February 16, 2017 -- ADVFN Crypto NewsWire -- With Blockchain
came Bitcoin, which spawned Ethereum, this led to a few other
major coins either forking off or being born a new in the
crypto space. As this ecosystem has grown, however, there has been
a boom in more cryptocurrencies being created; the ICO boom.
As more and more companies participate in ICO’s as a
fundraising tool and draw in even more interest from
individuals and investors, governments and regulators
have started taking notice. The issue is, these hitherto
unregulated investment opportunities are basically created with no
safeguards for investors. They are mostly set out as promises in a
white paper to solve a particular issue with the power of
Blockchain. However, holding them to those promises has not always
worked.
For regulators and governments, these investment opportunities
often have the hallmarks of dangerous scams and are
predominantly looked upon with suspicion. This has led to a
need for regulation and safeguards for individuals
investing in them. The regulation of these ICOs has come
predominantly from governments across the globe, but they haven't
followed anyone precedent, in fact, the divided opinion between
nations on the entire cryptocurrency space has seen a divided
approach being taken to regulate them.
Because ICOs are still a new phenomenon for many regulators, the
laws and rules about how to govern and regulate them are still
being formulated and rolled out. In fact, some governments
have only just recently made any public statement or warning on
them. Some countries have been proactive and set out their decision
on ICOs - either in a positive light or in a negative one. While
there are also those that are still building their regulations as
they continue to learn more about the technology behind it, and
what ICOs actually mean for their citizens.
Ready and regulated
Some countries have quickly caught up with ICOs and made their
decisions on how they will operate in state border. There are those
who have either flat-out banned them, and there are those who have
set out specific rules and laws for them to comply with.
China
One of the most high profile regulations, and this time in a
negative manner, of ICOs was the way in which China dealt with
these fundraising methods. The Chinese government proclaimed
a blanket ban on ICOs last year, which played its part in
dipping the price of Bitcoin and other cryptocurrencies.
The ban was implemented by the People’s Bank of China and
was aimed at all businesses and individuals. It was as extreme
as all those who had finished their funding cycles were ordered to
repay the funds.
South Korea
While there were rumors about a cryptocurrency ban in another
major Asian hub of cryptocurrency, the South Koreans
have officially banned ICOs. The South Korean Financial
Services Commission explained their decision by saying they were
aiming to protect investors from the growing risk of scams and ICO
frauds.
Russia
Russia is another country that has taken a hard-line approach to
both cryptocurrencies and ICOs. In regards to their
regulation of the latter, it is still not finalized and complete,
but there has been a number of orders set out by the Kremlin.
These orders affect things like altcoins registration, taxation, as
well as the application of securities laws. But the
true regulatory laws are set for March this year.
Australia
As one of the first nations to institute true ICO
regulations, Australia made sure they were covered in keeping ICOs
inline and protecting their citizens. The Australian regulators
reacted at the end of September as their Australian Securities
and Investment Commission laid out the rules.
The approach of the Australians is to set out clear
guidelines for how to operate within Australia’s regulatory
framework while encouraging innovation and the development of new
financial business models. Ultimately, it is a positive framework
for ICOs, but holds them inline with the existing legislative
framework in order to protect citizens against and scams or
fraudulent ICOs.
Gibraltar
The small UK territory off the coast of Spain has become
one of the latest countries to draw up its own ICO regulation.
Gibraltar government, and its Financial Services Commission (GFSC),
are developing their draft law aiming to regulate the promotion,
sale and distribution of digital tokens. One of the key concepts of
this draft regulation will be a new idea that will see the
introduction of the concept of “authorized sponsors,” who are
supposed to be “responsible for ensuring compliance with disclosure
and financial crime rules.”
Abu Dhabi (UAE)
The Abu Dhabi emirate of UAE also announced its plans for
regulations of ICOs recently with the Financial Services
Regulatory Authority (FSRA) willing to cooperate with relevant
qualified institutions and individuals involved in the
cryptocurrency industry, according to an announcement. The Abu
Dhabi Global Market acknowledges the global demand for digital
currencies, stating that: “virtual currencies, although not legal
tender, are gaining interests globally as a medium of exchange for
goods and services.”
US
Because of the size of the US cryptocurrency market, and
the growth of ICOs in the country there has been a need
for rather swift and stern regulation from the government, and
especially the SEC. However, just like there are differing
approaches in different countries, each state also has different
ways in which to handle ICOs. The SEC, as a federal agency, does
however mostly hold the view that ICOs are to be considered
securities.
