We’ve covered a lot about ICO’s before, ICO stands for initial coin offering, and it is a means by which cryptocurrency start-ups and other blockchain based companies raise funds to aid the development of their products. It is similar to an IPO, and we’ve elaborately discussed the differences in the article here.
The most important reason for the popularity of the ICO’s is the lack of regulations. Most governments around the world did not pay much attention when the ICO’s first boomed, and it became a big thing in no time, for the matter of fact, 2017 year raised a substantial $2 billion in ICO funding. Due to the lack of any such regulation, a lot of issues have sprung up, some of them related to fraud and other associated with the national security. China and South Korea have already imposed bans on ICO as it was possible for the scammers to use coin offerings to defraud investors. Although ICO’s were praised as an innovative way to raise funds, most fraudsters see ICOs as hotbeds for fraudulent activities, and a lot of founders have disappeared after raising the ICO funds.
The US SEC also issues a public alert that companies could be driving the pump-and-dump schemes in the fluctuating market. Governments are also hugely concerned about the possibility for money laundering that is made possible across the world, and a few governments have also expressed their concerns that some of the funds raised in an ICO might be used to fund terrorist activities.
Currently India has no regulations on ICOs, however, in February’17 the RBI has released a statement on the risks of trading in cryptocurrencies and also noted that they’ve issued no license to any company to deal with Bitcoins or any virtual currencies.
November 13th, 2017 was a turning point in the history of European Union when it came to the ICO regulations, the Securities Market Authorities adopted a stricter position on the ICO’s and declared that ICO’s could represent a considerable risk to investors. It then required firms dealing with ICOs to be able to meet all statutory regulations and requirements which resulted in ICO regulations of 2018 to be a lot different from the past.
ICOs are heavily regulated in the US, and the regulations vary with the state. ICOs are required to register and obtain a license. They are also expected to be registered with the Securities and Exchange Commission if the token is to trade securities. The SEC has also suggested that some altcoins qualify as security and are therefore subject to a future ruling. All ICOs are required to be AML or KYC compliant, and if an ICO fails on the compliance, it can face legal action with the assets being seized. The US is yet to release an official statement on their stance of cryptocurrencies and ICO tokens as securities.
China is one of the few countries that has completely banned all ICO activities in the country; the company accounts that the ICOs were fraudulent ventures and questioned the legality of ICOs. At the time of the ban, the government also made it clear that all Bitcoin exchanges need to shut down with immediate force. There is, however, a talk among the industry observers that China might revoke the ban and instead initiate regulations on ICOs and cryptocurrencies.
The Chinese ICO projects that hand completed their coin offering cycle were instructed to refund all the altcoins received in exchange. The People’s bank of Chine stated that any company or individual violating the law would be investigated. It was also reported in the Chinese media that China had plans to ban all trading related to crypto in the country and that the authorities want to block all sites related to cryptocurrency and ICOs.
As of now, ICOs are unregulated in Singapore, but this is soon expected to change. In November’17 the Monetary Authority of Singapore issued guidelines regarding cryptocurrencies and ICOs. The current guidelines indicate that the existing securities laws could apply to the altcoins and ICOs. The guidelines also state that an altcoin or ICO that is a “capital market product” as applied to the Securities and Futures act could be possibly regulated.
The United Kingdom has also allowed ICOs to go on mostly unregulated. However, the UK’s Financial Conduct Authority has issued a warning to investors about the risks of investing in ICOs. The FCA has also stated that ICO projects are experimental and thus pose a threat to the investors. The UK allows ICO developers to interpret and relate to the established regulations and laws as they deem to apply to their projects. The UK also has a regulatory sandbox and is a part of the ICO regulation testing.
Switzerland is perhaps one of the most crypto friendly countries, and the company has plans to put in regulations that would protect genuine ICOs from some of the stringent regulations being imposed that have the potential to threaten the market. The Financial Market Supervisory authority recently released a statement which establishes the plans to scrutinize all ICOs within the country.
ICOs are allowed in Russia, but there are careful considerations to have a proper regulatory framework in the future. Russian authorities confirmed that the ICOs in the country are being monitored and Kremlin released a statement in October’17 requiring all altcoin miners to be registered and for their taxation to be examined. It is also said that the securities laws might apply to ICOs.
ICOs are subject to regulations that are under formulation and are allowed for now. The Israeli Securities Authority also announced that a panel is in place to study how ICOs operate in the country. It is likely that ISA will take a cue from the US Security and Exchange Commission to give guidelines on the general way in which ICOs are conducted in the country. It is also planned that the ICO tokens be taxed.
The Japanese FSA is working on the regulations, and the pace has been picked up after the recent hack of the CoinCheck exchange. There are plans to have measures that will strengthen the KYC requirements. Fears are that Japan might crackdown on altcoins, and the ICOs in the future and in October’17 authorities indicated that ICOs could fall under the Payment Services act.
ICOs are allowed in Canada, but the Securities Administration has suggested that ICOs and altcoins constitute securities meaning that ICOs and altcoins are subject to regulations in the country which would be done on a case-by-case approach. The authorities have also designed a regulatory sandbox that is aimed at putting in place the rules for fin-tech industry and projects within it which do not meet the regulatory policies.