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

Bitcoin Price Surges Above $9,300 for First Time Since June 25

On Monday (July 6), the Bitcoin price managed to surge past the $9,300 level for the first since June 25, a move that was likely powered by the current bullish in the stock markets of China and the United States.

Today's strong rally in the world's major stock markets started was led by China, where the Chinese government is apparently encouraging investors to buy stocks.

According to a report by CNBC, "a front page editorial in state-owned China Securities Journal" (publishe-d earlier today) talked about the “wealth effect of the capital markets” and suggested that a “healthy bull market" was important for the economy at this time.

Peter Boockvar, chief investment strategist at Bleakley Advisory Group, says:

"We have the Fed to juice bull markets, China has its state media."

The CSI 300, which is "a capitalization-weighted stock market index designed to replicate the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange", closed over 250 points higher at 4,670.09, up 5.67%. 

CSI 300 Chart by Google Finance on 6 July 2020.png

As you can see in the above chart from Google Finance, in the past five trading session, the CSI 300 index has gained over 13%, the most in a five-day period since December 2014, and helping the CSI 300 to reach a level last seen in June 2015.

CNBC says that although "China’s economy faces many hurdles, including trade issues with the U.S. and the growing friction as the economies move to decouple",  in the near term, "the prospect of an improving China spilled over to other markets, boosting sentiment for global trade."

Europe's major stock markets followed China's and all closed higher.

As for the U.S. stock market, premarket trading data indicated that the market would be having a good day, and it has not been wrong so far.

Currently (as of 18:37 UTC on July 6), the Dow Jones Industrial Average (DJIA), the S&P 500, and the Nasdaq are at 26196.15 (up 368.79 or 1.43%), 3172.03 (up 42.02 or 1.34%), and 10404.81 (up 197.18 or .93%) respectively. The leading sector was (as usual) technology, with Amazon and Netflix setting new all-time highs, helping the tech-heavy Nasdaq to power itself to a new all-time high.

This is what President Trump tweeted around 10 minutes after the U.S. stock market opened:

Today's stock market rally in the U.S. means that the S&P 500 and the Nasdaq are both on a five-day winning streak. 

So, what's fuelling investors' perhaps surprising amount of bullishness on stocks in the midst of the COVID-19 pandemic? This might be especially mystifying in the case of the U.S., where we are seeing around 50,000 new daily cases of COVID-19 (even though, thankfully, the number of death are going down).

It seems that investors and traders believe that:

  • As lockdown measures are eased, the outlook for businesses should keep improving.
  • There are encouraging signs from the pharmaceutical industry that we will soon have good therapeutics in the next few months and reliable vaccines by next year.
  • Governments around the world will continue to support the financial markets with monetary and fiscal stimulus.

Andrew Brenner of National Alliance told CNBC:

"I’m starting to believe the Covid case are an inverse indicator. The worse it gets, the more the market does better because it means more Fed and fiscal stimulus will come towards the markets."

The optimism that is fuelling the stock market rally appears to be also helping Bitcoin since today Bitcoin shake off the lethary of the long Independence Day weekend -- which saw Bitcoin dropping below $9,000 at 21:15 UTC on Sunday (July 5) and bounce back above $9,300 for the first time in 11 days:

2 Week BTC-USD chart on 6 July 2020.png

Featured Image by "WorldSpectrum" via Pixabay.comSave