Although initially ICOs became known in 2013, they are currently gaining momentum with investors getting involved in token sales and conventional seed and Series A financing for ICOs. Token sale regularity and dollars collected through ICO’s are making cryptocurrencies become popular also.
The significance of ICOs has been talked about in a lot of summits and Undoubtedly therefore, ICOs shall also be a major topic of the early international Blockchain function, BlockShow Asia, backed by Cointelegraph this year in Singapore. Therefore, the subject of regulation is certain to arise, be analyzed and expounded on by professionals in the world of Blockchain.
Even in the face of all the present deliberation, ICOs continue to leave many asking themselves how government, financial and bank regulators will react. The question is still whether we require ICO regulation and whether there ought to be a compromise on that regulation.
Present Condition of Regulation
Presently, there is no transparency and standardization on the matter of ICO regulation. Countries have different opinions. Governments, banks, and regulators all appear to be divided on steps toward ICOs and Blockchain system regulation in general.
The banking industry is certainly giving contradictory messages on the issue. Banks and financial services do not seem to be in favor of cryptocurrencies or public Blockchains (open) nor friendly. However, they seem to encourage the utilization of hidden factors of the Blockchain technology.
Obviously, regulators desire to try to regulate cryptocurrencies. The US is especially opposed to the trend since they wish to regulate. Using cryptocurrency and ICO needs to be motivated as long as it carried out without violating the law.
In early August, the SEC officially proclaimed that they shall be considering regulation of cryptocurrency ICOs. SEC has taken this action, as they are worried that the character of ICOs will possibly trigger money laundering which needs to be established by regulations to avoid manipulations like these.
The key topic that is making it difficult for regulators, however, is the type of mechanism being run by Blockchain firms. Basically, the decentralized character of the coins signifies that no one entity is tasked with the provision of coins. This shows that regulators shall just manage to pursue service providers who are the third party.
SEC regulation has elicited divided reactions. The majority in the society has positive opinions since they believe ICO should be given more focus. Others, however have contempt for the idea since it opposes the very concept of decentralization in itself. The regulation for SEC may lower cost increases; however, it may simultaneously put off many profiteers.
The participation of SECs might also cause the reduction of the number of startups taking part since not all firms shall manage to adhere to the rules of SEC. SEC regulation can eliminate innovation with a lot of ventures failing to materialize.
Different opinions worldwide
A fintech analyst and research company, Autonomous NEXT, has written a report on the condition of Blockchain ICOs. The report analyzes the regulatory and operational difficulties created by ICOs. The report concentrated on six states; Russia, China, UK, Singapore and the US. The report highlighted the mixed opinion on ICO regulation and condition of ICOs in general.
According to the report, the US and the UK have been very active in regard to ICOs but greatly lack legal transparency. Singapore and the UK possess a regulatory sandbox to experiment with latest financial projects. The term ‘alphabet soup of regulators’ has been used to describe the US, making the provision of tokens more difficult.
Adding more bewilderment, each of the 50 countries has their individual regulation in connection to ICOs. In many countries, this fairness makes the presence of united regulation impossible.
Of late, Russia has not been taking ICOs or cryptocurrencies, making unclear decisions, where embracing cryptocurrency is concerned. Authorities in Russia seem to be planning to group crypto-tokens as legal monetary tools or derivatives in coming times.
China seems to be the most decisive in their method of managing ICOs and no state has become part of such a powerful prohibition yet. Hong Kong is also set to use the same tactic to the SEC.
In China today, a lot of people are scared about ICO regulation. Each person is anxiously looking out for the third section of the government officials report regarding the issue. In spite of this anxiety, business continues to operate as normal, with firms indicating that they are unable to stop now since the tendency has started.
The market should continue operating, even with technology prohibitions. Even though the marketing has been put on hold, each person is waiting to know what takes place after this.
The Bubi Network Technology Co. Ltd (Shanghai Branch) Co-founder Director VP and General Manager Jack Yank explains at the 3rd Blockchain Summit in Shanghai to BlockShow Asia team that the Chinese state has provided immense support to Blockchain in regard to the technology.
The Central Banks, as well as numerous other large banks in China, have been studying this area and talking about the area’s future with some companies (small, medium & privately owned) such as Bubi.
