What is the state of the global ICO regulation?
ICOs and cryptocurrencies are quite new assets to many people. Unlike the financial sector which grew with already established laws, cryptocurrency and ICO’s have grown first, leaving regulators to grapple with what to do about them.
Because of the volatility of cryptocurrency and the deepening understanding of blockchain technology by governments and regulatory bodies, the ICO regulations, in particular, keep changing by the month. It is possible to find a government stating its position about ICOs and cryptos today only to make a complete U-turn after a few weeks. The ICOs rated and reviewed here have been subjected to different regulations because countries are yet to come up with a uniform framework on how to deal with them.
The ICO regulations in different parts of the world
On March 7th, 2018, the Securities Exchange Commission (SEC) issued a warning to cryptocurrency exchanges which facilitate transactions of unregistered securities. SEC explicitly state that exchanges are supposed to be responsible for all activities that they facilitate. Such responsibility should include the exchange of digital coins that originate through an ICO process.
In March, the SEC issued many subpoenas to ICO issuers and also to ICO gatekeepers who might have been involved in token transactions that potentially didn’t comply with the law. This move caught many by surprise. According to the federal laws, ICO’s are securities and they must be issued in compliance with the written law. This means that if you have issued an ICO, ensure that you fix your house especially if you have issued tokens to unaccredited investors. In the past few weeks, SEC has also cautioned celebrities against endorsing cryptos without disclosing their agreement with the ICO issuer.
Towards the end of January 2018, there were some reports that the Chinese government would remove the already in place ICO ban. In February, however, China said that it was going to totally ban cryptocurrency trading in the country. This would be done by blocking all websites which were related to ICOs and cryptocurrency trading. Even foreign websites will be blocked. It is worth noting that China in the past, very effectively, blocked Facebook and Google websites in the republic. This means that when the government finally makes good its threat, cryptocurrency and ICOs might be a thing of the past in the country.
In January, South Korea was considering banning cryptocurrency because of tax evasion relate. However, towards the end of January, there were some reports from the government that a total ban might not be issued after all. The government was looking at the possibility of finally regulating ICOs and cryptocurrency in the country. The government’s change of tone might have been because the largest crypto exchanges in the country came together in January to form guidelines on self-regulation.
On March 22rd 2018, the government announced that it would be launching a task force aimed at cryptocurrency and ICOs. The government wants to create a formal government organization which will be responsible for assessing the risks and potential benefits of digital currencies. The task force will also explore the potential to leverage blockchain technology to help financial firms in meeting regulatory requirements. The statement came out as a cautious but positive move of the government towards cryptocurrency.
After reports came out on January 28th that Coincheck had been hacked and more than $500 million went missing, there was fear that more regulations targeting cryptos would be introduced. The Japanese finance ministry officials said that investigations and on-site inspections of the exchanges in the country would be done. ICO issuers, crypto exchanges, and investors are waiting with bated breath for the regulations which the government is likely to introduce.
On March 6th, 2018, the Brazilian National Bank for Economic and Social Development (BNDES) announced its intentions to tokenize its national currency. It plans to use the Ethereum blockchain as a base. According to Suzana Maranhao, one of the leaders on the BNDES project, Brazilians will be able to see companies involved in transactions. They will also be able to know what type of transactions are being carried out. Critical information won’t be stored in a database within BNDES but will be stored in the blockchain. Canada has a similar project.