ICOs | From Illegal to Regulated

Legislation in favor of Bitcoin has been steadily progressing. Although still mostly unregulated, Bitcoin is now considered legal in European Union countries, and most American and Asian countries. However, the legal status enjoyed by Bitcoin is not shared by the Initial Coin Offering (ICO) market. Three days ago, the People’s Bank of China (PBoC) released a statement prohibiting any organization or individual to start or participate in token fundraising.

In the official declaration from the PBoC, organizations and individuals are now unauthorized to participate in token sales or campaigns, which are now considered illegal methods of raising money. The PBoC also requested exchange platforms to stop their trading services of crypto tokens and Blockchain projects, who had recently completed their ICO campaigns, to refund their Chinese investors. A day after, Julia Leung, an executive director of the Hong Kong’s Securities and Futures Commission (SFC), stated that ICO’s may be classified as securities. She further quoted:

“Parties engaging in the secondary trading of such tokens (e.g. on cryptocurrency exchanges) may also be subject to the SFC’s licensing and conduct requirements.”

ICO Legal Landscape

This comes in line with recent events in the North American soil, where the crypto token legal situation took some form. The US Securities and Exchange Commission (SEC) has been issuing suspensions on cryptocurrency related firms involved in ICO investments. They also released a statement last July, informing the intentions of the US government to regulated ICO’s as securities and that anyone involved in creating or participating in unregistered ICO’s could face criminal punishment.

Following these events, the Canadian Securities Administration (CSA) also stated that ICO’s should be regulated as securities as well, and listed the requirements that companies should now take when launching and managing ICO’s.

But Canada seems to have the more liberal and progressive approach because not long ago Impak Coin, a token to be released on the Waves Platform, became the first ever regulated ICO in Canada. The Autorite des marches financiers (AMF), a Quebec financial regulator, even accepted the company behind the ICO, Impak Finance into its regulatory sandbox. This regulatory sandbox is meant to jumpstart financial technology projects, like ICO’s, that don’t fit the same molds as regular securities. And that’s exactly what happens, AMF relieved Impak from some of the necessary requirement that security issuers would normally have to take. According to, director of AMF’s corporate finance division:

“It’s in the spirit of the sandbox that we are willing to alleviate some of the requirements on, sort of, a test case basis. It’s a test run to see whether there are investor protection [issues] with the relief that we grant.”

The Future of Crypto Tokens

The crypto market seems to be recovering rather quickly after the price drop caused by the announcement from the PBoC. Regulation might be a good way to prevent the numerous hacks and scams that have happened throughout ICO history. If more commissions and regulators start taking steps similar to AMF, regulating and harmoniously integrating ICO’s into the financial world, then companies and startups won’t have to move to more legal friendly countries.

From Illegal to Regulated

The use of decentralized platforms that are specially designed for crowdfunding and creation of crypto tokens, like the Waves Platform, are going to become essential in terms of compliance. While “ICO Ban” is occurring in China, ‘Waves’ is working on legal blockchain framework together with partners like Deloitte CIS and Kazakh authorities to help ease the process of compliance. Let’s hope that effort made by many and these drastic changes seen recently end up having a positive impact on the crypto ecosystem and that ICO market keeps its steady growth.