In regard to the regulations, presently, the regulations connected to Blockchain have nothing to do with the technology,’ continues Yang. ‘This section is not government restricted. The state has been managing ICOs as well as other unlawful criminal wrongdoings. Their work has been geared to anti-criminal acts; but, no restriction is present on the technology growth.’
More information is circulating around that China might desire to work with other states to shield crypto trading in the world and strictly regulate it. This is to make sure that cryptocurrencies would not have an impact on standard currencies. A step like this is great for the SEC together with other state institutions who support regulation.
ViewFin founder, Eric Gu and Meta Verse Blockchain team in China tells the team at BlockShow Asia that no person is actually able to foretell how future regulations shall appear like, and therefore, many firms desire to shift to overseas; however, China represents their client base.
‘Let us imagine I have a venture in China and I relocated to Switzerland and China is where the market is. How do I describe the market and demands to Switzerland investors?’ enquires Gu.’ It shall be hard and is not feasible.’
Gu says that China presents many Blockchain startups; the number is the same as found in the Silicon Valley as the banks did not take part; they lost 3 years. When the PBOC all of a sudden discovered that Blockchain was a major factor, they directed the banks to research Blockchain and learned that the most ideal experts of the Blockchain sector are not in the area of banking.
‘Currently, these latest regulations are here and we shall possibly lose 3 additional years,’ notes Gu. ‘3 years from now, Chinese people will reflect and state, ‘We were in possession of Metaverse at a top level; however, currently, we do not.’ They shall need to utilize Ethereum as no other alternative will be present.’
As China features the hugest ICO, the regulations shall have an impact on all market in Asia, believes South Korean Exchange (Coinnest) CEO, Kim Eik Hwan. In a Cointelegraph interview, he discloses that South Korea has declared same regulations as well; however, their personality varies greatly from China’s.
‘Prohibition of Chinese ICO has been spread to the prohibition of all exchanges, while regulations in Korea are more similar to safety suggestions,’ corrects Hwan. ‘Exchange regulations in China were launched to eliminate fraud; however, they are not regulations for Bitcoin. Rather, this is an endeavor to try to eliminate unsuitable ICOs via the prohibition of exchanges.’
Recently, the Israeli state became part of the ICO study movement. They proclaimed via the panel of Israeli Securities Authority that they will study ICOs and will possibly regulate them. The head of Securities Authority, Prof. Shmuel Hauser has declared the setting up of a committee to assess whether ICOs are included in the description of a security and fall under Israeli securities law.
In the meantime, financial regulators are avoiding ICO activities. Autorite des Marches Financiers (AMF) in Quebec aims to try using Blockchain, if not generally support it. The AMF resolved that the sales of the token carried out by Impak Finance (enterprise investment startup) presents a security, therefore, including it to its regulatory sandbox.
Is regulation accessible or essential?
It is difficult to state whether a compromise in the regulation of ICOs shall soon appear or whether it is essentially required at all at this juncture. It appears a difficult task and almost impractical for regulators to standardize or manage the possible investments with a lot of new ICOs appearing regularly.
In addition, as there lacks present regulation, it shall be difficult to recognize ICOs’ illegality and since no regulation exists, the authorities lack a lot of room to adhere to any specific law.
It appears simpler to control ICO regulation if every state created their individual regulations and laws of ICOs designed to the requirement and anxieties of their state respectively.
In case the ICO form of organization becomes clearer, it shall get rid of anxieties, especially concerning SEC as well as other organizations. Also, investors should be aware of where the cash shall be precisely used.
This might be effective if the roadmap or white paper were clearly written, indicating whether the Blockchain ventures were public or open if in the event of code publication a separate audit was held or not and whether there was a listing of the ICO token on a cryptocurrency exchange.
A white paper that was well set up or good ICO roadmap might be better, compared to regulation. However, again, this might not offer any clear promise or guarantee.
Although regulation might restrict ICO’s unlawful acts, it shall also get rid of the ICOs spirit to generate profit. It is vital to remember that in case regulation does not happen, it shall make ICOs less attractive to investors.
Lastly, all over the world, compromise on regulation appears untenable in this instance since some states are split in the way to handle ICOs and cryptocurrencies. BlockShow Asia offers the medium to remain updated and get answers for more queries about ICO regulation. But, only time shall indicate whether and in what manner ICOs regulations shall develop.