France and Switzerland: an update on ICO regulations
With more than 1000 cryptocurrencies out there in the market since the launch of Bitcoins in 2009, companies have shifted to raising funds by attracting investors through Initial Coin Offerings (ICOs). The Ethereum ICO was the spark of exodus back in 2014, where $18 million dollars was raised in Bitcoin, at the rate of 40 cents per Ether. Fast forward to 2017, and Ethereum is trading at more than $200, with a market cap that is almost hitting $19 billion, placing it at position two after Bitcoin.
Following this huge spike, almost $300 million was raised through ICOs in the period between 2014 and 2016. What I find extremely breath-taking, and I guess you will, is the fact that in 2017 alone, Coindesk observed that a stunning $1.366 billion was raised by ICO companies worldwide! Quite recently, one ICO startup actually raised more than $150 million in no more than 3 hours! Huh, how about that?
With the remarkable surge in 2017, it’s not surprising that the attention of their regulation has been drawn to governing authorities. Quite recently, the fate of cryptocurrencies was sealed in China, when the authorities banned token sales, citing that “such sales are considered illegal and disruptive to economic and financial stability”. In this regard, it is therefore prohibited for organizations and individuals to initiate any token fundraising activities, and those who have completed ICOs have been ordered to make adequate arrangements to refund crypto assets to all investors. According to China’s authorities, this will go a long way in protecting the rights of investors as well as putting risks under control. Investigations and severe punishments by relevant law enforcements will be the portion for all who will not heed the orders to halt fundraising activities. Will other authorities follow suit? Well, we will in this regard cross examine two countries on ICOs and regulations, and that is Switzerland and France.
The Situation in Switzerland
According to a 70-page new report entitled “Token Mania” of July 13, 2017 by NEXT (a Fintech analyst and research Autonomous), Switzerland was singled out alongside 5 other countries, as one of the most advanced countries in creating conducive operational grounds for fintech and cryptocurrencies. It was the finding of this report that cryptocurrency companies did not require particular licencing or approvals by the Swiss Financial Market Supervisory Authority (FINMA), which is in charge of regulating business in Switzerland. According to the existing laws, FINMA noted that cryptocurrencies were more of assets than securities.
But in a quick turn of events, regulators have already started investigating ICOs in Switzerland, where they have already raised more than $600 million in 2017. According to a press release by FINMA on their website, several ICOs that were not specified are under investigation, noting that while there are no specific regulations on cryptocurrencies in the country, they were keen on establishing if any of the existing financial regulations has been violated. Such regulations include provisions that have to do with financing of acts of terrorism, money laundering, collective investment schemes, trading of securities, and laws governing banking. Accordingly, FINMA intends to initiate enforcement proceedings where circumvention of financial market legislation will be established. The release went on to warn investors of high price volatility for coins or tokens, as well as uncertainties on how ICOs in early developmental stages would be financed or implemented in the coming days.
That notwithstanding, I found it quite encouraging that the Swiss government still appreciates the changing power that comes with Blockchain technology, and that it remains supportive of innovative ideas within crypto space. I’m equally appreciative of the fact that the Crypto Valley in Switzerland remains rich in experience and technical talent, and that they are on top of the game, in a country that is still very stable and conducive for ICOs — but remember, the rules must be followed!
All Eyes on France
My attention, like the rest of the world, is drawn to France because the country has been relatively quiet on matters of cryptocurrencies. However, the silence was recently broken in an interview with Robert Ophele, the President of Autorité des Marches Financiers (AMF), which is charged with the responsibility of regulating the country’s stock market. Holding a balanced tone, he noted that blockchain technology has challenges of money laundering and financing terrorism, but also lauded it for fast and cost-free money transfers and combating tax evasion. In light of this, the country is considering to come up with a quick position on formal regulations of projects and startups keen on using the token sale model to raise capital. And while these plans are underway, it’s not yet clear when the legal framework will be released.
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