Here is an overview of what to expect in the upcoming ICO regulations on a global level. This is a nonexhaustive list of current practices in Top-Five jurisdictions – highlighting the best choices for launching an ICO from a legal standpoint.
FINMA | A set of guidelines
On 16th February, The Swiss Financial Market Supervisory Authority (FINMA) published a set of guidelines for applying existing financial market legislation to the regulation of Initial Coin Offerings (ICO). According to FINMA’s press release, the creation of the guidelines was prompted by an increasing number of ICOs taking place within Switzerland, in conjunction with the lack of clarity about how or whether they should be regulated. In order to assess future ICOs and determine which laws apply, FINMA says it will place ICO tokens into three categories: payment tokens, utility tokens, and asset tokens.
GFSC | ICOs law draft is coming soon
Gibraltar moves ahead with world’s first ICO rules. The Gibraltarian government, and its Financial Services Commission (GFSC), are developing a draft law aiming to regulate the promotion, sale, and distribution of digital tokens. One of the key concepts being introduced in this draft regulation is the concept of “authorized sponsors,” who are supposed to be “responsible for ensuring compliance with disclosure and financial crime rules.”
SEC | Reg D 506c, Reg S and Reg A+
Regulation (or Reg D) and Reg S (for non-US investors only) are viable options for an ICO, with the advantage that the legal work is far quicker and less expensive, and that there is no cap on the amount of capital that can be raised. Reg A+ allows investors worldwide, of any wealth level, to participate – providing very democratic access to capital — which is one of the mainstays of ICOs. Marketing to investors is allowed in Reg A+, which suits ICOs.
MAS | A guide to digital token offerings
Seen as quite a bastion of potential for ICOs and the cryptocurrency space in general. In November last year, the Monetary Authority of Singapore issued a guide to digital token offerings, which indicates how these coins should be treated under current securities laws.
FSA | Bitcoin payment law + A regulatory ICO framework is coming soon
The Financial Service Agency is considering the revision of relevant laws and regulations in an effort to regulate ICOs in Japan, amid the growing popularity of token sale activities within the territory. Japan currently has no clear regulations covering ICOs specifically, except for the existing bitcoin payment law that went into effect last April and legalized bitcoin as a payment method. This legislation is not, however, sufficient to determine the legal status of ICOs.
There are much more upcoming regulation pronouncements. As an example, G20 Summit in Argentina in March will consider proposals to regulate the bitcoin cryptocurrency globally. The UK and other EU governments plan to regulate cryptocurrencies, including bitcoin, amid concerns that they are being used for money laundering (the new legislation is expected to come into effect this year). We are also keeping a close eye on how the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) intend to improve regulation of the crypto industry and ICO. The most recent announcement from the Bank of England discussed greater regulation of cryptocurrencies, and which called the huge price moves and volatility “speculative mania.” The list of countries that are working on their own legal frameworks today can go on and on. But one thing is clear: global regulators intend to hold the crypto-asset ecosystem to the same standards as the rest of the financial system and to develop a coordinated approach among different jurisdictions.