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

U.S. Treasury Secretary Steve Mnuchin 'Fine' With Launch of Facebook’s Libra

The secretary of the U.S. Treasury, Steve Mnuchin, has revealed he is “fine” with the launch of the Facebook-led cryptocurrency Libra, as long as the project follows strict financial rules.

According to a report published by Bloomberg, Mnuchin revealed his thoughts on the Libra cryptocurrency while speaking in a Washington, D.C. hearing of the House Financial Services Committee, responding to a question from a lawmaker. He was quoted as saying:

I’m fine if Facebook wants to create a digital currency, but they need to be fully compliant. In no way can this be used for terrorist financing.

Since Libra was announced back in June of this year, Mnuchin revealed he has met with Facebook various times to discuss regulatory concerns, something that slowed the cryptocurrency’s pace towards its launch, expected in 2020.

The cryptocurrency is set to be governed by the Libra Association, and is reportedly going to be backed by fiat currencies and short-term U.S. Treasury bonds. Its backing in terms of fiat is set to consist of the European euro (18%), the Japanese yen (14%), the British pound (11%) and the Singaporean dollar (7%).

During the hearing, Mnuchin also addressed the U.S. potentially developing its own digital currency, and noted that both he and Federal Reserve Chairman Jerome Powell don’t see a need for it in the near future. Mnuchin stated:

Powell and I have discussed this – we both agree that in the near future, in the next five years, we see no need for the Fed to issue a digital currency.

The European central bank, according to a report, may launch its own digital currency if cash usage drops and is the private sector fails to create an efficient solution for cross-border payments, which the financial institution deemed too expensive.

Featured image via Unsplash.