Asian market of emerging ICO start-ups had always been one of the most popular and lucrative ones. The market volumes in these countries rise constantly. Let’s consider the current governmental position on ICO in main countries of the Asian region.
Last year had seen the pressure on ICO market tightening as many major regulators including China had decided to take ultimate steps regarding the use of this economic model. Nonetheless, the ground behind such serious actions had been present – as the major checking’s had shown the fraudulent nature of the most digital start-ups.
An official document issued by the People’s Bank of China had indicated the number of 90% of start-ups being present as a scam. As a result, the
decision was to ban all the ICOs from China, either targeting domestic or an international market.
As a result, the world’s largest token sale market had been taken out of the picture. Moreover, the special directive statement had ordered all the Chinese companies not only to stop any ongoing and future projects, but also to fully return funds to their investors. These events led to Bitcoin and Ethereum market crash on 11 and 16 percent respectively, as the announcement went worldwide.
The regulators in this autonomy, presented by the Securities and Futures Commission (SFC), had been less straightforward. Instead of simple and total ICO ban, a certain set of rules for the ICO launching companies and entrepreneurs had been issued.
The approach taken by the SFC had been the following: ICO start-ups tokens could be considered as securities and had to comply with the Hong-Kong securities law. As a result, the ICOs are viewed as the activities regulated by the law and the teams launching them hold full legal responsibility. No matter which location these start-ups are registered in, the companies that are participating in such ventures must obtain specific licenses and to register in the SFC.
The legal statement indicated that tokens as an investment instruments should be considered depending on liability options, which are: the debt instrument use; corporate rights and property provision, collective investment scheme for token shares.
Summing that up, the current ICO market state in Hong-Kong could be considered quite liberal.
At the moment, the cryptocurrency market in Japan is the largest in the world – the country holds nearly 35% of the global volume of bitcoin trading according to the cryptocompare.com data. This is facilitated by various factors – the loyalty of the government of the country to new technologies and Bitcoin as well as the lack of a legislative framework for the direct ICO regulation.
Japan is one of the leading countries in terms of technology, and digital currencies are no exception – this country was one of the first to legalize cryptocurrencies, which occurred on April 1, 2017.
as means of payment for individuals and companies. The country controls approximately 65% of the world Bitcoin market at the moment and leads in the number of legal cryptocurrency exchanges.
Nevertheless, there are certain difficulties that prevent Japan from becoming a place of pilgrimage for ICO companies. For example, in order to conduct the business, the company must pay a license and to keep a reserve of funds in the amount of at least $100,000 and be ready for regular audits. Any incomes from cryptocurrency operations are taxed the same as Fiat profit.
At the moment, there is no legislative framework for the direct regulation of ICO in Japan, but the “law on virtual currencies” has been adopted recently. This law defines the legal status of how to attract investments in Japan – in particular, according to this collection of regulations, any company that is going to conduct Initial Coin Offering and issue its own digital currency, must be officially registered.
According to the latest Pony JFSA information, at the end of December 2017 the Bitocean Corporation specializing exclusively in bitcoin Toras. At the moment, she was 16 at the expense of officially sanctioned Burj in Japan, right – of pollute applicants over the past year. This bra since 2013 works in China and Japan, is engaged in the development of a trading platform and bitcoin Bank for operations on the period of cryptocurrency in Fiat funds.
In 2017 the Japanese finance regulator issued 15 rights totally – 11 at the end of September for the following exchanges: Money Partners, Quoine, Bitflyer, Bit Bank, SBI Virtual Currencies, GMO Coin, Bittrade, Btcbox, Bitpoint, Fisco Virtual Currency, и Zaif., and another 4 – in December 2017:Tokyo Bitcoin exchange, a bit of Arg stock Exchange, Tokyo, FTT corporations and Xtheta Corporation.
Another interesting point- it is curious that until recently, the FSA has never disclosed the names of companies that provided a legality application and are under review. The financial published a list of 32 exchanges on February 1, which are currently the object of attention of this organization, and it also includes 16 cryptoexchanges that have not yet obtained the license.
In addition to the above 16 exchanges currently working, another 16 are not currently licensed, but classified as “considered the Virtual value traders”, while their analytical FSA is being conducted, the Agency explained. Among them is Coincheck, one of the largest cryptocurrency exchanges in the country. Interestingly, at the same time, the application of the second crispy pans of crypto currency exchange Coincheck, which had water in the FSA in mid-September are still under consideration by the regulator.
