The Chinese central bank, People’s Bank of China (PBoC) stated that STOs (Security Token Offerings) are illegal in their country, just as ICOs (Initial Coin Offerings) are.

An STO is actually an initial coin offering that is backed by something tangible such as a company’s assets or revenue or profit.

ICOs and STOs Rejected

Pan Gongsheng, one of the deputy governors of the central bank, stated at a summit in Beijing this weekend that “illegal financing” via STOs and ICOs were still prevalent in China despite a nationwide crackdown on the cryptocurrency market in 2017.

Gongsheng also stated that had the Chinese government not intervened when it did, the cryptocurrency market could have destabilized the overall financial stability of the country.

The deputy governor went on to say that even the new type of financing activity, called STOs were illegal in China. He reiterated the fact that cryptocurrencies were directly linked with crimes and criminal activities.

He also said that the official view of the Chinese government on cryptocurrencies is that they are tools being used to fund terrorism as well as other anti-social and criminal activities.

According to the news, Gongsheng is reported to have said that most of the ICOs fund raisers in China conducted in the recent past were suspected to have been illegal and were using pyramid sales schemes as well as other types of financial fraud.

Increased Policing in Crypto Space

Gongsheng is not the only Chinese official to have taken such a negative stance against STOs. According to news reports, last week, the Bureau of Financial Work’s head Huo Xuewen is reported to have warned people against investing in STOs.

Xuewen is reported to have stated that he was warning those who were using STOs to raise funds in Beijing would be “kicked out” if they continued to do so.

The government has increased policing the peer-to-peer lending space after dozens of such operations collapsed in 2018, either due to bankruptcy or financial fraud, thereby putting potentially billions of Yuan of investors’ money across the country at risk.

Blockchain Adoption Embraced

Interestingly enough, while cryptocurrencies and their related fund raisers have been rejected as dangerous and criminal, the technology behind them have been relatively embraced by the Chinese government.

In fact, a number of government agencies in the country have begun exploring options on how to integrate or apply Blockchain technology to improve their systems.

Recently, a Chinese internet court has started using Blockchain tech to protect online writers’ intellectual property rights.