What is a token offering? Is it illegal in China?

Token issuance is a popular model in the current rapidly developing digital currency market, including financing and asset management. Token issuance refers to the creation and issuance of new digital tokens or crypto-assets on a blockchain or distributed ledger technology (DLT) platform. These tokens can have various functions and uses, such as serving as digital currency, representing assets, realizing decentralized autonomy, etc. Having said all this, there are still many people who don’t understand what token issuance is? Simply put, it means digitizing assets for issuance and trading. The editor below will explain it in detail to help you fully understand token issuance in one article.

What is token issuance?

Token issuance is the first stage of a token sale, where a group of buyers become the first to reserve a portion of a project’s token supply. These tokens can represent a variety of different values ​​or interests, depending on the rules and purpose set by the issuer. The purpose is usually to support a project or platform, or as part of a specific economic system.

Issuers create new tokens through blockchain technology. Different blockchain platforms (such as Ethereum, Binance SmartChain, etc.) provide different token issuance mechanisms and standards. The issuer can define the name, total amount, symbol, distribution method (such as ICO, airdrop, etc.), smart contract rules (such as programmable nature, governance mechanism, etc.) and the purpose of the token (such as digital currency, representing physical objects) assets, participate in platform governance, etc.).

Once a token is created, the issuer can distribute the token to the target audience in different ways. This could be selling to investors, distributing directly to community members, rewarding participants, etc. Issuers usually need to manage and maintain the token ecosystem, including ensuring security, promoting applications, supervising the use of tokens, etc. For some tokens, it may also involve governance decisions by the community or holders. Once a token is issued and circulates in the market, its price and liquidity will be determined by market supply and demand and investor behavior.

Is token issuance illegal in China?

Token issuance is illegal in China. Token issuance financing activities are expressly prohibited in China and are considered an unapproved and illegal public financing activity. This position is supported by multiple official documents, including but not limited to:

In September 2017, the "Announcement on Preventing Financing Risks of Token Issuance" jointly issued by seven departments including the People's Bank of China clearly stated that token issuance Financing activities are essentially an act of illegal public financing without approval, and are suspected of illegal sales of tokens, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities.

In May 2021, the "Announcement on Preventing Speculation Risks of Virtual Currency Transactions" jointly issued by the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association further emphasized that virtual currency transaction contracts are not protected by law, and investment transactions cause The consequences and losses incurred shall be borne by the relevant parties themselves.

In September 2021, the "Notice on Further Preventing and Dealing with Speculation Risks in Virtual Currency Transactions" jointly issued by ten departments including the People's Bank of China and the Supreme People's Court once again clarified that the exchange business between legal currency and virtual currency, and the exchange between virtual currency The exchange business and other virtual currency-related business activities are suspected of illegal sales of tokens, unauthorized public issuance of securities, illegal futures business, illegal fund-raising and other illegal financial activities.

These documents together constitute China’s strict regulatory stance on token issuance and financing activities, which clearly prohibits any form of token issuance and financing activities, and emphasizes that any legal person, unincorporated organization and natural person investing in virtual currencies and related derivatives violates public order and good customs , the relevant civil legal actions are invalid, and the resulting losses shall be borne by the parties themselves.

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