Crucial Information For Investors Part 1: Europe’s Favourable Regulatory Environment for ICOs!
Initial Coin Offerings (ICOs) have become a fashionable new way for tech-savvy firms to fundraise their projects. Entrepreneurs and investors are eagerly searching for ways to get a piece of the market action. According to CoinDesk, over $20bn has already been invested in ICOs since the start of 2016.
However, the popularity of Ethereum-based ICOs also has caused major regulators to sit up and pay attention. With the market value reaching new highs every month, watchdogs are becoming ever more suspicious and eager to regulate.
To guard yourself against potential legal liabilities and protect your rights as an investor, it’s 100% important to know what regulatory frameworks ICOs are currently operating in. To find out how we can help you, read on!
ICOs? Aren’t they a new tobacco-heating device?
Regulators are somewhat puzzled about what ICOs exactly do or how to define the tokens they produce. Throughout government institutions, everyone is asked to pitch in and explain this new financial technology to senior watchdogs.
In the words of the European Crowdfunding Network, they’ll be able to explain that an ICO is not a weirdly-named drug, but rather a “significant opportunity for small to medium-sized businesses to raise funds.”
And they’ll point out that it isn’t only a market for tiny basement-based projects. Cases like Telegram’s $1.7bn token sale has shown that ICO can be just as lucrative as an IPO (Initial Public Offering) — the traditional way for a firm to go public.
However, even with all the potential, those who understand the principles of ICOs are concerned about the risks involved. Governments are associating this crypto market with fraud, Ponzi/Pyramid schemes, market manipulation, money laundering and generally faceless boogeymen who disappear into the sunset with millions of their investors’ dollars or euros.
More than $20bn has already been invested in ICOs since the start of 2016, according to CoinDesk.
And you can’t really blame them — these problems are rife in the market. Many projects have started fundraising with nothing but an idea and a beautifully written whitepaper. Some have engaged in pump-and-dump schemes, in which they artificially increase the value of their own tokens only to cash out once it’s high enough. Many more have simply failed and left investors helpless and unable to recoup their losses. There has even been claims that ICOs could also become a way for terrorist organizations to raise funds.
So, it’s understandable that regulators are stepping in — after all, their pivotal interest is protecting the common investor from scams and losses that they cannot withstand.
The goal of investor protection has spurred a myriad of different regulatory regimes, that all claim to have a distinct, sometimes contradictory, solution to the problem.
China chose to outright ban ICO-related activity, citing “scammers defrauding investors” as the primary motivation.
The U.S., as it is right now, is fairly open, but the SEC has already issued an alert on the rise of “pump-and-dump” schemes and the regulatory regime in the future could be moving slightly towards the bars-and-cages model. In other words, turning its regulations fully against ICOs.
Meanwhile, the European Union as a whole is not unified in its stance on ICOs. A few inviting beacons of freedom such as Switzerland or Lithuania shine through. However in Sweden and Slovakia, there is almost no crypto-related activity.
European law enforcers are a bit more lax, but they also demand adherence to anti-money laundering/know your customer (AML/KYC) practices, and require additional regulatory steps, such as registrations and disclosure statements
DESICO, the world’s first platform for fully legally-regulated STOs, is especially well-placed to reap the benefits of Lithuania’s ICO-friendly stance. It’s CEO and co-founder, Laimonas Noreika, explained this Baltic country’s position like so:
“On June 8th, Lithuania’s Ministry of Finance published a set of ICO guidelines, which show not only how the ICOs should be implemented, but also the relevant tax treatment for companies and individuals conducting ICO projects. Lithuania’s Law of Crowdfunding is arguably the most progressive of its kind in Europe. Moreover, the authorities — especially the Bank of Lithuania — are welcoming of new ICO projects, which is a rarity in the region that has yet to embrace the new technology.”
Other ICO-friendly countries such are Estonia, Switzerland, Gibraltar, Singapore, Luxembourg, the Cayman Islands and Malta.