Top Chinese Regulator Says STOs Are ‘Illegal Financial Activity’

Asia China Regulations Security Tokens
China Central Bank Deputy Governor Pan Gongsheng said that “illegal” financing activities through STOs and ICOs were still rampant in China despite the ongoing nationwide crackdown on the country’s cryptocurrency market that began last year.

China’s Central Bank, the People’s Bank of China, officially banned security token offering (STO) businesses last week (Dec 7), in keeping with the country’s increasingly unfriendly stance on crypto asset companies.

The South China Morning Post on December 9 reported that People’s Bank of China Deputy Governor Pan Gongsheng told an internet finance forum in Beijing that “illegal” financing activities through STOs and ICOs were still rampant in China despite the ongoing nationwide crackdown on the country’s cryptocurrency market that began last year.

“The STO business that has surfaced recently is still essentially an illegal financial activity in China,” he told the forum, according to state-owned China Central Television.

“Virtual money has become an accomplice to all kinds of illegal and criminal activities,” said Pan Gongsheng, the SCMP reports.

This is the first time a top financial official has publicly announced a ban on STOs, despite the crackdown on similarly structured ICOs and other crypto-related activities which began last year.

In his address, Pan 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.

The crackdown on ICOs commenced in September last year, with officials ordering all platforms to halt issuing digital currencies immediately.

This move came as a shock to the international crypt market because at the time, 80 per cent of the world’s cryptocurrency transactions and ICO financing took place in mainland China.

China is also a major hub for cryptocurrency mining operations, which received less scrutiny under the crackdown, and in large part continued to operate.

Pan Gongsheng added that if the government had not initiated the crackdown to stem illegal behaviour arising from digital currency transactions in 2017, evolving and largely unregulated cryptocurrency market could have hurt the country’s overall financial industry.

According to the SCMP report, Huo Xuewen, chief of financial watchdog Beijing Bureau of Financial Work, also issued a warning against STOs at another forum a week ago.

“I want to warn those who are promoting STO fundraising in Beijing. Don’t do it in Beijing. You will be kicked out if you do it,” he said.

Analysts have suggested that the continued crackdown on private ICO and STO projects is helping to pave the way for China’s Central Bank to introduce its own cryptocurrency – a goal it has explicitly stated it is working towards.

About the author

Mark Knowles

Mark Knowles

Coinlaw Multi-Jurisdiction Blockchain News
Mark Knowles is the Executive Editor of
With more than a decade of experience as a journalist and editor, Mark has now turned his focus to the blockchain and cryptocurrency revolution that is currently reshaping the global economy. As Executive Editor at Coinlaw Mark is working to create a website that is a hub for the international crypto community to find the latest legal news, legislative changes and expert opinion from across the industry. Contact him at [email protected] or through mobile on +66 (0) 98 705 2716.

Leave a Comment

Coinlaw Newsletter

Whether you are a law firm, founder gearing-up for a token offering, or a crypto currency trader, subscribe to the biggest crypto legal newsletter to be informed of the latest developments in each and every jurisdiction