights and interests of financial consumers, the association once again reminded the risks. Here are the three warnings that the governing bodies came out with:

  1. To inspect all relevant institutions and individuals in Beijing to abide by national laws and jointly resist and prevent the use of virtual currency, the blockchain, stable currency, STO, and ICO. Illegal fund-raising activities and communication activities.
  2. Second, be wary of criminals to issue tokens in the name of IFO, IEO, etc., or use the banner of shared economy, pass-through economy, crowdfunding, consensus economy to conduct virtual currency in IMO mode.
  3. Investors should treat the blockchain rationally and do not fall in any kind of trap or hype.


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