PBC Deputy Governor Says Security Token Offerings (STOs) Are Illegal in China

Pan Gongsheng, a deputy governor of the People’s Bank of China (PBC), the country's central bank, and the director of the State Administration of Foreign Exchange, has reportedly said that the Security Token Offering (STO) business is "still essentially an illegal financial activity in China."

His comments, apparently, were made on December 8th, at the second China Internet Finance Forum, and were reported by Chinese media outlet JQK News; they were confirmed the next day in an article in South China Morning Post (SCMP), which sourced the comments from a report on the state-owned China Central Television.

Gongsheng said that before China started the process of cleaning up the crypto market in [September] 2017, "more than 80% of the worlds virtual currency transactions and ICO financing took place in China," and that after this cleanup process started, some trading platforms had been transferred overseas, but were still providing their services to Chinese residents. 

The PBC deputy governor also said that "most of the financing operations conducted through ICOs in China were suspected of being illegal fundraising, pyramid sales schemes and other financial fraud."

With regard to STOs, he was quoted as saying: "The STO business that has surfaced recently is still essentially an illegal financial activity in China." He went on to say that cryptocurrency had become "an accomplice to all kinds of illegal and criminal activities."

Gongsheng's declaration on the illegal nature of STOs came one week after a similar warning from Huo Xuewen, the director of the Beijing Municipal Bureau of Local Financial Supervision. On 1 December 2018, Xuewen said at the 2018 Global Wealth Management Forum that he was warning those who were thinking of issuing STOs not to do it because they were illegal, at least in Beijing.

Despite the Chinese government's negative stance towards cryptoassets and the illegal activities surrounding them, it is much more enthusiastic about certain other uses of blockchain technology. For example, on 7 September 2018, the Supreme People's Court (SPC) issued a statement that said evidence authenticated via blockchain was binding in legal disputes at internet courts:

"Internet courts shall recognize digital data that are submitted as evidence if relevant parties collected and stored these data via blockchain with digital signatures, reliable timestamps and hash value verification or via a digital deposition platform, and can prove the authenticity of such technology used."


Featured Image Credit: Photo Courtesy of People's Bank of China