Another 15 are: Minnano Bitcoin, Payward Japan, Lemuria Bitcoin Exchange (Bitcrements), Campfire Corporation, Tokyo Gateway, Lastroots Corporation, Debit, Eternal Link, FSHO Corporation, Kirin Corporation, Bit Station, Blue Dream Japan, Mr. Exchange, Bmex Corporation and Bitexpress Corporation.
The Agency published this list in response to the recent hacking of Coincheck, Japan’s largest cryptocurrency exchange at the moment. On Friday, January 26, the Coincheck platform announced the theft of 58 billion yen ($533 million) in NEM crypto currency (XEM). Even earlier, Coincheck suspended operations with NEM and other altcoins, after more than 100 million XRP tokens had been withdrawn from the company’s wallet in an unknown direction (about $123.5 million at the rate).
At the same time, although the exchange promises to repay the debts of its 260,000 affected clients from the company’s wallet, no timeframe for payments has yet been established. In addition, the FSA has ordered to conduct internal audits of all other cryptocurrency exchanges in Japan on the basis of a checklist of 43 items, according to Jiji Press. They must report on their risk management systems, such as the details of their systems for asset management clients and offer countermeasures cyber-attack prevention.
According to Reuters, the FSA ordered Coincheck to submit an “ incident report and measures to prevent recurrence” by February 13, 2018. In addition, the Agency can “conduct on-site inspections of other exchanges», the press service said. In addition, the Tokyo police Department will soon investigate the stock exchange hack.
At the moment, the government of Japan is not likely going to ban the ICO. Nevertheless, it is planned to create a legislative framework for regulation, the main priorities of which will be the fight against fraudulent projects and the protection of investors ’ funds, the inability to launder money during the ICO, as well as the creation of a set of rules for processing cryptocurrency transactions.
JFSA also issued a statement about the risks of investing in the ICO for the citizens of the country from 27/10/2017.It follows the trend of tightening ICO regulation by the governments of the Asian region countries.
In a statement, the Japanese FSA warns the citizens of the country about the possible risks of a sharp decline in token prices, as well as the risks of potential fraud conducted by the ICO companies: the opportunities of the token described in the White Paper projects may not be planned for implementation at all, and goods and services may not be intended to be provided for the platform tokens.
The financial regulator also reported that the ICO could fall under the law on payment services on securities market and stock exchange legislation depending on the legal registration of the ICO. In this case, the organizing companies of the ICO must comply with the requirements of a specific law, including mandatory registration.
In addition, the regular provision of services related to the exchange of cryptocurrencies will require a separate registration with the local financial Bureau. JFSA also specifically noted that carrying out these activities without registration is a crime in Japan.
To sum up, on the one hand, the JFSA and the authorities of the country encourage the production and use of cryptocurrencies, including through the adoption of a special law that enshrines the regime of virtual currencies as a monetary value used in the performance of obligations.
On the other hand, not all the tokens are cryptocurrency at large, and not all the token functions are limited to the means of exchange. That’s why the JFSA position is rather guided on the elimination of uncertainty than tighter ICO regulation.
These points, as well as all the above laws are included in the official document of the Japanese Blockchain Union of November 18, 2017 – ‘guide to ICO sale marker for residents of Japan.’
Koji Higashi, the co-founder of the digital token wallet IndieSquare and a very prominent figure on the Japanese cryptocurrency scene, believes that despite recent steps, there is still uncertainty about the country’s position regarding the ICO. Contrary to popular belief, many industries Japan is not risk-averse and conservative, and he believes that the suppression of the new amount of cryptocoins JFSA is still ‘certainly possible.’
‘Japan, in fact, is not very friendly to the ICO. Regulators are simply more loyal than in other countries. They are trying to find out whether it will be good or bad,’ he said during a visit to Seoul”. This does not mean that the JFSA will not begin to regulate the ICO more actively in the future when serious problems begin to arise.”
However, while the issue of ICO regulation is in limbo, some Japanese companies take advantage of the model. For example, at the end of November 2017, the administration of the village of Nishiavakura distinguished itself, which thanks to ICO successfully raised money for the revival of the economy in the region.
The recent events in Japan shows that the country will not become a new Mecca for the ICO campaigns in a short run as the latest trends, including a tightening of the rules JFSA hacking exchange Coincheck, an additional review of the exchanges does not improve the investment climate of the country.
The country regulator called the Financial Supervisory Service (FSS) had taken the cardinal approach to the ICO emerging market. While nearly two million people trading digital assets, South Korea is considered the world’s third-largest cryptocurrency market accounting for some 15% of daily global trade volume. Many analysts believe the unusual popularity of cryptocurrency in South Korea may be attributable to a unique mixture of geopolitical and cultural factors.
