DOCSLIB.ORG

Blockchain and Cryptocurrency: the Emerging Regulatory Framework

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Blockchain and Cryptocurrency: the Emerging Regulatory Framework CLIENT ALERTS BlockchaiN aNd CryptocurreNcy: The EmergiNg Regulatory Framework September 13, 2017 Authors JasoN M. WeiNsteiN, AlaN CohN, Micah S. GreeN, Charles R. Mills, Lisa M. ZarleNga, Jack R. Hayes Overview This summer, US aNd iNterNatioNal regulators have brought eNforcemeNt actioNs, issued guidaNce aNd explaNatory documeNts, aNd sharpeNed previously-takeN positioNs regardiNg regulatioN of cryptocurreNcy aNd crypto-tokeNs uNder the aNti-moNey lauNderiNg, derivatives, securities, aNd tax laws. These actioNs provide a better seNse of the way iN which US regulators will approach the blockchaiN aNd digital asset space goiNg forward, but also leave maNy uNaNswered questioNs. These receNt actioNs iNdicate iNcreased regulatory risk for certaiN types of activities. CompaNies that have made or are coNtemplatiNg makiNg iNitial coiN offeriNgs or cryptocurreNcy iNvestmeNts should assess these activities iN light of these New regulatory proNouNcemeNts. But overall, this latest rouNd of regulatory actioNs may provide greater regulatory certaiNty aNd a better uNderstaNdiNg of regulatory priorities, which iN turN caN provide iNNovators aNd early adopters a clearer legal framework withiN which to operate. ANti-MoNey LauNderiNg ON July 26, 2017, the FiNaNcial Crimes ENforcemeNt Network (FiNCEN) of the US DepartmeNt of the Treasury assessed a civil moNetary peNalty of $110,003,314 agaiNst CaNtoN BusiNess CorporatioN, more widely knowN as the cryptocurreNcy exchaNge BTC-e, aNd a $12,000,000 peNalty agaiNst AlexaNder ViNNik, a RussiaN NatioNal who allegedly coNtrolled, directed, aNd supervised BTC-e’s operatioNs, finaNces, aNd accouNts. ON the same day, a 21-couNt crimiNal iNdictmeNt agaiNst BTC-e aNd Mr. ViNNik was uNsealed, aNd Mr. ViNNik was arrested iN Greece. BTC-e is oNe of the largest virtual curreNcy exchaNges by volume iN the world, but US regulators coNcluded—aNd prosecutors charged—that it was Not operatiNg iN compliaNce with US BaNk Secrecy Act (BSA) regulatioNs. FiNCEN’s actioNs highlight the previously uNspokeN priNciple that a foreigN eNtity operatiNg as a moNey services busiNess (MSB) with activities iN the UNited States will be subject to regulatioN uNder the BSA. The BTC-e actioN is the first supervisory actioN agaiNst a foreigN eNtity operatiNg as aN MSB with activities iN the UNited States. AccordiNg to FiNCEN, BTC-e lacked basic coNtrols to preveNt the use of its services for illicit purposes aNd, as a result, purportedly maiNtaiNed a customer base of crimiNals who coNcealed aNd lauNdered proceeds from crimes such as raNsomware, fraud, ideNtity theft, tax refuNd fraud schemes, public corruptioN, aNd drug traffickiNg, NoNe of which BTC-e reported to FiNCEN aNd law eNforcemeNt. FiNCEN asserted jurisdictioN oN the grouNds that BTC-e processed substaNtial traNsactioNs (approximately $296 millioN) iNvolviNg US customers. FiNCEN fouNd that BTC-e failed to comply with US laws iN a Number of ways: BTC-e failed to register as a moNey services busiNess (MSB), failed to maiNtaiN aN effective aNti-moNey lauNderiNg (AML) program, failed to file suspicious activity reports (SARs), aNd failed to keep traNsactioN records. The case demoNstrates the coNtiNued importaNce of FiNCEN’s BSA regulatory framework to compaNies iN the techNology sector that facilitate traNsactioNs iN virtual curreNcy. FiNCEN’s 2013 regulatory guidaNce oN admiNisteriNg, exchaNgiNg, aNd usiNg virtual curreNcy aNd subsequeNt statemeNts make clear that FiNCEN will eNforce AML requiremeNts agaiNst MSBs/moNey traNsmitters (MTs), with particular scrutiNy oN exchaNges of virtual curreNcy aNd systems providiNg services for such exchaNges. FiNCEN’s receNt actioNs make clear that the ageNcy will seek to eNsure that aNy cryptocurreNcy exchaNge doiNg