Get the facts: Is it legal to issue a token?

In recent years, with the continuous development of blockchain technology, issuing tokens has become a popular financing method. However, the issue of whether issuing tokens is illegal has always been a concern. In this article, we will briefly introduce this topic with you, hoping to be helpful to everyone. First, let’s be clear, issuing tokens is not illegal per se. Whether it is through ICO (Initial Coin Offering) or STO (Security Token Offering), issuing tokens is a legal act. However, if there is fraud, illegal financing, money laundering, etc. in the process of issuing tokens, then illegal issues will be involved. Therefore, during the process of issuing tokens, it is necessary to comply with relevant laws and regulations to ensure compliant operations.

Is it illegal to issue tokens?

According to the latest regulations, token issuance financing refers to illegal public financing without approval, in which financing entities raise virtual currencies through illegal sales of tokens.

"Announcement on Preventing Token Issuance Financing Risks"

1. Accurately understand the essential attributes of token issuance financing activities

Token issuance financing refers to the financing entities through which The illegal sale and circulation of tokens and the raising of so-called "virtual currencies" such as Bitcoin and Ethereum from investors are essentially an act of illegal public financing without approval, and are suspected of illegal sales of tokens, illegal issuance of securities and Illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities. Relevant departments will closely monitor relevant developments, strengthen work coordination with judicial departments and local governments, strictly enforce the law in accordance with the current working mechanism, and resolutely control market chaos. If suspected criminal issues are discovered, they will be transferred to judicial authorities.

Tokens or "virtual currencies" used in token issuance financing are not issued by monetary authorities, do not have monetary attributes such as legal solvency and legal enforceability, nor do they have the same legal status as currency, and cannot be The market is used as currency circulation.

2. No organization or individual may illegally engage in token issuance financing activities

According to the announcement, all token issuance financing activities are now required to stop immediately, and organizations that have completed token issuance financing are required Make refund and other arrangements with individuals to protect the rights and interests of investors and properly handle risks. For those who refuse to stop token issuance and financing activities and illegal activities, relevant departments will seriously investigate and deal with them in accordance with the law.

What will happen if we issue tokens domestically?

The issuance of virtual currency may involve non-profit and fund-raising fraud, as well as the risk of pyramid scheme crimes. According to Article 13 of the Judicial Interpretation of Illegal Fund-raising, if you illegally absorb funds through pyramid schemes, it constitutes both a non-abduction crime and the crime of organizing and leading pyramid schemes, and you will be severely punished. Therefore, issuing virtual currencies requires careful consideration of legal risks.

Article 224-1 of the Criminal Law stipulates the crime of organizing and leading pyramid schemes. This crime has two levels of punishment. Generally, the person shall be sentenced to fixed-term imprisonment of less than 5 years, and in serious cases, he shall be sentenced to fixed-term imprisonment of more than 5 years. According to the judicial interpretation of MLM, if there are more than 30 people participating in MLM activities within the organization and the level is above level 3, the organizers and leaders will be held criminally responsible. If there are more than 120 people and more than 2.5 million yuan in total, the situation is serious.

MLM activities can be divided into two categories: 1. Original MLM, which uses the number of goods sold as the basis for remuneration or rebates; 2. Fraudulent MLM, which uses the number of people developed as the basis for remuneration or rebates. The second type of pyramid selling is the activity that is cracked down on by criminal law.

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