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International regulation of ICOs | cryptocurrency lawyer

The Regulation of cryptocurrencies and in particular ICOs [Initial Coin Offering] where cryptotokens are issued to investors has become a matter of international concern. In recent weeks, due to a large number of successful funding rounds for a variety of companies and buy-in from some of the largest tech companies & financial institutions in the world, public and private sector interest in the blockchain industry has increased dramatically.

Many commentators feel that regulation is needed to reassure and protect investors and the public so that a ‘dotcom bubble’ is not created which would have an adverse effect on the uptake of blockchain and other DLT technologies. Journalists are already warning that ICOs can damage your health [ See FT 25th May 2017] 

The problem facing advisers and entrepreneurs is that different jurisdictions have taken widely differing approaches to the issues surrounding compliance and regulation. In Europe, the approach seems to be to apply AML regulation to tokens in the 4th AML directive which follows the approach of the US Financial Action Task Force, an international body. Problems may arise as certain types of token ( for example those which only act as ‘fuel’ for a blockchain system) are not suited to this form of regulation, so any attempt to introduce this type of regulation may stifle innovation. Interestingly, it appears that the new Payments Service Directive 2015/2366 does not regulate cryptocurrencies and will probably not apply to tokens.√جª¬ø√جª¬ø

Coinbase has reported that the U.S. Securities and Exchange Commission [SEC] has suspended the trading of shares in an OTC-traded technology company based in Florida over questions about the accuracy of a planned initial coin offering [ICO].

This is the second ICO that has attracted the attention of the SEC. On 7th June this year, the regulator made public its attempts to suspend the trading of securities offering exposure to the company, called Sunshine Capital, citing “public interest” and the “protection of investors”. Of particular concern to the SEC was the value and liquidity of its ‘dibcoin’ cryptocurrency, launched last October, and the accuracy of statements describing the token and its related opportunities.

Issued on 9th August, the order was made against a firm called CIAO Group (now rebranded as NuMelo Technology), which trades on markets operated by OTC Markets Group. NuMelo first announced plans for an ICO on 6th July, at the time indicating a desire to bring a “digital financial products marketplace” based on blockchain tech to the African market.√جª¬ø√جª¬ø√جª¬ø

The SEC felt that the firm ‘blurs the lines between its ideas, evoking the power of blockchain, promising a “$530 billion target market collaboration” and making bold claims about the ability of the technology to revitalise economic access in developing markets.

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