To this end, there is no ban or blanket block out, but ICOs are
expected to be registered and licensed with the SEC if they are to
sell these assumed securities. Recently, in a discussion at the
Senate, the SEC hinted at even further, and tougher, regulations
for ICOS. The Chairman of the SEC, Jay
Clayton, noted that every ICO token the SEC has seen so
far is considered a security.
Adjusting under current rules
Many nations have come forward and at least acknowledged that
ICOs are something that needs to be looked at by their regulatory
bodies. Moreover, some of them have moved to keep their policies in
line while figuring out their approach. Because ICOs are pretty
unprecedented in terms of being a fundraiser, a security, a way to
gain capital, governments have looked to rather shoe-horn them
into existing regulations and legislation.
Canada
Last year, in August, the Canadian Securities Administrators
(CSA) issued a statement that ICOs would be falling into
the legislation that governs securities, but it also called for a
categorization of such a token as a security first. Essentially, it
was a call for those looking to launch an ICO to run it past the
CSA before advancing, letting them take it on a case by case
basis.
“Any business that is planning to raise capital through an ICO
should consider whether it involves a security. Businesses should
also contact their local securities regulatory authority”, it
read.
Germany
Germany is another country that has not yet set out direct
regulation of ICOs, but they expect any new Coin Offering to adhere
to the existing legislation, including the Banking Act, Investment
Act, Securities Trading Act, Payment Services Supervision Act, and
Prospectus Acts. They have also gone as far as to issue a warning
however that there are risks in ICOs.
“Due to the lack of legal requirements and transparency rules,
consumers are left on their own when it comes to verifying the
identity, reputability, and credit standing of the token provider
and understanding and assessing the investment on offer. It can
also not be guaranteed that personal data will be protected in
accordance with German standards,” a statement read.
Singapore
Seen as quite a bastion of potential for ICOs and the
cryptocurrency space in general, there have been a number of ICOs
that have headed to its sure, especially considering the stance of
China and others in the Far East. Their approach has been giving
guidance at the moment, as they also develop their own stance. In
November last year, the Monetary Authority of Singapore offered
a guide on ICOs, which indicates how these coins should
be treated under current securities laws.
The most recent word on ICOs in the country is that they will
not be banned and that they do not feel there is any risk
concerns. The MAS has been closely studying these developments and
the potential risks they pose. “As of now, there is no strong case
to ban cryptocurrency trading here,” the deputy Prime Minister
said.
The European Union
Within the European Union, overall, there has been a focus
bringing ICOs in line with current legislation. The main process in
contending with them is to allow ICOs to operate within the union,
as long as they adhere to Anti-Money Laundering/Know Your
Customer (AML/KYC) policies. However, like many of the nations
in this category, The European Securities and Market Authority
declared that they represent a high risk for investors.
Issuing a warning
There are not many countries that have not redicated an
‘approach with caution’ response when quizzed about ICOs. It is
usually the first port of calls for regulators who admit
that they need to learn more about how ICOs function in their
countries.
It is understandable that they expect ICOs to operate within the
bounds of their current legislation, and if they do decide to
categorize them as securities, say, that they follow those
regulations. There are a few countries that have been predominantly
hands-off, really only offering a warning or advice as to how to
handle ICOS. This libertarian approach does mostly seem to be a
starting point before regulation comes in, in most instances.
Japan
Japan took one of the biggest steps in legitimizing Bitcoin when
it declared it a legal currency back in 2016. However, in
regards to ICOs Japan has not taken many major steps towards
controlling or regulating it. Japan has taken a wait-and-see
approach to the ICO market with their statement an investor
warning. The Financial Services Agency has also admitted that they
are looking to international trends on this regulation front to
follow.
Malaysia
In September last year, the Malaysian Securities Commission sent
out their own press release asking investors to take head
of their warning when looking into ICOs. The Malaysian regulator
also warned the investors “to be mindful of the
potential risks involved in ICO schemes.”
Taiwan
In Taiwan, Financial Supervisory Commission chairman Wellington
Koo in October issued a statement on ICOs, Blockchain and
Fintech, but instead of it being a warning, it was a positive
stance. Koo said that the Taiwan government intended to support the
development and adoption of ICOs, Blockchain technology and
Cryptocurrencies, and address them as lawful.
UK
The UK allows for the operation of ICOs, but expects them to
regulate themselves to the existing financial laws and regulations.
On top of that, there have also been some stern warning.
The Financial Conduct Authority warned that ICOs are
unregulated and potentially fraudulent, while investors may be
provided with “unbalanced, incomplete or misleading” documents by
the ICO issuer, the Financial Times reported.
Author: Darryn Pollock