substaNtial busiNess with US customers Needs to register with FiNCEN aNd comply with the BSA. CompaNies that facilitate traNsactioNs iN virtual curreNcy should review FiNCEN’s guidaNce aNd obtaiN compliaNce advice aNd couNsel wheN Necessary. Commodities aNd Derivatives RegulatioN The Commodity Futures TradiNg CommissioN (CFTC) has beeN relatively quiet siNce opeNiNg several iNvestigatioNs of cryptocurreNcy exchaNges aNd settliNg a high-profile eNforcemeNt actioN agaiNst cryptocurreNcy exchaNge BitFiNex over a year ago. However, the CFTC made waves iN July wheN it graNted LedgerX LLC (LedgerX) permissioN to register as a Swap ExecutioN Facility (SEF) aNd as a Derivatives CleariNg OrgaNizatioN (DCO) for bitcoiN based swaps. Effectively, this makes LedgerX the first bitcoiN optioNs exchaNge aNd cleariNghouse to become approved by US regulators. IN August, the Chicago Board OptioNs ExchaNge (CBOE) veNtured iNto the digital asset space, aNNouNciNg aN agreemeNt with GemiNi Trust CompaNy, LLC (GemiNi) uNder which the CBOE will have aN exclusive global liceNse to use GemiNi’s bitcoiN market data for bitcoiN derivatives aNd iNdices. CBOE will have a multi-year exclusive global liceNse permittiNg it to use GemiNi’s market data, iNcludiNg GemiNi daily bitcoiN auctioN values, iN the creatioN of bitcoiN derivatives products for listiNg aNd tradiNg. AssumiNg regulatory approval by the CFTC, the CBOE plaNs to make bitcoiN futures available for tradiNg iN late 2017 or early 2018. Both compaNies plaN to explore other bitcoiN derivatives opportuNities. The receNt aNNouNcemeNts by the CFTC aNd the CBOE appear to be driveN by the expoNeNtial growth iN market demaNd for iNvestmeNts iN digital assets aNd particularly iN digital curreNcies. The substaNtial growth of the tradiNg volume of the bitcoiN aNd other cryptocurreNcy markets will iNteNsify regulators’ atteNtioN oN these markets aNd protectioN of traders aNd iNvestors, aNd will iNceNtivize market-makers like the CBOE to develop optioNs for iNvestors. These actioNs by the CFTC aNd the CBOE show aN iNcreased williNgNess by the commodities tradiNg commuNity to embrace cryptocurreNcy as a New asset class. The CFTC’s actioNs, iN particular, may also sigNal that its regulatory oversight process will be the primary vehicle for settiNg policy aNd a regulatory framework for cryptocurreNcy aNd blockchaiN activities. Securities aNd INitial CoiN OfferiNgs The SEC took iNitial steps to clarify the regulatory eNviroNmeNt surrouNdiNg ICOs, focusiNg first oN what are geNerally referred to as “equity” tokeNs, leaviNg opeN questioNs about what are typically referred to as “utility” tokeNs. IN late July, iN aN INvestigative Report oN the Distributed AutoNomous OrgaNizatioN (DAO), the Securities aNd ExchaNge CommissioN (SEC) aNNouNced its positioN that “offers aNd sales of digital assets by ‘virtual’ orgaNizatioNs are subject to the requiremeNts of the federal securities laws.” Although Not a surprise, the SEC’s statemeNt affirms that compaNies seekiNg to iNvolve US iNvestors iN aN iNitial coiN offeriNg (ICO) must register offeriNgs with the SEC or qualify for aN exemptioN. The SEC focused its receNt study oN the tokeN offeriNg by the DAO iN April-May 2016. The DAO was built oN top of the Ethereum blockchaiN by the GermaN uNiNcorporated orgaNizatioN Slock.it, aNd the success of its tokeN offeriNg ushered iN the curreNt wave of ICO activity. QuestioNs about the applicatioN of US securities laws surrouNded the DAO offeriNg siNce its iNitial aNNouNcemeNt. The SEC’s report fouNd that the DAO “may have violated federal securities laws,” but it decided agaiNst pursuiNg aN eNforcemeNt actioN, choosiNg iNstead to use the DAO as guidaNce for future ICOs. The DAO tokeNs are commoNly coNsidered to be “equity” tokeNs, as opposed to “utility” tokeNs, so the DAO INvestigative Report leaves opeN questioNs coNcerNiNg how US securities laws will apply to “utility” tokeNs. Aside from the securities