The Outlook of ICO Regulations Worldwide
As 2018 picks up the pace, cryptocurrency enthusiasts begin to sigh in relief. Apart from the tedious wait in 2017 as prices plummeted, three other things pop up to mind as well: an unforgettable time with bitcoin stealing the show at $20,000; celebrities banging at the cryptocurrency door, and the ICO fiesta.
This article will not dwell on the first two for obvious reasons- one the mini-crash that followed made a lot of people upset about the overall crypto sphere, and two, well- Katy Perry got onto the bandwagon and spoiled the party with her crypto claws.
2017 and the ICO Fiesta
2017 saw a massive raise of $5.6 billion that was aiming to support approximately 211 ICO projects. However, we should remember that the ICO landscape was (still is to a large extent) unregulated, something that does not sit well with the authorities.
Why are regulations being sought?
During the scenario, many companies emerged with ICO consulting expertise and offered ICO Whitepaper services. To sum up the end result, there were many good ICOs with professionally-written whitepapers that reached their caps within no time and gained amazing traction. But, we also witnessed some very poor projects put up for an ICO backed up by nothing but a bundled-up plagiarised whitepaper and a hastily done website.
Over 85% of them are yet to roll out any program to show for the huge sums of money collected. The rate at which these fraudulent projects were coming raised red flags with the authorities.
By the end of the year, many governments around the world had indicated that they were looking into introducing regulations to rein in rogue behavior in the ICO industry. In this article, we’ll look at some of the countries that have taken a particular stance concerning Initial Coin Offerings.
ICO regulations worldwide – Country by country outlook
Cryptocurrency/ICO regulation was a huge debate in 2017 and so that you know, nothing has changed so far in 2018. Here is the list of the most vocal countries and what their authorities have planned for ICO regulations.
The U.S is one of the countries spearheading ICO regulations. However, no regulations have so far been rolled out by the SEC. On February 6, 2018, SEC chairman, Jay Clayton, emphasized that all ICO token were securities and therefore should be subject to the law. He said that there would be stricter regulations to all ICOs while at the same time; true cryptocurrencies would be cushioned with smart policies.
ICOs in Germany have to adhere to the following Acts within German law: banking, payment services, and the securities and trading Act. The country has indicated a willingness to follow guidelines from the European Securities Market Authority. Under the law, ICO tokens qualify as securities and therefore need to be regulated
ICOs are still allowed in the EU but they must adhere to AML/KYC policies. The public has been warned that ICOs are risky and that they have to avoid participating in such activities. The EU’s SMA requires that all companies planning ICOs be registered and licensed. Future regulations will apply.
China has banned all ICO related activities last year in response to accusations that they were fraudulent and posed threats to the country’s economy. In February 2018, China indicated that it was looking into sanctioning cryptocurrency exchange websites.
Canada still allows ICOs in the country but has formed a regulatory sandbox for the FinTech industry. All ICOs are placed under the stipulated regulations.
This is one of the few ICO-friendly countries. The country has plans to initiate regulations that would protect genuine ICOs. Switzerland’s Financial Market Supervisory Authority will regulate all ICOs that fall under its jurisdiction.
South Korea has banned all ICO activity involving all domestic companies and startups. The Financial Services Commission (FSC) it had prohibited all forms of coin offerings and that even margin trading became illegal after that ban was implemented. The FSC stated that ICO funding was a violation of the country’s capital markets law.
Israel allows ICOs at the moment but has plans to introduce future regulations on the conduction of ICOs, including taxation of ICO tokens. The Israeli Securities Authority has commissioned a study to find the best way to regulate the industry.
Australia is one of the very first countries to have regulatory policies in place. The authorities have stated that ICOs must adhere to the Corporations Act and that they have to issue a disclosure document concerning the ICO. The country’s financial regulatory body has also drafted laws meant to introduce a sandbox for the benefit of fintech. Consultations are ongoing for future regulation of all ICO activities.
Japan does not have specific laws regulating ICOs but the country’s Financial Services Agency published a statement warning the public against ICOs. The statement said that coin offering are highly volatile and there was the risk of fraud. However, even though there are no specific regulations, ICOs can still be regulated if their token happens to fall under the Payment Services Act and the Financial Instruments and Exchange Act.
The Philippines Securities and Exchanges Commission has previously indicated that it would be drafting rules aimed at regulating cryptocurrency transactions. The regulations, which are still at the drafting stage, will require ICOs to register with the SEC as they are considered to be securities.
The country’s central bank issued guidelines on ICOs, stating how the ICO tokens were supposed to be applied under the securities laws. The Monetary Authority of Singapore (MAS) said that it would be examining the structure and characteristics of digital tokens to determine whether they fell under the Securities and Futures Act (SFA). The central bank has previously called for regulation of ICO activities.
To sum it up…
Initial coin offerings are the most popular way for cryptocurrency startups to raise funds for their projects. It is not illegal in many countries around the world. However, various reasons necessitate that some sort of regulation is put in place to protect the consumer. For instance, some ICO projects have been found to be nothing but Ponzi schemes intent on defrauding the public. Others are suspected of having links to criminal activities. It is such that require stringent regulations. The flipside is that genuine cryptocurrencies and ICOs may find themselves facing the same stifling regulations.
DISCLAIMER: Opinions expressed by Coinschedule Blog contributors are their own.