It seems China really wants to give cryptocurrencies a hard time. The country has always been strict against the blockchain and crypto industry, and now it’s taking that to another level. Beijing has just declared Security Token Offerings, or STOs, illegal.
Beijing Bans STOs
So for those who may be unfamiliar, an STO creates an investment offer by tokenizing stocks or bonds and putting them on a blockchain.
An ICO raises funds for a company by selling tokens to the public. However, an STO gives holders stocks or shares in the company, and the ability to share a company’s profits through dividends.
China is always one step ahead, and the Government is well aware of the ‘update’ to the common ICO. At a wealth management forum over the weekend, Huo Xuewen, chief of Beijing’s Municipal Bureau of Finance, said the following:
“The ICO model is getting left behind for a new concept called STO. I want to issue a warning to anyone considering running an STO in Beijing. Don’t do it in Beijing–it is illegal. You can only engage in such activities with the approval from the government.”
STOs have become the latest mania to replace ICOs. Blockchain startups, in particular, seem to be favoring them, so much so that STOs are projected to have a market cap of $10 trillion by 2020, according to Ernst & Young.
A Security Token Offering is considered less worrisome than an ICO. As it offers stocks and bonds, a token holder does have more rights than given in the ICO model. They may offer a solution to regulatory bodies because in order to start an STO, a business must complete the traditional registration process of an IPO.
Businesses are now clambering to find a cleaner way to generate capital from crowdfunding, considering the strict stance against ICOs across the globe.
What do you think about Security Token Offerings?
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