While it’s been around for much longer, Initial Coin Offerings (ICOs) have been the latest craze within the blockchain community since 2016, as organizations like The DAO raised about $160 million dollars in funding. Simply put, ICOs are a means for a company to raise funding for a blockchain based start-up, where ownership is distributed through tokens that can be exchanged into cryptocurrency or fiat money.
There have been quite a lot of negative factors associated with ICOs, as the risks seem to outweigh the benefits. For one, with the process being largely unregulated. This means that there are a lot of organizations that end up being scams, taking investors money and failing to produce anything worthwhile. Furthermore, a lot of the crypto-related projects that are published on a white paper fail to offer anything concrete or worth investing into. All of these factors can lead to high risk for investors.
Yet, on the flip side, there is level of high reward in this market, since if invested into a legit, worthwhile project, ROIs can be massive. The Ethereum ICO for example is a prominent case, where they initially sold at 0.005 Bitcoin, but are now worth around 0.064 BTC, showing an unprecedented profit of 10,000%.
While IPOs and ICOs both focus primarily on offering their shares to the public with hopes of collecting their funds for expanding their business, there are slight differences that separate the two from one another that most people must know. For example, ICOs are typically open to everybody while the former are exclusive to a certain number of people. Furthermore, while IPOs are mainly meant to collect dividends and appreciating stock value, ICOs, while still having a hope of a good ROI, are largely meant for promoting the company and its services. And one of the larger distinguishing factors are that IPOs are heavily regulated, while ICOs are still wrapped with uncertainty when it comes to regulatory insight, although this has began to take more shape in recent times.
Since Bitcoin began to take more mass appeal, nations have been figuring out how to handle the sudden disruption ICOs have been making on the market, and the responses across Asia have been interesting to note.
ICO Regulations in Asia
Communist mainland China has probably been one of the more prominent countries that have shown the strongest reaction against ICOs. At a time when many nations in Asia were still figuring out what to do with the appealing trend and how to regulate it, China burst the bubble on September, 2017 by putting a ban on cryptocurrencies and ICOs as a whole. This stance has gone so far as to block all international websites even mentioning cryptocurrency and the use of it. This decision shook the world as China has long served as a world leader in the financial sector, having immense economical influence on the business and manufacturing industries. Yet, although this decision startled the community, it was not so surprising, as the idea of a cryptocurrency and a decentralized system that would free the masses would be rather unsettling for a country like China that runs off of a centralized system that governs all citizens lives.
Japan has always served as one of the great supporters to ICOs, being ranked as the 5th most friendliest country to cryptocurrency and a nation where cryptocurrency was permitted to be used as a payment by individuals since April, 2017. With 63% of the world’s bitcoins being traded in Japan, the country serves as a leader among the ICO community. And since September, 2017, has expressed that they have no interest to ban the cryptocurrency, yet have released warnings against negative uses. For example, in October, 2017, the Financial Services Agency of Japan published warnings on ICO investments, emphasizing the point that many projects are fraudulent and investors are at high-risk of no return.
- South Korea
South Korea, while initially being open to ICOs, standing with Japan as a potential leader in the development of the crypto world, eventually followed the footsteps of China on September, 2017. At the end of the month, South Korea startled the crypto world, as the Financial Supervisory Service (FSS) released a statement on banning “raising money in virtually all forms of cryptocurrency.” The reasoning behind their stance was similar to China’s, as they claimed it was out of the interest to protect investors after realizing the myriad of cases of frauds out there. Yet, although their stance has remained rather strong for the months since, recently (as of March, 2018), reports have been released that the Korean government is working on possibly lifting the ban and finding more effective regulatory oversight, possibly open to talks with Japan and/or China on exploring regulatory cooperation.
- Hong Kong
Unlike their counterpart China, Hong Kong’s Securities and Futures Commission (SFC) did not express desire to ban cryptocurrencies or ICOs. Instead, their statements released indicated that tokens released for ICO projects were to comply to Hong Kong securities laws. Furthermore, those interested in these activities would require a license and registration with the SFC. A company’s ICO would be regulated by law and would be held to full legal responsibility. For the most part, Hong Kong’s stance has been rather lenient, siding more with the views of countries like the United States and Canada.
Malaysia has been rather neutral toward ICOs throughout, with it’s only major statement being in September, 2017. At that time, they warned investors to be “mindful of ICO schemes” and mentioned that one should take careful legal advice when making the decision to invest. Now, in 2018, with the advent of new ICO projects soliciting senior citizens and the overall public at large, the Securities Commission Malaysia released a new statement in January warning investors once more on potential fraud offerings. While there still isn’t an enforced ban or legal suppression quite yet, it appears that only time will tell until we see the country act.
Taiwan (the other China) is another country that has been rather open to ICOs. Since October, 2017, they have expressed that the Taiwanese government sees opportunity in using blockchain technology and cryptocurrencies as a means to develop their country, instead of holding it back. Instead of following suit with neighboring countries South Korea and mainland Communist China by banning ICO-related projects, Taiwan’s Financial Supervisory Commission has expressed that the government has always offered support for ICO related startups and financial technology. Thus, with their outright stance on working to develop a regulatory framework, it will be interesting to see where Taiwan will be in the future of the crypto world.
Indonesia, surprisingly serving as a huge rising e-commerce hub in Asia and one of the largest economies of Asia, expressed on December, 2017 their stance on banning ICOs, rendering cryptocurrencies useless. While looking into whether or not the Bank of Indonesia would be ruling Bitcoin as a means of payment, it was reported that merchants and investors should stay away from transactions that make use of this currency.
Thailand, much like most of the other countries in Asia, has expressed their sentiment toward ICOs, reporting that there is potential for ICOs to be used for fraud and scams. In September, 2017, Thailand Securities and Exchange Commission (SEC) released a statement showing that, while it is not going as far as to ban the use of cryptocurrencies and/or ICOs, it is staying alert and keeping an eye on its development. While they have acknowledged that there are cases of fraudulence, the financial regulator of the SEC has said “The SEC Thailand encourages access to funding for business, including high potential tech startups, and realizes the potential of ICO in answering startups’ funding needs.” As of March, 2018, it was announced that the country’s central bank would be open to enact new laws that would help comprehensively regulate cryptocurrencies for the future.
Singapore has served as sort of a hub for ICO-related startups, with the country’s taxation laws and government’s open attitude, the Monetary Authority of Singapore (MAS) released guidelines related to ICOs and cryptocurrencies in November, 2017, explaining their purpose, what they were and were not to be used as. The guidelines go into specifics on how the security laws would be applied to ICOs and the possibility of certain projects being regulated. As beyond all else, MAS aims to maintain Singapore as a financial hub. This has not been without total skepticism, however.
In the end, as 2017 was the year that ICOs and cryptocurrencies flooded into the mass markets, it will be interesting to see where 2018 goes, as the current outlook of ICOs at large in Asia seems rather optimistic. While countries like China and Indonesia have remained strong with their prohibition on the use and trade of cryptocurrencies, deeming it dangerous and high-risk, the slow ease and acceptance of ICO projects from previously banned nations like South Korea are demonstrating that no decision is for certain. At the end of the day, ICOs are not expected to disappear completely. Just as many of the countries like Thailand and Taiwan are doing, as long as the proper regulatory frameworks are created, embracing the blockchain technologies involved and the rising innovative startups which are using ICOs could truly help Asia grow into a technologically proud place.
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