The digital currency meeting in Seoul had seen the declaration of the full ban of the all forms of virtual currencies fundraising. The reasons behind this had been clarified quite simple – the investors safety as the legal examination had revealed the unprecedented number SCAM projects. This event had put many in despair as before the controversial decision, the South Korean market had been viewed alongside Japan as one of the most favorable for an overall crypto industry development and ICO start-ups launch.
Speaking about the best directions for ICO market development, this city-state is definitely aimed to become the most attractive one.
Certain factors could explain this phenomenon, though the main things is a government attitude as it results in convenient taxation rules and the government funding of the best digital start-ups.
Back In August 2017, the Monetary Authority of Singapore (MAS) issued its first guidance note on ICOs that stated “the function of digital tokens has evolved beyond just being a virtual currency” to the point that some coins “may represent ownership or a security interest over an issuer’s assets or property.”
In result, sellers of tokens with these characteristics are required to register a prospectus with MAS prior to their ICO. Along with secondary market operators set to trade the tokens, these sellers are also subject to Singaporean licensing requirements for securities vendors and need regulatory approval from MAS. This closely follows the line adopted by the US Securities & Exchange Commission.
In regard to ICOs, the Authority wishes to hold the Singapore reputation as a financial center and at the same to prevent money laundering. Already in August MAS claimed that tokens of certain ICO projects may be subject to the Securities and Futures Authority regulations. The stance was shared right after the similar announcement by the US SEC: tokens will be considered as securities depending on the context of their issue.
After revealing its position on tokens, together with the Consumer Advisory on Investment Schemes of Singapore Police Force, MAC has issued the statement on potential risks of digital token and virtual currency-related investment schemes. Among the factors to consider are the incorporation within Singapore territory, credible and reliable information on the issuer and token sales, and token liquidity
guarantees on the secondary markets. Moreover, investors should be worried in case the rocketing returns are promised or there are grounds to suspect criminal money laundering.
The authority is certain that not the restrictions but the right regulations will be a magic pill that will cure the ICO market. With relevant regulations investors will be protected by law and more people will be able to participate in ICO projects. MAS advised investors to mitigate risks when possible and in case of questions, do not hesitate to turn to MAS for assistance and clarifications. The authority promised to provide full information on the ICO projects, which have presence in Singapore.
Speaking about this country, the beginning of September 2017, the Securities Commission Malaysia has also published the press release warning ICO investors. The commission warned the companies that potentially the initial coin offerings could be a subject to securities regulations. As many others, the Malaysian regulator warned also the investors “to be mindful of the potential risks involved in ICO schemes”, resulted, in particular, from secondary market high price volatility and lack of legal protection for investors. The statement concludes “as the terms and features of ICO schemes may differ in each case, investors who wish to engage or invest in ICO schemes are reminded to seek legal or other professional advice if there are doubts on the legitimacy of these schemes”.
It is worth noticing, that in its statement the Malaysian regulator remains neutral towards ICO itself. There are no directions in regards to fees or any other methods for crime suppression.
At the beginning of October 2017, Taiwan’s Financial Supervisory Commission chairman Wellington Koo has told during a joint session that Taiwan government intended to support the development and adoption of initial coin offerings and acknowledge blockchain technology and cryptocurrencies as lawful. Koo stated that Taiwan government is not planning to ban the blockchain and crypto-related activities. Moreover, the innovative startups were promised a government comprehensive support.
The legislator Jason HSU, a congressman from Taiwan’s Nationalist party, which has long adopted a deregulatory pro-FinTech stance, stated during the session:
“Just because China and South Korea are banning, doesn’t mean that Taiwan should follow suit – there is a huge opportunity for growth in the future. We should emulate Japan, where they treat cryptocurrency as a highly regulated, highly monitored industry like securities.”
Thailand Securities and Exchange Commission (SEC) has issued its stance on ICO in the middle of September. With the development and growing popularity of ICO, the Thailand SEC has developed a concern that “in some cases, ICO may be deliberately used as a tool for fraud and scam”.The statement wording suggests that Thai regulator is striving to find the balance between protecting the investors and supporting digital innovations. The commission viewpoint is in many ways similar to Hong-Kong, Japan, and the US SEC stances:
“Since the digital tokens can diverge widely in design and representation, some may resemble financial returns, rights and obligations in similar ways to securities under the Securities and Exchange Act”.
As a final statement, the agency accentuated that the control over ICO market is the only way to gain the best value from the promising blockchain market, the development of which the Thai government does not plan to suppress in forthcoming future.