On 2017 from Bitcoin to #ICOs: token sale legal status State by State and future challangings

Giulia Arangüena
Dec 21, 2017 · 7 min read
The Stayling of BearWhale, by Christopher Edwin Steininger

Throughout the world, FinTech is transforming traditional financial services thanks to Blockchain technology which offers a cheaper mechanism than the current one for recording and verifying transactions information.

From 2009 when Bitcoin was released till today, the power to create and transfer money — as wisely noted byMiguel Cuneta in thishas passed to every single person on earth taking it away to public institutions and bank bureaucracies. And as centuries ago it happened with the invention of the press that removed the monopoly to create and transfer information from the hands of those who held it giving rise to the Renaissance (that later led to the industrial revolution), Bitcoin and its technology have trigged a real Financial Renaissance, by affirming on the Internet a new technical standard with which everybody can issue and exchange financial value.

From Bitcoin to ICOs

In the last years, behind Bitcoin growth driving thousands of other cryprocurrencies have come to light: Litecoin, Ethreum, Ripple, Zcash, Monero, Golem, Cardano, just to name a few. Thus, while Bitcoin ecosystem was cementing itself attracting more and more capital, investments and people, other cryptocurrency clusters have arisen increasing levels of capitalization, jobs and business opportunities up to reach the current unbelivable level of the cryptocurrency industry’s global estimated market cap of $ 508 billions in less than ten years ($ 600 billions at the date of posting).

In such Big Bang, with and under Bitcoin umbrella, the new ICOs financing mechanism (also known as initial token sales — ITOs) has taken root using the distributed ledger technology to raise capital outside of the classical sources (i.e. IPOs and venture capital) through a very smart crowdfunding combination with Blockchain leverage built on Bitcoin model, that is — as properly noted by Balaji S. Srinivasan in a post — on a standard of an open and distributed crowfunding platform based on the cryptographic token concept and on a certain scarcity of digital resources, which confers full control to its holder and which can be reallocated and transferred to others in a secure, unquestionable, non-counterfeitable manner and without need for central counterparties.

See What Tomorrow Brings, by Nina Y

Thanks to ICOs and the resulting increase of cruptocurrencies competition, during this year, along with Bitcoin’s definitive mainstream affirmation and its value’s explosion , a new segment of crypto-industry came up in all its “arrogance”, setting records on records with 237 financed projects in the just only 2017, as many new cryptocurrencies launched on the market and a collecting volume that is over $ 3.6 billions to date I write (cfr ). This to prove the magnitude of Bitcoin both as a buster and economic model and that the most prominent cryptocurrency industry’s property is to exchange internally the driving capacity the entire sector.

Regulation increasing

Fueled by the explosive growth of Bitcoin, Ethereum and Altcoins, the excitement surrounding ICOs boom has fueled investor interest even more
through that unstoppable feedback loop deriving by the network viral effect of Bitcoin model we learned from the fundamental lessons published in .

Huoston we have a problem stone inscription, by Henrik Pask

This sudden exponential hype in cryptocurrency industry has provocked the regulators response that never before as in the 2017 it has been so immediat and spreaded world wide, as if public institutions —
even the most sleepy up until now —had shouted all together to their “Houston” having sniffed a looming danger along with prosperous economic views.

Over the last few months, regulators in US, UK, Russia, UE, and Hong Kong have taken a more sceptical position about the legitimacy of ICOs with a general concern regarding the risks associated with cryptocurrencies, including AML/CTF risks and fraud. From last September till now, a number of other regulators in Germany, Estonia, Finland, Singapore, and Canada just to name a few, have issued statements or warnings that digital tokens structured as securities will be regulated irrespective of the name ascribed to them and subjected to the existing securities law, prospectus regulation requirement and crowdfung legislation; or decided to consider non equities token only ruled by consumer laws as it happened in Australia. While other countries have chosen to ban ICOs, such as China, on the contrary, others as in the case of Gibraltar decided even to issue ad hoc legislative measures to give the cryptocurrencies industry those basis of legal certainty so necessary to growth and develop.

Map of ICOs legal status country by country

The countries that offer ICOs regulatory solutions are becoming so many, just as the most varied are the positions assumed (friendly, unfriendly, warned or regulating) and legislative techniques applied: specific regulations, guidances for digital token issuers and investors, or warnings however establishing guidance to regulate them within existing legal frameworks.

And it is worth making a comparative reconstruction of the individual positions on ICOs State by State (A/N: as I actually tried to do in the excel spreadsheet below) to understand what is happening internationally and what are the regulatory elements that act and will affect the future of ICOs and how increasing regulation and compliance will impact this rapidly growing industry.

Main ICOs key leagal areas

Key legal questions and future challangings

Most regulators worldwide still haven’t figured out how token sales should operate in a lawful and compliant system and many other have already offered their own solution. But more diversified regulation and crypto activity increasing are easily predictable in 2018 given that according to someone we are only at the beginning of a new era, still at the end of a prehistoric phase in which the potential of decentralisation and Blockchain-based technologies has not yet been fully realised.

Cave Painting, by Helen Kholin

Therefore, in the persistence of this legal uncertainty and too diversified situation with too many legal frameworks at disposal country by country,
without any initiatives to standardize legislations at international level, distortions in ICOs economic advantages deployment can be created and the development of this new cross-boarder market would not benefit because if too many rules risk killing it, in the other side the absence of legal certainties prevents greater capital entrance and does not reduce entry barriers, taken into account that regulatory certainty would help manage investor and consumer expectations and provide defined avenues for legal recourse to protect against violations and inconvenient behaviors.

Pros and cons about ICO regulation (source: Stellar Development Foundation and LHoFT ICO Report)

To mitigate this situation and to be prepared if regulators come knocking at the door in order to ban, fine or put ICOs under investigations, it began a very interesting and innovative internal process of rules standardization and industry self-regulation. Examples of this self-regulation process are certainly the document called “”, released in December 2016 by Coinbase, Coin Center, Union Square Ventures and ConsenSys, who designed the most compliant and trasparent ICO model, or the , a “a smart and promising way to address the uncertainty in the law”, as released in a Coin Center post . And they came to light also very interesting initiatives of rule and contracts standardization by some lawyers consortia, such as legal-block, Legal Blockchain or Accord Project that, from all over the world, are giving life to multinational communities to collaborate in an innovative way to give tools, legal standards and open-source softwares for the future of legal contracting
also that involved in the implementation of ICOs via smart contracts.

Anyway, although it is not possible to know the future, the emergence of these ICOs self-regulatory initiatives together with the increase in legal standardisation by the various regulators and lawmakers world wide, are the two of the biggest shifts we can expect to see in 2018. And, however, 2017 was clearly a turning point from which there is no more going back also from Law Lovers point of view.

My ICO legal status country by country spreadsheet in airtable


A #Fintech watch to gather news, insights, observations…

Giulia Arangüena

Written by

Blockchain Roundtable @SanMarinoInnovation, Lawyer @Legal_Block and @ADLPStudio, E-finance teacher @unipisa, AML/KYC & Compliance Officer @mistralpay


A #Fintech watch to gather news, insights, observations, comments, infographics, and more to aid the development of fintech culture in Italy

Giulia Arangüena

Written by

Blockchain Roundtable @SanMarinoInnovation, Lawyer @Legal_Block and @ADLPStudio, E-finance teacher @unipisa, AML/KYC & Compliance Officer @mistralpay


A #Fintech watch to gather news, insights, observations, comments, infographics, and more to aid the development of fintech culture in Italy

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