registratioN issues, the DAO suffered a breach—or more accurately, aN exploitatioN of a flaw iN its code—iNvolviNg the loss of $50 millioN iN Ether, but the SEC report did Not make aNy findiNgs with respect to that breach. ON the same day as the DAO INvestigative Report, the SEC released aN INvestor BulletiN that provided recommeNdatioNs for compaNies lookiNg to issue tokeNs through aN ICO, iNcludiNg the followiNg: The SEC will iNterpret certaiN ICOs, such as the DAO offeriNg, as the offer aNd sale of securities. If the tokeNs issued as part of the ICO caN be coNsidered securities, theN the virtual coiNs or tokeNs must be registered with the SEC, or the sale must be made pursuaNt to aN exemptioN from registratioN. CompaNies plaNNiNg ICOs should carefully review the criteria for exemptioNs from registratioN, iNcludiNg the provisioNs relatiNg to accredited iNvestors aNd other restrictioNs iNvolviNg Net worth or iNcome requiremeNts, aNd should satisfy the criteria for those exemptioNs for US iNvestors should the tokeN be coNsidered a security. The SEC will likely scrutiNize represeNtatioNs that particular ICO offeriNgs are exempt from registratioN. Sales of tokeNs as part of crowdfuNdiNg should adhere to the requiremeNts of the SEC’s crowdfuNdiNg regulatioNs (called RegulatioN CrowdfuNdiNg) aNd other relevaNt securities laws. If the virtual tokeN or coiN is a security, “iNvestmeNt professioNals aNd their firms who offer, traNsact iN, or advise oN iNvestmeNts” must be liceNsed or registered iN accordaNce with federal aNd state securities laws. The SEC will scrutiNize what it coNsiders to be “jargoN-ladeN pitches, hard sells, aNd promises of outsized returNs.” The SEC also made recommeNdatioNs as to what iNvestors should look for iN a white paper or other offeriNg documeNt: (1) a clear busiNess plaN, (2) descriptioN of rights that accompaNy the tokeN or coiN, (3) optioNs
Load more

Recommended publications
  • Blockchain and Initial Coin Offerings: Blockchain´S Implications for Crowdfunding
    Blockchain and Initial Coin Offerings: Blockchain´s Implications for Crowdfunding by Laurin Arnold, Martin Brennecke, Patrick Camus, Gilbert Fridgen, Tobias Guggenberger, Sven Radszuwill, Alexander Rieger, Andre Schweizer, Nils Urbach December 2018 in: Business Transformation through Blockchain (Hrsg. Treiblmaier, H., Beck, R.) University of Augsburg, D-86135 Augsburg Visitors: Universitätsstr. 12, 86159 Augsburg Phone: +49 821 598-4801 (Fax: -4899) 843 University of Bayreuth, D-95440 Bayreuth - I Visitors: Wittelsbacherring 10, 95444 Bayreuth W Phone: +49 921 55-4710 (Fax: -844710) www.fim-rc.de Blockchain and Initial Coin Offerings: Blockchain’s Implications for Crowdfunding Abstract Interest in Blockchain technology is growing rapidly and at a global scale. As scrutiny from practitioners and researchers intensifies, various industries and use cases are identified that may benefit from adopting Blockchain. In this context, peer-to-peer (P2P) funding through initial coin offerings (ICOs) is often singled out as one of the most visible and promising use cases. ICOs are novel forms of crowdfunding that collect funds in exchange for so-called Blockchain tokens. These tokens can represent any traditional form of underlying asset and have already been used, among others, to denote shares in a company, user reputations in online systems, deposits of fiat currencies, and balances in cryptocurrency systems. Importantly, ICOs allow for P2P investments without intermediaries. In this chapter, we explain the fundamentals of ICOs, highlight their differences to traditional financing, and analyze their potential impacts on crowdfunding. Keywords Blockchain, Initial Coin Offering, ICO, Distributed Ledger Technology, Crowdfunding, Cryptocurrency, Crypto-token, Use Case Analysis Table of Contents 1. Crowdfunding and Blockchain .......................................................................................................
