ICO – Page 4 – FinTech and Blockchain Law Watch

EU supervisor warns about risks of ICOs and calls for regulatory compliance

Nov 22 2017

Following the rapidly increasing use of Initial Coin Offerings (ICOs), the European Securities and Markets Authority (ESMA) issued two statements to warn investors on ICOs’ risks and to encourage companies involved in ICOs to comply with the relevant European legislation.

ESMA defines an ICO as “an innovative way of raising money from the public, using coins or tokens”. In an ICO, businesses issue tokens and sell them in exchange for traditional, or more often, virtual currencies like Bitcoin or Ether. The tokens are created and disseminated using distributed ledger or blockchain technology (DLT).

BaFin publishes a consumer warning for ICOs

Nov 16 2017

By Judith Rinearson and Rizwan Qayyum

Echoing thoughts from the FCA recently, Germany’s Federal Financial Supervisory Authority (BaFin) issued a formal warning to investors and consumers in general to steer clear of ICOs on the grounds that they constitute “highly speculative investments” that contain “substantial risks”

BaFin notes: “Investors should be aware that a total loss of their investment is possible”, whilst further it added that the huge public interest in the tokens “also attracts fraudsters.” This is very reminiscent of language from the FCA earlier this year.

Taiwan takes a stance on ICOs

Oct 16 2017

By Jim Bulling and Michelle Chasser

On 6 October 2017, Taiwan’s Financial Supervisory Commission chairman, Wellington Koo, attended a joint session of the Taiwanese parliament and cabinet in response to a request by legislator Jason Hsu to clarify Taiwan’s stance on cryptocurrency. During the session Koo pledged to adopt a friendlier stance to support the development of cryptocurrencies and blockchain and not follow neighbours China and South Korea who both recently banned initial coin offerings (ICOs).

This move appears to be well received by Hsu who stated “Just because China and South Korea are banning, doesn’t mean that Taiwan should follow suit – there is a huge opportunity for growth in the future. We should emulate Japan, where they treat cryptocurrency as a highly regulated, highly monitored industry like securities.”

Abu Dhabi Global Market sets out guidance on ICOs

Oct 16 2017

By Rizwan Qayyum

The Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) has released guidelines on ICOs and Virtual Currencies.

Much like other guidance, consumer protection is the key motivating factor behind this release. It notes that if an ICO has characteristics of a security, i.e. some associated right of ownership or value in the issuing company, then the FSRA will regulate. Christopher Kiew Smith, head of FinTech at the FSRA discusses the “incredibly diverse” market of quality of ICOs and thus some of the tokens issued will be of high-risk for consumers.

The FSRA appear to want to work with firms who aim to use ICOs in a “transparent fashion”. Under the issued guidelines, companies wishing to execute an ICO must approach the FSRA to learn whether it will fall under the body’s regulation. Companies will also be requested to publish a prospectus (which is assuming similar to a current white paper, but the extent of information required in this was not mentioned), and further, secondary market operators dealing with ICOs must also be approved by the FSRA.

There are, however, some ICOs that will remain unregulated. If a token issued as part of an ICO does not constitute an “offer of securities” it will remain unregulated. In such instances, the regulator said investors should exercise “extreme caution” before committing money.

The FSRA also commented on virtual currencies, noting that these are not legal tender, but seen as “commodities”; akin to precious metals. As such, these remain unregulated.

ICOs in Switzerland

Oct 12 2017

By Jonathan Lawrence

The Swiss Financial Market Supervisory Authority (FINMA) issued guidance on initial coin offerings (ICOs) on 29 September. FINMA has observed a marked increase in ICOs conducted in Switzerland. It has therefore published FINMA Guidance 04/2017 on this topic. FINMA has also indicated that it is investigating a number of ICO cases to determine whether Swiss regulatory provisions have been breached.

FINMA observes that the structuring of ICOs from technical, functional and business standpoints varies markedly from offering to offering. ICOs are currently not governed by specific regulations, either globally or in Switzerland. Swiss legislation on financial markets is principle-based; one such principle is technology neutrality. Collecting funds for one’s own account without a platform or issuing house is unregulated from a supervisory perspective in cases where repayment is not obliged, payment instruments have not been issued and no secondary market exists.

Gibraltar issues statement on initial coin offerings

Oct 03 2017

By Jonathan Lawrence

The Gibraltar Financial Services Commission (GFSC) issued a statement on initial coin offerings on 22 September. The GFSC has noticed the increasing use of tokens or coins based on Distributed Ledger Technology (DLT) as a means of raising finance, especially by early-stage start-ups. The sale of such tokens is often conducted using terms such as initial coin offering (ICO), token sale, initial token offering and the like.

A new regulatory framework for DLT will become operational in Gibraltar as from January 2018 and will regulate the activities of firms, operating in or from Gibraltar, that use DLT to store or transmit value belonging to others, such as virtual currency exchanges. Gibraltar is considering a complementary regulatory framework covering the promotion and sale of tokens, aligned with the DLT framework. In common with regulators around the world, the GFSC says that is continuing to monitor the use of unregulated tokens as a means of raising finance.

What you need to know about capital raising with ICOs (Business Bytes video)

Sep 28 2017

There is a lot of noise surrounding capital raising with Initial Coin Offerings (ICOs) and there are updates almost daily from regulators around the globe. For instance, the Australian Securities and Investments Commission (ASIC) released their views on ICOs today (see ‘ASIC releases its guidance on ICOs‘), while China has recently banned this new form of capital raising.

ASIC releases its guidance on ICOs

Sep 28 2017

By Jim Bulling and Felix Charlesworth

On 28 September 2017, the Australian Securities and Investments Commission (ASIC) released Information Sheet 225 which provides its view on initial coin offerings (ICOs) and their application in relation to the Corporations Act 2001 (Cth).

Initial Coin Offerings (ICOs) under German law

Sep 20 2017

By Hilger von Livonius and Philipp Riedl

The raising of funds for cryptocurrency projects (also called Initial Coin Offerings or ICOs) gain more and more market interest. Although there is no specific and coordinated regulatory framework applicable to ICOs, it is not something happening in a completely unregulated area.

Hong Kong Securities and Futures Commission statement on initial coin offerings

Sep 11 2017

By Jonathan Lawrence

The Hong Kong Securities and Futures Commission (SFC) issued a statement about initial coin offerings (ICOs) on 5 September. The SFC noted an increase in the use of ICOs to raise funds in Hong Kong and elsewhere. The SFC said that, depending on the facts and circumstances of an ICO, digital tokens that are offered or sold may be “securities” as defined in the Hong Kong Securities and Futures Ordinance (SFO), and therefore subject to the securities laws of Hong Kong. ICOs typically involve the issuance of digital tokens, created and disseminated using distributed ledger or blockchain technology.

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