How Regional Differences In ICO Regulation Affect The Development Of The Local Altcoin Market Bincentive Follow Oct 1, 2018 · 6 min read

The explosive growth of ICOs in the past two years has been truly astounding. Within the first 6 months of 2017, more than 90 ICOs took place raising over $1 billion. By the end of the year, the number had reached nearly $4 billion. Need some more numbers? How about this eye-opener: former Mozilla CEO, Brendan Eich, raised a whopping $35 million in just under 60 seconds for his coin, the Basic Attention Token (BAT).

Figures like these didn’t only catch the attention of investors looking for the next big thing to put their money into — governments across the globe started taking a closer look at what exactly was going on in the world of ICOs.

Since then, most governments have adopted one of three approaches towards dealing with ICOs.

Some governments, seeing the potential ease at which scammers could take advantage of unsuspecting investors, ended up completely banning ICOs. Others recognizing both the dangers of ICOs as well as the opportunities they present, opted for a more balanced approach where they remained legal, yet highly regulated. Lastly, many countries have chosen to freely allow ICOs with few or no regulations whatsoever.

Of these three of ways of approaching regulation the first two have some interesting characteristics. Below, we let’s take a closer look at how the regulation of ICOs affected the development of the altcoin market in several specific countries.

Countries Which Have Completely Banned ICOs

Several countries have outright banned ICOs. Some of these include the following:

Bolivia Ecuador Macedonia Bangladesh Nepal Pakistan Algeria Morocco China South Korea

Among this list, two particularly noteworthy countries are China and South Korea — countries in which huge amounts of money have been invested into altcoins and yet ICOs are technically illegal there.

China

In the case of China, the country’s central bank announced last September that there would be an immediate ban on ICO funding due its disruption of “economic and financial order.” They then ordered all ICOs to return all cash back to their investors. According to Xinhua news (via Forbes), 90% of the more than $1 billion raised had been returned by September 22, 2017. Today, China’s ban on ICOs remains in effect and the current outlook is that it’s here to stay. The government has even begun banning commercial venues from hosting crypto-related events.

Despite the government’s attempts to prevent the rise of ICOs in the country, both Chinese investors and issuers have continued to operate the sale and trade of altcoins overseas. These audacious entrepreneurs have even continued to target domestic nationals with marketing campaigns launched abroad. The situation has grown to the point where just last month, a vice-governor of the People’s Bank of China (PBoC) stated that he will “crush” any financial product that “is not authorized under the existing legal framework.”

South Korea

Weeks after China’s ban on ICOs last year, South Korea followed suit with their own ban. Despite the estimate that 1 in 3 salaried Korean workers have invested into cryptocurrency, the government has not been supportive of ICOs. At one point, they even threatened to outright make the trading of cryptocurrencies themselves illegal, prompting 217,000 Koreans to sign a petition urging the government to reconsider their decision.

Public pressure against the government is mounting, and there have been hints that a shift in policy might occur sometime in the near future. Won Hee-ryong, the governor of Jeju province, has been fervently working to attract foreign direct investment to transform the island into an ICO hub. Seeing the development of both blockchain technology and cryptocurrency in the Philippines and Thailand, Won has demonstrated his desire to maintain a certain level of technological competitiveness.

Until the government decides to make some changes to ICO regulations, South Koreans are still heavily investing into altcoins. According to Venturebeat, South Koreans account for nearly 30% of all cryptocurrency trading transactions.

Legal But Regulated

The following is a list of countries which allow ICOs, but are heavily regulated.

France Japan Singapore United Kingdom The United States Estonia Thailand Australia Switzerland Russia

What’s worth pointing out here is that the top seven countries in terms of percentage of ICO projects are all present in this list: the United States, the United Kingdom, Singapore, the Russian Federation, Switzerland, Estonia, and Australia. Let’s examine in particular Australia and Switzerland.

Australia

One of the countries with among the most developed ICO regulations is Australia. The Australian Securities & Investments Commission (ASIC) has crafted a thorough explanation as to how ICOs are perceived from a legal perspective on their government website. The page clearly explains how the legal status of varying ICOs are defined.

The government is also in the process of introducing a new legislative framework for an “enhanced regulatory sandbox to enable new and innovative financial technology (FinTech) products and services to be tested in Australia.”

All of these regulatory acts seemed to have only helped the growth and adoption of crypto assets. HiveEx, An Australian brokerage firm, found that the number of altcoin investors in the country has tripled since the beginning of the year.

Switzerland

The Swiss Financial Market Supervisory Authority (FINMA) oversees the regulation of ICOs and their tokens in Switzerland. The regulatory body has crafted an ICO guide, clearly defining three categories of token types: payment, utility, and asset tokens.

The guidelines also include a description of what specific pieces of information FINMA requires in order to process ICO inquiries.

Similar to the case in Australia, this clear-cut, hands-on approach to dealing with ICOs has lead to an explosive growth of the industry in Switzerland. By March of this year, 146 ICOs had already been successful in the country.

The Takeaway

Through this information, it’s clear that regulation done right can greatly boost the development of ICOs and of the local altcoin market. A balanced approach to regulation that provides a clear and transparent structure without stifling innovation has been the recipe for success in countries like Australia and Switzerland.

While China and South Korea struggle with crafting a similar model, given the huge amount of nationals in their respective countries that seek to invest in altcoins, both countries risk possibly even more by outright banning ICOs. The battle for technological and financial competitiveness is extremely fierce in Asia. By not participating in the development of ICOs and blockchain technology, China and South Korea may lose some ground to other hungrier countries in the region.

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