Beijing Financial Watchdog Warns Against Illegal Activity Related To STOs

Kevin O'Brien

The head of the Beijing Financial Supervision Authority (FSA) has issued a warning to those getting involved with activity related to Security Token Offerings (STOs).

At the Global Wealth Management Forum on December 1, FSA chief Huo Xuewen said those promoting and issuing STOs should “only engage in such offerings when the government has legalized them,” according to reporting from TechNode. STOs, which are still in the early development stage, are a form of fundraising where people can share company profits through dividends. They are touted as a ‘safer’ option than initial coin offerings (ICOs).

Time To Shift Away From ICOs?

A small but steady chorus of people are asserting it is time for blockchain and crypto-related companies to shift towards STOs if they are interested in raising funds.

Some are more bullish on STOs since compliance measures like KYC and AML requirements can be made transparent through contracts. Others point towards the purported massive market opportunity for security tokens as evidence companies need to get on board.

Reporting from the South China Morning Post said

“The potential market for security tokens is enormous, with estimates for the broader transition of conventional financial assets to the blockchain valued at as much as US$24 trillion.”

China’s Crypto Crackdown

Authorities in the Asian nation have not been shy about establishing more control over the cryptocurrency industry. Internet regulators demanded the WeChat messaging platform close down twelve popular blockchain-related accounts in August. The nation’s Internet Finance Association currently regulates 124 crypto trading platforms, all of which have servers overseas.

In early November, CryptoGlobe covered reports that the People’s Bank Of China, the country's central bank, was going to investigate cryptocurrency firms who were giving out free tokens via airdrops. Allegations were these firms were airdropping tokens to residents in China and then trying to cash in on profits by selling token supplies via pump-and-dump schemes.

The Bank said they were going to keep a close eye on local markers and keep consumers safe by collaborating with other agencies.