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Seen as Illegal Financial Activities, STOs Will be Cracked Down in Beijing

Beijing’s financial regulator issued a fresh risk alert against Security Token Offerings(STO) on December 1, warning that STO-related activities will be ‘expelled’ from China’s capital city, according to local news media. The move signals that Chinese government is escalating crackdown on all digital token based fundraising activities.

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Huo Xuewen, head of the Beijing Financial Supervision Authority, said at 2018 Global Wealth Management Forum that the government would clamp down on STOs which are seen as illegal financial activities until they had got approval from relevant government agencies.

“ The option of Initial Coin offering(ICO) has recently been discarded, but the new concept of STO is gaining momentum,”Huo said. “ I will issue a warning to STO issuers and promoters that don’t  conduct STO-related activities in the city, or the government will crack down on or expel them. My advice is to only engage in such activities when the government has authorized them.”

It remains unclear the decision of Beijing’s financial authority will lead to a nationwide crackdown on STOs.

STOs are believed to overtake ICOs in the crypto space in the near future as the latter are considered as a potentially fraudulent way to scam investors. A security token is a kind of digital currency that is backed by real assets such as shares, bonds or real estate, and subject to regulations that govern securities. NASDAQ predicts that 2019 will belong to STOs as they’ll attract significant amounts of Wall Street money.

Commenting on the city’s stern stance against STOs, Zhu Youping, an officer of the state-run China economic information network and a blockchain expert, said the STO in China would be portrayed as the variant of ICO, and is illegal too.

“STOs that are launched in an international market but take money from Chinese investors are also against the Chinese law; however, STO-related training and academic activities will not suffer.” Zhu said.

China has first introduced a blanket ban on ICOs in September 2017, and frequently reminds investors of the risks associated with ICOs and crypto trading. China’s tech giants—Baidu, Alibaba and Tencent—have tightened their monitoring and sought to ban accounts related to cryptocurrency-related activities. Now the emerging STOs has become the latest target of Chinese financial watchdog although some countries like Singapore and Malta have given green light to the issuance of security tokens.

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