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The head of Beijing’s Municipal Bureau of Finance, Huo Xuewen, warned all companies thinking about crowdfunding campaigns that security token offerings (STOs) are illegal in Beijing during the wealth management forum on December 2, 2018.

“Don’t do it in Beijing,” he said authoritatively, according to the local source, explaining that this is a risk warning directed at all who are in the city and are thinking about conducting an STO.

This may present a huge disappointment for startups which were possibly looking to become more regulatory compliant by conducting their offerings in the form of STOs. Since tokens sold as securities always and everywhere need to be registered with the country’s financial authority and regulator, it was maybe possible for STOs to provide compliance, even in the harsh and traditional Chinese market.

However, obviously, those thinking that way were terribly wrong as the Vice President of the People’s Bank of China (PBoC), Pan Gongsheng, shrugged off any possibility of that happening by saying that any new financial commodity that is not precisely approved under the existing regulatory wireframe will be considered as illegal.

“We will crush them as soon as they dare to surface”, he declared.

In September 2017, just as the world’s ICO market was getting ready to approach its climax, PBoC banned the new way of crowdfunding altogether. Furthermore, in August 2018, Beijing banned all cryptocurrency and blockchain promotional events, extending the ban to 124 cryptocurrency exchanges in the country somewhat later that month.

The Chinese government only kept their tight scrutiny when, in November 2018, they suspended all cryptocurrency mining operations in Xinjiang and Guizhou provinces for more than a few days, to perform tax and real-name registration inspections, making miners lose roughly $100,000 daily.

As the hype around ICOs fades, security token offerings are a hot topic for those looking to raise funds, tokenize assets, etc. STOs are thought to be more acceptable than ICOs, which avoid the government’s scrutiny by offering utility tokens, despite the fact that the tokens are later available for trading on cryptocurrency exchanges.

STOs, on the other hand, completely fall under various forms of Securities and Exchange Acts of most countries, which gives the government a good oversight of the token offering.

Along with the ongoing bear market came the possible downfall of ICOs as we know them.

The ICO fundraisers are scoring incomparably lower numbers in total than at the end of 2017. We can find many reasons for the bans issued by some countries, but also because in the noticeable distrust some of the scammy or abandoned projects have alarmed investors.

Looking at the perspective of the crypto-related and blockchain development business, it would be logical that wild ICO campaigns get substituted by much more tamed STOs. Still, some countries, like China, are going to resist the fintech advancement as long as they can as it is now evident that no matter which forms token offerings take, they will not allow the financial innovation to take root in their courtyard.

The statement made by Beijing’s chief of Municipal Bureau of Finance can be interpreted that he and his municipal government may not fully understand STOs.

In his statement, he explains how ICOs have gone out of fashion and that “a new concept called STO has been advertised.” STOs are indeed a new concept but are very different than ICOs in terms of economic and legal structure.

STOs are not here to replace ICOs but to help the tokenization of every traditional asset known, from traditional public equities to private investments and art.