China Deems ICOs & STOs as Illegal

By Prashant Jha

In the breaking news coming from China, the government agencies have deemed the modern-day fundraising methodologies of ICOs and STOs as solicited illegal financial activities, and anyone found involved with these will be severely punished as of March 21, 2019.

China’s strong stance against the crypto use and various financial activities associated with it have been a growing concern among the crypto community in the country. In a recent notice from the Beijing Finance industry which majorly focused on “illegal activities” that may arise “in the name of the virtual currencies, ICOs, STOs, stable currencies.”

The notice was released on March 21st, however, it did not mention the time frame in which it would come into effect. Whether the names of companies mentioned in the notice would have to seize their operations immediately or the government would provide adequate time, it has to be seen.

The notice was especially aimed at online social media platforms which indulged in such activities and exploit these particular crypto niches with the aim of issuing money for money.

Here is an extract from the published notice,

“The value of trading speculation has been lucrative. Using the names of “research” and “forum” to promote “ICO” and “IEO” , “STO”, “stable currency”, “integral currency”, “digital currency”, etc., in order to carry out training, project promotion, financing transactions and other forms of online and offline activities. Such activities are not really based on blockchain technology but take the opportunity to speculate on the concept of the blockchain, which seriously disrupts the normal financial and economic order and brings social risks.”

The notice also voices the concerns of authorities and public banks like the People’s Bank of China, which considers the token sales in the form of initial Coin offering and Security Token offering as “illegal public financing.”

The notice further notes that any financial activity within the country must be under the supervision of government authorities and thus, something like Security Token offering falls under the illegal bracket.

“Here, we solemnly remind all relevant financial institutions and individuals in Beijing that all financial business and activities need to be included in the scope of national supervision. Take “STO” as an example, STO, Security Token Offering, which is a solicited illegal financial activity. Groups involved in such activities will be severely punished by eviction, closure of the website platform and mobile APP, and revocation of business licenses.”

The above extract is from the notice which specifically talks about the security token offerings. Whether all the ICOs and STOs are banned by the government or the approach would be specific, only time would tell. We have to wait and watch how government authorities aim to implement the law.