The Overview of ICO Regulations In Some of the Biggest Markets in the World

After the unregulated el dorado of late 2017, Initial Coin Offerings (ICOs), along with the whole cryptocurrency market, have been declining throughout 2018.

One of the reasons for that is the unclear or overly traditional regulatory wireframe that plagues the majority of the biggest markets in the world.

Therefore, we are going to present the stance that each of those market’s regulator has taken towards ICOs, starting with an overview of the United States, the largest countries in the European Union and other significant actors across the globe. The next article in the series will approach regulations in Central and South America, followed by a final overview of the market’s regulations in South East Asia and Australia.

Let’s begin with the market that has had a significant role in dictating the trend in ICOs.

The United States of America

The US Securities and Exchange Commission is already known for its rather harsh scrutiny, which is somewhat suffocating the development of the young cryptocurrency market.

However, the regulatory framework varies from state to state, as some lack regulations, while others request deposits to conduct a crowdfunding with utility tokens. On the federal level, there is also no specific rules regulating ICOs.

The thing is that most SEC commissioners consider cryptocurrencies to be securities, and as such, they should oblige to a strict set of laws despite the fact that two of the most prominent coins, Bitcoin (BTC) and Ethereum (ETH), have been declared as not being securities.

ICOs which have been defined as security offerings have to register and get confirmed by the SEC if they want to comply with the traditional Securities and Exchange Act. Furthermore, they have to implement a full Know Your Customer (KYC) and Anti-Money Laundering (AML) mechanisms.

Lately, the SEC has been doing due diligence on ICOs which conducted their fundraising campaigns in 2017 and 2018. During the investigation, if the commission finds that some of them have been offering unregistered securities, the companies will be shut down, suffering extensive repercussions in the process.

European Union

European Union, although it is called that, cannot be looked upon as a unique regulatory environment. Some countries still don’t have any crypto regulations, while others took a friendly stance, promoting new ways of crowdfunding.

Germany

Germany allows ICOs until they collide with the whole existing, untuned set of legal acts. Banking Act, the Investment Act, Securities Trading Act, Payment Services Supervision Act, and Prospectus Acts are examples of laws in the country that companies conducting ICOs should keep in mind.

However, the Federal Financial Supervisory Authority is leaving investors somewhat unprotected as they state that they are not guaranteeing the security of their identity, and understanding of the risks of the investment.

France

Although France has been unprepared for the rise of digital assets, it is catching up quickly with the rest of the crypto-friendly pack. The new framework with the working title Plan d’Action pour la Croissance et la Transformation des Entreprises (PACTE) has already passed through the half of the parliament procedure and is looking to bring a crypto-friendly set of regulations.

ICOs are allowed, and crypto tokens are defined as “immaterial items, representing in digital form one or more rights, which could be issued, compiled, kept and transferred through a digital shared instrument, allowing to identify — directly or indirectly — its owner.”

ICO quality certificates, which will be implemented with PACTE, are voluntary, and taxes have been lowered to 30% flat, as it is normal for capital gains.

The United Kingdom

Although ICOs in the UK are allowed, the Financial Conduct Authority (FCA) has already warned investors that, usually, companies behind ICOs are still experimenting with their would-be products, so there is a possibility that investors could lose their invested funds.

Since the FCA considers cryptocurrencies to be private currencies, issued for private business cases, it cannot be forbidden to issue them, or use them for crowdfunding purposes.

Other EU Countries

The rest of the EU has ICOs allowed, mostly because there is no regulatory framework at all, with the exceptions of Finland and Norway, where ICOs are subjected to the standard capital gains and wealth taxation.

China

Cryptocurrencies, ICOs, cryptocurrency exchanges, and crypto trading have been completely banned in China. The Chinese government is practising the highest possible level of scrutiny towards any kind of crypto projects, including crowdfundings.

People’s Bank of China (PBoC) has also ordered all companies which finished their ICOs to refund the investors and threatened any of the mentioned entities with harsh repercussions if they don’t comply.

Japan

Japan has warned their citizens of the uncertainty following ICOs. However, these kinds of fundraisers are still allowed, provided that they comply with KYC/AML requirements that the Financial Services Agency (FSA) had put before them.

Still, the crypto space has been given a certain level of self-regulatory ability in Japan, as the FSA has placed the Japanese Virtual Currency Exchange Association in charge of overviewing the market.

Canada

Canada has, by now, been lenient with cryptocurrencies and ICOs. However, lately, they have started to follow their southern neighbours. The recent news of the new regulations have reached our ears, and we can say that they are preparing the turf for a much higher level of scrutiny, which will encompass fiat to crypto exchanges and even cryptocurrency wallets.

Until now, ICOs were allowed. However, after the Canadian House Finance Committee published their recommendations, it remains to be seen how ICOs will be treated.

Russia

Russia has an unclear stance towards ICOs. Kremlin requests all utility token-based crowdfunding to be registered, taxed, and that other country’s securities laws be applied to the crowdfunding in question.

What does the future hold?

We wouldn’t be revealing a big secret if we said that the US dictates the financial market of the western world. Countries like the United Kingdom and Canada might be following the biggest empire of the west when regulating ICOs is concerned.

Still, Europe is, obviously taking another route as France, of bigger countries, is looking to exploit the opportunity that emerged with the world’s leading economic powers defensive policy.

China, as another enormous market, has declared their intentions clearly, and there is no sign that their restrictive regulations will soon change.

However, as always, in all that regulatory madness, there are a few smaller countries that deserve to be mentioned as they are providing the most fertile ground for the development of the cryptocurrency businesses from start to finish.

Malta, Cyprus, Liechtenstein, and Gibraltar are among those that already managed to lure in some of the most prominent names in the industry, such as Binance or OKEx, with their clear set of crypto-friendly regulations.

In the end, there is also a dubious case of Venezuela, whose president, Nicolás Maduro, has conducted their own ICO of their cryptocurrency Petro, which they are heavily promoting even though there is no existing wallet or code published.

The next few years will be crucial for the broader acceptance of cryptocurrencies, as well as for the crowdfunding campaigns derived from them. It will be interesting to see all the influences and turns the new technology is going to go through before the possible main-stream recognition.

Those who thought that things would be easy, were, obviously, very wrong. And with the USA leading the way in the west, it is bound to get even tougher for ICOs and willing investors.