How Your Government Feels About Your ICO

Whilst the world is feeling the after shock of the ICO eruption of 2017–18, many countries are scrambling to regulate the perceived dangerous volcanic ash of shifty ICOs. For those of us budding crypto entrepreneurs, these shifting regulations have made for unanswered questions; Which countries should I be targeting? Where can I launch my ICO? Will I be sued by my own government?

Here’s a snapshot of how your country might feel about your ICO:

USA:

US residents appear to be the most news savvy and ICO hungry people in the world. However, recent SEC investigations have burst the US ICO bubble. For US citizens, It’s all a question of security. The main function of the US Securities and Exchange Commission is to ensure that securities institutions treat all investors fairly and equally. Despite the decentralized nature of cryptocurrency, the SEC has been quick to categorize tokens sold by a ‘virtual’ organisation as securities, and therefore subject to ‘federal securities laws’. Whilst utility tokens would seen an obvious circumvention to SEC law, proving the utility of your token goes beyond just saying so.

So what does this mean for your US based ICO?

To avoid legal headaches, you must define the nature of your token and prove it. Run your token through a Howey test to determine whether your token qualifies as a security. If your token screams security — register, register, register. You don’t want your ICO to be the next Munchee (MUN). In terms of marketing your ICO, all US investors must be accredited investors, cashed up with an income exceeding $200 000 (or $300 000 together with your spouse), or have a net worth of over $1 million.

The EU

Prior to November 2017, ICOs were generally considered to be legal in the EU. However, following the great American security debate, this seemed to have a domino effect in the EU. A sweeping ‘buyers beware-esque’ statement issued by the European Securities and Markets Authority warned ICO investors of the potential risks in their investment, cautioning that investors ‘do not benefit from the protection that comes from regulated investments’. A European Commission roundtable took place in in February to pave the way for regulatory discussions for ICOs.

What does this mean for your European based ICO?

Watch this space. Regulatory legislation could be coming any day now.

South Korea

Cryptocurrency means big business in Korea, with the South Korean Won ranking as the third most traded national currency for Bitcoin. However, despite the potential of the Korean market to be a smoking red hot bed for launching ICOs, the Korean Financial Service Commission announced in September 2017 that they were breaking up with all ICOs, leaving many Korean investors heartbroken. Reasons for the breakup? Head of the FSC, Kim Yong-beom cited irreconcilable differences, stating that cryptocurrency was flooding money into an ‘unproductive and speculative direction’.

However, fast forward to December, where Korean official announced plans to flip the September ban. But like many exes who come back into our lives, things are different post break up. In a bill moved on May 2nd, legislation is directed towards government supervision. The bill promotes ICOs that are ‘initiated by public organisations and research centers committed to promoting and developing blockchain technology’.

Singapore

When it comes to successful ICOs, Singapore are gold medalists for producing ICOs that raise over $10 million in token sales, home to over 20% of successful ICOs. Whilst the Monetary Authority of Singapore (MAS), much like many other financial government organisations, warns investors of the risks of investing in a speculative market, the MAS holds a seemingly neutral stance towards cryptocurrency. Singapore’s Deputy Prime Minister, Tharman Shanmugaratnam even stated that ‘the country’s laws do not make any distinction between transactions conducted using fiat currency, cryptocurrency or other novel ways of transmitting value’. This view purporting an equal playing field implies a welcoming stance for cryptocurrency innovation. Singapore seems like a safe bet for avoiding any legal dilemmas, paving the way for positive sentiment surrounding your ICO.