18 mins ago |
By Samuel Haig – |
ICO Regulatory Round-Up: UK, Malaysia, and Switzerland’s Crypto Valley Point to Risks
UK and Malaysian financial regulators have issued statements suggesting that many ICO token sales may fall under the jurisdiction of local financial regulators, and highlighting the risks associated with ICO investment.
UK’s Financial Conduct Authority Stated That It Is “Keeping a Close Eye on” the ICO Industry
The United Kingdom and Malaysian authorities have issued statements seeking to highlight risks associated with initial coin offerings, and discourage the distribution of unlicensed securities through ICOs. The statement largely advance the positions recently put forward by the United States, Hong Kong, Canadian, and Singaporean financial regulators.
This week, the UK’s Financial Conduct Authority (FCA) stated that it is “keeping a close eye on Initial Coin Offerings”, before describing the parallels between Initial Public Offerings (IPOs) and ICOs. The FCA concluded that many initial coin offerings are likely to fall under the FCA’s regulator jurisdiction, due to the similarities between IPOs and ICOs, and the prevalence of token sales issuing securities to investors.
Speaking with the Financial Times, an FCA spokesman stated that “initial coin offerings have various parallels with Initial Public Offerings, private placement of securities, or crowd sales. Depending on how they are structured, they may, therefore, fall into the regulatory perimeter.” The statements have largely been interpreted as a warning to the ICO industry, and an outline of what legal considerations should be made by entrepreneurs seeking to launch initial coin offerings.
The Securities Commission Malaysia (SC) also issued an official statement seeking to the potential risks associated with investing in an ICO. The concerns highlighted include the difficulty of “verify[ing] the authenticity of” an ICO, challenges regarding “the recovery of invested monies [that] may be subject to foreign laws or regulations” in the event that ICOs are based outside of Malaysia, the potential for “digital tokens traded on a secondary market” to “give rise to risks of insufficient liquidity or volatile and opaque pricing”, and the absence of regulation and “legal protection… for investors”. The SC also articulated concerns pertaining to money laundering and terrorist financing risks.
Switzerland’s Crypto Valley Association Has Developed An “ICO Code of Conduct”
Switzerland’s Crypto Valley Association (CVA) has developed an “ICO Code of Conduct”, laying the foundation for potential self-governance models for the initial coin offering industry. President of CVA, Oliver Bussmann, has recently spoke in favor of governments developing clear and comprehensive regulatory frameworks for ICOs, stating that “the explosion of innovation surrounding blockchain and cryptocurrency technologies… has caught the attention of regulators worldwide, who wish to protect participants by clarifying the exact function and legal and tax status of the tokens…. The Crypto Valley Association fully supports innovation in the blockchain space. We believe that token sales represent an exciting, sound and innovative approach to raising investment capital. Therefore, we believe Switzerland should support this trend by developing clear, comprehensible, yet flexible regulation that clarifies the legal status of ICOs and the tokens generated.”
Whilst the CVA’s statement largely described the ICO industry in a positive light, the association also touched on several concerns raised by financial regulators. “The rapid development of token launches has raised concerns around stability and security, and… investors are often unaware of the true nature of their investment, and the documentation published to accompany token launches often minimizes or ignores the associated risk.”