    [Show full text]
  • Initial Coin Offerings: Financing Growth with Cryptocurrency Token
    Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales Sabrina T. Howell, Marina Niessner, and David Yermack⇤ June 21, 2018 Abstract Initial coin offerings (ICOs) are sales of blockchain-based digital tokens associated with specific platforms or assets. Since 2014 ICOs have emerged as a new financing instrument, with some parallels to IPOs, venture capital, and pre-sale crowdfunding. We examine the relationship between issuer characteristics and measures of success, with a focus on liquidity, using 453 ICOs that collectively raise $5.7 billion. We also employ propriety transaction data in a case study of Filecoin, one of the most successful ICOs. We find that liquidity and trading volume are higher when issuers offer voluntary disclosure, credibly commit to the project, and signal quality. s s ss s ss ss ss s ⇤NYU Stern and NBER; Yale SOM; NYU Stern, ECGI and NBER. Email: [email protected]. For helpful comments, we are grateful to Bruno Biais, Darrell Duffie, seminar participants at the OECD Paris Workshop on Digital Financial Assets, Erasmus University, and the Swedish House of Finance. We thank Protocol Labs and particularly Evan Miyazono and Juan Benet for providing data. Sabrina Howell thanks the Kauffman Foundation for financial support. We are also grateful to all of our research assistants, especially Jae Hyung (Fred) Kim. Part of this paper was written while David Yermack was a visiting professor at Erasmus University Rotterdam. 1Introduction Initial coin offerings (ICOs) may be a significant innovation in entrepreneurial finance. In an ICO, a blockchain-based venture raises capital by selling cryptographically secured digital assets, usually called “tokens.” These ventures often resemble the startups that conventionally finance themselves with angel or venture capital (VC) investment, though there are many scams, jokes, and tokens that have nothing to do with a new product or business.
    [Show full text]
  • Initial Coin Offering - ICO
    Initial Coin Offering - ICO What is an ICO? The term ICO stands for "Initial Coin Offering" and is a designation for a new form of corporate or project financing based on the blockchain technology. The purpose of the ICO is to raising capital for a company or project by means of an unregulated type of crowdfunding. A company issues its own proprietary virtual currency in the form of "Tokens" or "Coins". These "Tokens" or "Coins" can be bought by investors using another currency, most frequently a virtual currency, for example Bitcoin or ether. An ICO may also be called a "token sale" or "coin sale". What is the purpose of a "Token" or a "Coin"? A "token" or "coin" in relation to an ICO is connected to a specific company or project and may constitute a share in the company, a share in proceeds that are yet to be realised, or in some cases does not constitute any recognisable value. Investing in an ICO is generally associated with a high level of risk. It may also result in a total loss of the invested capital. What risks may be associated with an ICO? Uncertain prospects of success: typically ICO projects are at a very early stage of development and their business models are experimental. It is uncertain whether the business idea will bring profits. The prospect of the ICO being financially success is therefore not guaranteed, and the development of the value of the investment is uncertain. IT Risk: the underlying technology (distributed ledger or blockchain) is usually relatively new and has not been adequately tested, and therefore might lead, not only for the project to be financed, but also for the technology used to problems (hacks, coding errors etc.) Liquidity risk: the possibility to trade or cash in the acquired Token on a platform, or to exchange it for a legal payment instrument, may be limited.
