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Crypto and Blockchain Talk Podcast: Regulations

Podcast / September 20, 2018



ICOs – or Initial Coin Offerings – are a widely used method for cryptocurrency startups, and also how some blockchain technology companies raise their initial funds to get their projects started. It is very much like a Kickstarter or GoFundMe, with the “reward” being given in newly created tokens. These tokens can be used on the product or service that is being built, which is referred to as a utility token, or in some cases, held like a stock and entitles the holder to a profit share, which is referred to as a security.


With an ICO, businesses will usually write a whitepaper which gives all the details about their purpose, ideas, and a roadmap to allow investors (both small and large) to have the information needed to buy into these projects for a fraction of the speculated cost, once the coin hits the open market. These projects, are mostly still in the beginning stages of development.


That’s right, most have no working product yet, but still ask people to pay them… and people do! By the tens of thousands, or even millions in some cases. ICOs took in over $2 billion dollars in 2017. There are currently over 1500 ICOs that have taken place, with thousands more on the horizon. All on the promise of what might be.


If that doesn’t sound scary enough, add this factor in – ICOs have been mostly unregulated. Until now.


Until recently, the industry has not been taken seriously by governments, financial institutions, or most of the general population. But with a market cap today of over $424 billion dollars at the time of writing (May 2018), it is now just beginning to get the attention it warrants.


While many have gotten rich beyond their wildest expectations, others have been defrauded, robbed, and scammed. For even a discerning mind, it can be difficult to tell the difference when taking in a project at first glance. As 2018 moves forward, governments around the world are taking notice and passing laws they feel best protects their people.


There are many concerns:


Fraud, is the first, and most obvious, concern. China and South Korea have both banned ICOs. The United States has launched several SEC investigations, and is considering whether it can claim crypto coins are securities (which can only be sold by licensed individuals/institutions).


Ponzi/Pyramid schemes have been a big problem also. USI-Tech and Bitconnect are two of the largest successful scams to date, taking in hundreds of millions of dollars, on false pretenses, only to shut down (or be shut down by the government).


A substantial amount of money is now leaving the traditional investment sector, to a place where it can vanish and never be recovered if a company goes under. For money to leave the country in the past, a wire transfer had to be created, which was recorded and monitored, and took a long time to complete. A cryptocurrency transaction can move any amount of money around the world in just a moment, with or without a trace (depending on which currency is used).


Price fixing is an issue as well, with many coins being mineable (created), using computer hardware performing work. It is considered a “pump and dump” technique, to create and flood the market with supply at will, to control the price.


Some cryptocurrencies are untraceable and private, so governments are worried they will be used for money laundering for criminals, and avenues that can be used to fund terrorism.


It is important to mention in context, that all of the above activities still existed and thrived long before cryptocurrency ever came around. Even though automobiles are used by bank robbers to make their escape, not every car on the planet is used by a criminal. Hopefully, the same logic will prevail.


Despite all the calamity, why are ICOs still growing in popularity? Because it gives people a chance to make an investment. The minimum investment into a wall-street IPO is tens of thousands of dollars. Many offerings are restricted to accredited investors only. The common person isn’t permitted or endowed enough to participate at the most profitable stages in traditional finance. Cryptocurrencies and blockchain companies are built and financed by the common person, united to build something that makes the world a better place. On social media channels and community sites like Telegram, you can see thousands of loyal (sometimes rabid) followers and investors who believe in their project of choice, and back it like their favorite sports team.


Legal Standing in 2018:

China – ICOs are banned 100%. The Chinese companies who completed their ICOs were instructed to refund all the money they received. The government has also banned crypto exchanges and may be soon blocking all sites related to the cryptocurrency industry entirely.


European Union – ICOs are regulated, as of November 13th, 2017. An ICO must adhere to Anti-Money Laundering and “Know Your Customer” policies. Investments cannot be anonymous, and full personal disclosure must be made by investors.


United States – ICOs are heavily regulated. ICOs are required to obtain a license, and register with the SEC. Many who have not considered their own token to be a security have not registered yet, and are fearful the SEC will come after them. Anti-Money Laundering and Know Your Customer procedures are required. There is more regulation to come from currently ongoing investigations.


Canada – ICOs are regulated. Depending on the type of coin, it may be classified as a security, and is subject to government regulation. Canada looks at each project on a case by case basis, rather than one sweeping law that rules everything related.


Switzerland – ICOs are treated with supportive regulation! Laws are friendly, and help protect cryptocurrency companies against suffocating regulations from other countries. They go through each ICO to weed out the potential fraud and poorly designed projects, leaving behind a good promising ICO market.


Israel – ICOs are allowed, though a study is being conducted to decide how to regulate these operations in the future. There are plans to introduce tax laws on ICO tokens.


Germany – ICOs are regulated. Germany warns the public that investments in these projects are risky. Germany defers to the November 13th, 2017 European Securities Market instruction to comply to securities standards.


Japan – ICOs are allowed, but regulation is on the horizon. Japan is considering whether ICOs could fall under the Payment Services Act, or Financial Instruments and Exchange Act. In 2016, Japan declared Bitcoin a legal currency, a monumental achievement for the cryptocommunity!


Russia – ICOs are allowed. The government is currently watching things unfold while it determines what stance to take. In October 2017, it issued a ruling that requires all altcoin (a blanket term for any cryptocurrency besides Bitcoin) miners to register, and tax laws will be modified.


Singapore – ICOs are allowed. Regulation seems to be coming soon, as the Monetary Authority stated in November 2017, that altcoins could qualify as a “capital market product” and be subject to existing regulations for other products in that industry.


United Kingdom – ICOs are allowed. The government has issued warnings to investors about the risks of investing in these products, calling them “experimental”. Regulation could be coming soon, but there are no clear indicators of what the attitude will be.


Brazil – ICOs are regulated. Virtual currency exchanges are banned. ICOs are considered securities and are subject to all applicable laws.


Australia – ICOs are regulated. Australia looks to weed out scams and fraudulent ICOs, promoting the remaining ICOs as free from fraud.


United Arab Emirates – ICOs are allowed. The UAE plans to pass regulation at some point in the near future.


Taiwan – ICOs are allowed. The Taiwanese government is supportive of blockchain technology and cryptocurrency.


While ongoing legislation is underway, the crypto market experiences extreme volatility and has nearly unimaginable dips and peaks, when fears about unfavorable rules or country-wide bans occur. In February 2018, the market overall value dropped more than 60% from January highs, as China passed its law banning cryptocurrencies and exchanges. As of mid-April 2018, it has since recovered the majority of that loss, (much of that growth happening in a 2 week span). It is a scary place to be a day trader, but those who hold for the future are always optimistic.


With so much happening so fast, it can get confusing very quickly. In some places, the rules hurt ICOs. In some places, the rules help ICOs. In some places, the rules apply only to the ICO but not the actual coin and company itself. In some places, the rules apply to the entire industry regardless of the product. It is safe to expect that as time goes on, only more laws (and taxes) will be implemented. Some may see this as a good thing, paving the way for financial institutions and the general public to feel safe participating in the financial revolution, boosting the portfolios of everyone else who got in early. Others feel these rules are burdening and suffocating a decentralized worldwide market, prohibiting natural growth. In any event, there are many more changes to come in the next few years. It’s an exciting time to be alive.






Crypto and Blockchain Talk Host - Aviva Õunap
Crypto and Blockchain Talk is a podcast for everyone who is new to the crypto and blockchain space. If you are you lost in the world of cryptocurrencies and you don’t know the difference between a chain-gang and the blockchain then this online podcast is for you!




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