As some countries were being very cautious about ICOs whether by publishing warnings like the U.S. or flat out banning them like China, other countries are known for being crypto-friendly and actually encouraging ICO investments. Singapore, Estonia, Gibraltar, and Switzerland are not only noticing the benefits but also foreseeing the welfare of being crypto hubs.
ICO’s are an incipient phenomenon that started to get jurisdictions’ attention in 2017. The ICO world has shown significant risks due to a huge number of them turning out to be fraudulent using different sorts of rascality such as Ponzi schemes and phishing which sent an urgent siren to regulations to take action.
However, in the ICO world, even honest ICOs can hold other types of risks. As a matter of fact, ICOs are highly volatile providing investors with only a minimum of assurances related to the future success of their projects with few upfront and continuous disclosures, making the token market highly unstable (Kaal.W,2018). In addition, token investors are betting on future promises, whether it be of an idea or intangible product, which increases the possibilities of it turning out as a fraud or an unsuccessful project.
Given the risks held within token investments and ICOs, the SEC was the first to take action by warning investors that some ICOs could be scams. The U.S. Security and Exchange Commission (SEC) issued explicit warnings to investors to be highly cautious against scammers that would host ICOs with engaging websites and very attractive language, but unfortunately turned out to be of the particular scenario, colloquially termed, “pump and dump” (Chohan.U,2017). Actually, it’s true that ICOs are allowed in the U.S., but they are highly regulated as they’re supposed to be licensed and registered like any other kind of project. Besides, in 2017, the SEC pointed out that some Federal securities laws must actually be applied to tokens. Countries like South Korea and China even took a much more sensitive attitude toward ICO investments as their financial regulators officially prohibited all ICOs. The People’s Republic of China even went so far with a firmer stance against ICOs, banning them entirely.
As some countries were being very cautious about ICOs whether by publishing warnings like the U.S. or flat out banning them like China, other countries are known for being crypto-friendly and actually encouraging ICO investments. Singapore, Estonia, Gibraltar, and Switzerland are not only noticing the benefits but also foreseeing the welfare of being crypto hubs. Switzerland even created a crypto valley (idea created by Johann Geversthe in 2013) making the country a universal core for crypto technologies and the first choice for ICO investors.
As a matter of fact, The Swiss Financial Market Supervisory Authority (FINMA) is very strict when it comes to protecting investors, as Mark Branson, the FINMA’s chairman claimed: “our balanced approach to handling ICO landscapes and to launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system.” In addition to this, money raised through an ICO could be held in a foundation and the Swiss foundations are very strict. Actually, “Swiss laws state that these foundations should operate completely independently.”
With countries taking a variety of positions and attitudes over ICOs and crypto, startups are forced to take into consideration many factors before choosing where to launch and/ or register. For example, Estonia is very open when it comes to registration; a physical residency is not even needed. The probability of obtaining a license for crypto exchanges and those companies registering to host an ICO is close to 100%. On the other hand, getting a license or registration in the U.S. is very hard and requires a lot of paperwork and time. Thus, the venture team must make their decision to issue and/ or register their ICO according to the regulations mentioned as well as other features like taxes, KYC, etc.
It is sure to be quite interesting to witness how the blockchain regulations will evolve and affect each jurisdiction around the globe over the next decade. While they seem to cover a very wide spectrum, cryptopreneurs will need to exercise much due diligence in their research to seek out the best fit for their projects. Factors such as team member geographies and project ideas themselves such as exchanges, Fintech innovations, social media transformations, payment methods to aid in mass adoption, and especially finding clever ways to permeate educational material to those who are just starting out each come with their own unique challenges with respect to abiding by regulations.
Maybe the countries that welcome crypto will help support and incubate many of those projects that show promising signs to succeed, and even prove to reluctant countries how progressive adoption would be for all.
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