Cryptocurrency and ICO news 30.07.2018
ICOs’ regulation in different countries
Initial Coin Offerings (ICOs) – the most common way cryptocurrency start-ups and other blockchain-based projects raise funds for development. It is similar to IPOs, but in ICOs investors get digital currency for their investments instead of shares.
Why have they become popular nowadays? Because this market has been being unregulated for a long time. No one payed much attention from the government side around the world. Thus, ICO wave in 2017 led to almost $2 billion raised in over 1500 ICOs.
So, it attracted thieves as well as any other unregulated industry. That is where governments decided to come in, as many people started suffering and losing their funds due to frauds, Ponzi schemes, market manipulations, money laundering and even terrorism funding.
Here we summed up what position different counties and alliances around the world have adopted regarding ICO regulation.
ICOs were allowed to provide AML and KYC procedures and adhere to mandatory business regulations/licensing policies.
On November 13, 2017, Securities Market Authorities declared ICOs as a considerable risk to investors. Thus, all the firms that dealt with ICOs were required to be able to meet all the statutory regulations.
ICOs have to adhere to regulations, including Banking Act, Securities Trading Act, Payment Services Act. Moreover, authorities issued a warning that ICO investments are risky.
Overall, all the projects in the country are subjects to the EU regulations as well.
Chinese government banned all ICO activity in the country. All concluded projects had to refund all the collected funds.
However, recent dynamics shows that most countries chose to regulate instead of total prohibition. Industry observers in China also expect government to change its mind.
Japanese authorities consider regulations and plans to strengthen AML/KYC requirements. Furthermore, the Japanese FSA indicated that ICOs might become a subject to Financial Instruments and Exchange Act in case if it gains features of investments.
ICOs are allowed and unregulated so far. However, in November 2017, the Monetary Authority of Singapore issued guidelines regarding cryptocurrencies and ICOs, which indicated the way current securities laws could apply to ICOs and altcoins.
ICOs are allowed in Canada but Securities Administration identified ICOs and the altcoins as a subject to regulation, which would be done case-by-case. The authorities created a “regulatory sandbox” where projects, which don’t meet national regulatory schemes, would face fintech industry regulations.
ICOs in USA allowed but they have to be registered, licensed, AML/KYC compliant. Security Exchange Commission pays special attention to those ICOs that operate with securities.
On the other hand, the US is yet to decide whether cryptocurrencies and ICO tokens are securities or not.
Switzerland is friendly to crypto industry. Still, the government has plans to implement regulations that would protect genuine ICOs from some of the toughest regulations in the market.
Recently, the Financial Market Supervisory Authority stated that they plan to scrutinize all the ICOs within the country in order to identify fraudulent projects.
ICOs are allowed but all of them are subjects to future regulations. Israeli Securities Authority to study ICOs’ operations in the country. Some people believe that ISA may impose general guidelines for ICOs while others expect to see planned tax laws on ICO tokens.
ICOs are allowed in Russia, but there are hearing in Duma ongoing concerning regulation of the crypto industry in the country. Recently, the Chairman of the Russian State Duma Committee on Financial Markets, Anatoly Aksakov, told local media that lawmakers are looking to pass the bill on cryptocurrencies during the autumn session of the Duma.
According to Aksakov, the document will not include separate taxation schemes for cryptocurrency owners, meaning that mining and circulation of cryptocurrencies will be regulated under existing provisions of the Russian Tax Code.
Aksakov specified that individuals engaged in the circulation of virtual currencies will pay personal income tax, while legal entities will have to pay taxes in accordance with their type of business.
What consequences for ICOs may be entailed by the regulations?
Most countries decided to regulate crypto industry instead of banning it or letting it develop itself. The obvious move is to start regulating this industry. But what kind of consequences of ICO regulation we may witness?
- First of all, regulations are likely to remove the decentralization and privacy aspect of crypto coins.
- Price volatility – regulations may lead to high volatility in prices, which is a strict way to higher risks for investors.
- The Asian market is vital so if the regional governments increase pressure on the crypto industry – crypto bubble may burst.
The crypto industry is very young and it is developing very fast. Thus, it is incredibly complicated to deal with it for governments that do not have an experience and trying to apply instruments from the traditional economy. Anyway, considering the amount of fraudulent projects the industry needs some kind of regulation and soon we will face it.