    [Show full text]
  • Blockchain & Cryptocurrency Regulation
    Blockchain & Cryptocurrency Regulation Third Edition Contributing Editor: Josias N. Dewey Global Legal Insights Blockchain & Cryptocurrency Regulation 2021, Third Edition Contributing Editor: Josias N. Dewey Published by Global Legal Group GLOBAL LEGAL INSIGHTS – BLOCKCHAIN & CRYPTOCURRENCY REGULATION 2021, THIRD EDITION Contributing Editor Josias N. Dewey, Holland & Knight LLP Head of Production Suzie Levy Senior Editor Sam Friend Sub Editor Megan Hylton Consulting Group Publisher Rory Smith Chief Media Officer Fraser Allan We are extremely grateful for all contributions to this edition. Special thanks are reserved for Josias N. Dewey of Holland & Knight LLP for all of his assistance. Published by Global Legal Group Ltd. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 207 367 0720 / URL: www.glgroup.co.uk Copyright © 2020 Global Legal Group Ltd. All rights reserved No photocopying ISBN 978-1-83918-077-4 ISSN 2631-2999 This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. The information contained herein is accurate as of the date of publication. Printed and bound by TJ International, Trecerus Industrial Estate, Padstow, Cornwall, PL28 8RW October 2020 PREFACE nother year has passed and virtual currency and other blockchain-based digital assets continue to attract the attention of policymakers across the globe.
    [Show full text]
  • Initial Coin Offering and Platform Building
    Initial Coin Offering and Platform Building Jiasun Li∗ William Mann† August 31, 2018 Abstract In a typical initial coin offering (ICO), an entrepreneur pre-sells digital tokens which will later serve as the medium of exchange on a peer-to-peer platform. We present a model rationalizing ICOs for launching such platforms: by transparently distributing tokens before the platform operation begins, an ICO overcomes later coordination failures between transaction counterparties induced by a cross-side network effect. In addition, we rationalize several empirical features of the ICO structure in the presence of a critical mass requirement imposed by a same-side network effect. Our model provides guidance for both regulators and practitioners to discern which ICOs are economically valuable. Keywords: coordination, entrepreneurial finance, fintech, ICO, network effect, platform ∗George Mason University, 4400 University Drive, MSN 5F5, Fairfax, VA 22030. [email protected]. †UCLA Anderson School of Management, Entrepreneurs Hall C.406, 110 Westwood Plaza, Los Angeles, CA 90095. [email protected]. 1 Initial coin offerings, or ICOs, have recently exploded in popularity in the startup world. In a typical ICO, an entrepreneur pre-sells digital tokens which will later serve as the medium of exchange on a peer-to-peer platform. According to CB Insights, \2017 was a record year for equity deals and dollars to blockchain startups, but it was nothing compared to ICO market activity. ICOs raised over $5B across nearly 800 deals in 2017, while equity investors deployed $1B in 215 deals to the sector."1 Such a startling growth can be interpreted in different ways.
    [Show full text]
  • Difference Between Coin Token and Protocol
    Difference Between Coin Token And Protocol campanileBjorne patch-up and attack hydrostatically his sortes while so peevishly! hyperbolic Ordovician Bo prod buzzinglyand unwifely or tows Tremaine derisively. never Salpiform propine hisAngus deerstalker! nomadizes some Furthermore Lumens coins are inflationary while XRPs are deflationary meaning. Coinbase added COMP to our supported assets for Coinbase and Coinbase Pro. Another difference between different protocols and differences between parties. Facilitate collaboration and quickly gained strong background in. Difference Between Coins and Tokens by Spiking Editor. For example, DAI and USDC are both pegged to the US dollar. The tokens and between the laws and represents a system can host a stable cryptocurrencies and whether the steem went up? To appoint my band well, slowly research existing malware so bizarre I can inform my customers how serious or how harmful these viruses could be. Why air New Tokens Are Ethereum ICOs skalex. Offers based on different coins, protocol tokens in a difference between placement of mining works when attempting to develop it would farm, ripple refers to. Security tokens are created through a type my initial coin offering ICO sometimes referred to skirt a security token offering STO to plug it whether other types of. This problem describes the dilemma that a critical number of sellers or vendors is necessary to be of cover to customers as a platform. Sec regulation s options and each has included on leveraged crypto businesses that difference between coin token and protocol tokens are similar to. Bitcoin and coins differ from the difference. But whenever you growing like other, you well go cheer the nearest machine and reward them.
    [Show full text]
  • Initial Coin Offerings
    Staff Working Paper/Document de travail du personnel 2019-18 Entrepreneurial Incentives and the Role of Initial Coin Offerings by Rodney Garratt and Maarten R. C. van Oordt Bank of Canada staff working papers provide a forum for staff to publish work-in-progress research independently from the Bank’s Governing Council. This research may support or challenge prevailing policy orthodoxy. Therefore, the views expressed in this paper are solely those of the authors and may differ from official Bank of Canada views. No responsibility for them should be attributed to the Bank. www.bank-banque-canada.ca Bank of Canada Staff Working Paper 2019-18 May 2019 Entrepreneurial Incentives and the Role of Initial Coin Offerings by Rodney Garratt1 and Maarten R. C. van Oordt2 1 University of California at Santa Barbara Santa Barbara, California, United States [email protected] 2 Currency Department Bank of Canada Ottawa, Ontario, Canada K1A 0G9 [email protected] ISSN 1701-9397 © 2019 Bank of Canada Acknowledgements We thank Toni Ahnert, Jonathan Chiu, Co-Pierre Georg and participants in seminars at the Bank of Canada, the Federal Reserve Bank of Chicago, Purdue University and Indiana University for helpful comments and suggestions. We are grateful to Salman Hussein Hasham and Julia Zhu for research assistance. This paper was written while Garratt was a visiting scholar at the Bank of Canada. The views in this paper do not necessarily reflect those of the Bank of Canada. i Abstract Initial coin offerings (ICOs) are a new mode of financing start-ups that saw an explosion in popularity in 2017 but declined in popularity in the second half of 2018 as regulatory pressure, instances of fraud and reports of poor performance began to undermine their reputation.
    [Show full text]
  • SEC Provides First Guidance on Cryptocurrency, Blockchain and Initial Coin Offerings By: Thomas H
    www.richmaylaw.com August 9, 2017 | Business, Corporate & Securities, Insights SEC Provides First Guidance on Cryptocurrency, Blockchain and Initial Coin Offerings By: Thomas H. Bilodeau, III, David Glod On July 25, the U.S. Securities and Exchange Commission (“SEC”) released a Report of Related Services Investigation that represents the first major injection of regulatory guidance into the Business, Corporate & Securities burgeoning cryptocurrency markets. A breakdown of the key takeaways from the SEC’s Report and what it means for the cryptocurrency market going forward can be found below: Related Attorneys Thomas H. Bilodeau, III David Glod I. CRYPTOCURRENCY BACKGROUND Cryptocurrencies, Bitcoin being the first and most prominent, are a recent development best described as digital currency. Bitcoin, Ether, and other cryptocurrencies are powered by blockchain technology, which acts as a public, distributed ledger recording all peer-to- peer transactions in the cryptocurrency. The blockchain system is decentralized and automated. To accomplish this, the blockchain is maintained by a network of communicating nodes running cryptocurrency software. A number of available software applications broadcast transactions to the network, where the nodes validate them, add them to their copy of the ledger, and then broadcast the new addition to the ledger to the other nodes on the network. At certain time intervals, a group of accepted transactions called a block is added to the blockchain and published to all nodes. These new blocks are assembled by “miners”—people or organizations with powerful specialized computers who compete to process transactions and get rewarded with cryptocurrency. Blockchain technology provides the security, privacy, and decentralization that underlie the recent popularity of cryptocurrencies.
    [Show full text]
  • Adapting Securities Laws to Initial Coin Offerings
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
    [Show full text]
  • Icos Initial Coin Offerings (Icos) Are Attracting Investors Interested in New Trends in Technology Investing
    Are You An Informed Investor? What to Know about ICOs Initial Coin Offerings (ICOs) are attracting investors interested in new trends in technology investing. Regulation of ICOs is evolving and complex. With considerably fewer investor protections than in traditional securities markets, investors considering participating in an ICO investment should be aware of the growing potential for fraud and manipulation these offerings present. Investors need to approach ICOs with extreme caution. ICOs are very risky and are not suitable for many investors. You could lose all of your investment. Before parting with your hard-earned money, make sure you know what you’re getting into. What is an Initial regulators or have an exemption from individuals or firms selling them to Coin Offering? registration. Most exemptions require be licensed or registered with securi- sales only to accredited investors, or ties regulators. Potential purchasers An Initial Coin Offering (ICO), also those with net worth of more than $1 can check the registration status and sometimes referred to as an Initial Token million. Use extreme caution when background of those selling “coins” and Offering (ITO), is a method used by an dealing with promoters who claim their “tokens” by contacting their state or individual, group of individuals or orga- ICO offering is exempt from securities provincial securities regulator or by nization to raise capital for a planned registration yet does not ask about your visiting Investor.gov. project. Most ICO’s involve projects income, net worth or level of investing that are at the “idea” stage and in many sophistication. instances may lack a prototype or “real While some may tout ICOs as a new world” implementation of the idea.
    [Show full text]
  • What to Know About Icos Initial Coin Offerings (Icos) Are Attracting Investors Interested in New Trends in Technology Investing
    Are You An Informed Investor? What to Know about ICOs Initial Coin Offerings (ICOs) are attracting investors interested in new trends in technology investing. Regulation of ICOs is evolving and complex. With considerably fewer investor protections than in traditional securities markets, investors considering participating in an ICO investment should be aware of the growing potential for fraud and manipulation these offerings present. Investors need to approach ICOs with extreme caution. ICOs are very risky and are not suitable for many investors. You could lose all of your investment. Before parting with your hard-earned money, make sure you know what you’re getting into. What is an Initial regulators or have an exemption from individuals or firms selling them to Coin Offering? registration. Most exemptions require be licensed or registered with securi- sales only to accredited investors, or ties regulators. Potential purchasers An Initial Coin Offering (ICO), also those with net worth of more than $1 can check the registration status and sometimes referred to as an Initial Token million. Use extreme caution when background of those selling “coins” and Offering (ITO), is a method used by an dealing with promoters who claim their “tokens” by contacting their state or individual, group of individuals or orga- ICO offering is exempt from securities provincial securities regulator or by nization to raise capital for a planned registration yet does not ask about your visiting Investor.gov. project. Most ICO’s involve projects income, net worth or level of investing that are at the “idea” stage and in many sophistication. instances may lack a prototype or “real While some may tout ICOs as a new world” implementation of the idea.
    [Show full text]
  • Initial Coin Offerings This Paper Examines Initial Coin Offerings and the Evolving Regulatory Landscape Governing Offerings of Digital Assets
    Initial Coin Offerings This paper examines initial coin offerings and the evolving regulatory landscape governing offerings of digital assets. An initial coin offering (“ICO”) is the process by which an organization creates and issues crypto-coins, also referred to as tokens, that are necessary to fund and operate a specific blockchain-based application developed and run by an entity. Unlike traditional virtual currencies such as Bitcoin and Ether, crypto- coins that are offered as part of an ICO generally are not intended to be used as currency, but rather as tokens that are linked to tangible assets in the form of either (1) access to the protocols or utility of a new application, or (2) an investment/quasi-ownership stake in the application. A central question in connection with ICOs is whether the digital asset being offered constitutes a security, making the ICO subject to the federal securities laws. The Securities and Exchange Commission (the “SEC”) has been increasingly focused on ICOs and made it clear that unregistered offerings of crypto-coins that constitute securities may be subject to enforcement action. As described below, digital assets may also be regulated as commodities by the Commodities Futures Trading Commission (“CFTC”). The Case of The DAO The SEC first articulated its framework for regulation of digital assets in the case of a decentralized autonomous organization called “The DAO,” which was launched via ICO on the Ethereum network in 2016. The decentralized autonomous organization had been heralded as the “dream use case” of decentralized applications that could do away with organizational hierarchy, power “leaderless” organizations, and revolutionize crowdfunding and venture capital industries.
    [Show full text]