For ICO issuers, it’s starting to look better to set up shop outside the US.
In a market environment of uncertainty, where regulation is unsure and the United States Securities and Exchange Commission has started investigating ICOs, most issuers and stakeholders are finding other jurisdictions a more conducive place to launch their projects.
This was the hot topic over at Token Summit III in New York City.
Startup founders, attorneys and investors all had strong opinions about how far they can go in a market environment where regulators and enforcement agencies know how easy it is for malicious actors to take advantage of unwary investors and scam millions of dollars out of unwitting buyers.
“The reason there’s a thousand people here, it’s not blockchain technology,” Jason Fang of Sora Ventures said, noting that he’s been going to blockchain events for years and it was all the same people until the initial coin offering (ICO) boom. “The difference is money. The difference is speculation.”
However, not everyone felt that hype meant rushing would be the right approach.
For example, David Sacks, former Paypal COO and investor in Craft Ventures, spoke about how getting compliance just right led to Coinbase becoming “the first really successful company in the space.”
Sacks wasn’t the only person. Throughout the day, several speakers returned to the question of regulation, and from the stage it became clear that the rest of the world isn’t nearly as complicated as the U.S.
Securities laws in the U.S. are based around the Roaring ’20s, which led to the Great Depression, Lowell Ness of Perkins Coie explained during a panel on regulation,explaining that:
“Literally the securities law is intended to exclude the moms and pops from too risky investment.”
Other countries, however, have a more relaxed approach and this is luring some ICOs overseas.
While geography seemed a main concern for many ICO issuers, it isn’t the only kind of distance that could lower risk. Time could also serve a token issuer.
Several issuers are relieved that they had finished their token fundraisers before the ICO hype started.
All of this said, it is crystal clear that the ICO industry is keeping a wary eye on both the unclear guidelines throughout the world and the thought that regulators could create rules that make their businesses illegal at some point.
Speaking to the fear felt by many toward U.S. regulators, MME’s Thomas Linder said:
“The U.S. needs to learn that in a globalized, decentralized economy, they are not the center of the universe anymore.”
According to a report from local news group Denver Post last May 17th, Colorado politicians could soon accept Bitcoin or other cryptocurrencies as campaign contributions.
Colorado Secretary of State Wayne Williams made the proposal for allowing donations of cryptocurrencies in political campaigns in draft rules presented on May 16th, the Denver Post reported.
The Federal Election Commission (FEC) already approved acceptance of Bitcoin, categorizing it as in-kind donations for political campaigns, and gives the campaign 10 days to transfer the donated cryptocurrency into their campaign’s official depository.
According to the Denver Post, Colorado is most likely to follow the FEC’s designation of cryptocurrency as an in-kind donation. This would mean the donation could be returned or refunded back if the value of the donated cryptocurrency exceeds the aggregate limit.
While such donations may be convenient for the donor, Colorado’s deputy secretary of state Suzanne Staiert reportedly said, “[i]t’s going to be an accounting problem, potentially, for campaigns who want to use it.” However, Staiert also added that the “FEC is doing it now, so we are just going along for the ride.”
Colorado won’t be the first US state to go down this trail. New Hampshire actually began allowing candidates to accept contributions in cryptocurrency back in 2014.
Earlier this May, a piece of state legislation to create guidelines for identifying crypto tokens was voted down in the Colorado state Senate, in what some perceived as a blow to blockchain innovation in the state.
ZDNet Korea reports that Bithumb is going to launch a trading platform in the UK.
Bithumb is the largest cryto exchange in South Korea and the sixth largest in the world by trade volume, handling about half a billion dollars in trading volume a day.
According to official documents, Bithumb Europe was registered lat February 27th, with offices at City Road in Islington, London. It will be headed by a Mr. Rahul Khanna, who is a partner of a firm called Canary Asset Management.
Bithumb will own 80% while Canaru Asset Management will own 20% of Bithumb Europe.
The new platform will be using the URL bithumb.uk. However, the website is currently non-functional. The delay may be due to the exchange’s search for a compliance specialist.
A spokesman for BTC Korea.com, owner of Bithumb, said to ZDNet Korea that: “Bitsum [Bithumb] is preparing to advance to Europe.”
The UK has been attracting crtypto exchanges lately, a welcome trend given the recent exodus of traditional financial institutions to Europe.
Huobi, a Singaporean exchange recently announced that it was going to set up shop in London due to the fact that it has “the most active trading scene across all of Europe.” Huobi handles almost $2 billion in trading daily, making it the third-largest cryptocurrency exchange in the world.
Meanwhile, London Block Exchange reportedly expanded its menu, now including Bitcoin Cash and Ethereum Classic. A recent survey of more than a thousand Londoners found out that 14 percent had purchased cryptocurrency at some point, and 20 percent of those that hadn’t been considering doing so.
British crypto businesses have also banded together, urging the government to regulate them formally to ensure their stability and protect customers.
Due to the Chinese government’s recent hard-line stance against crypto, ASIC manufacturer Bitmain announced that they would turn to AI development as an alternate revenue source, Bloomberg reports May 17th.
Chinese regulations have included bans on ICOs, a blanket ban on “exchange-like services” and another ban on foreign crypto exchanges.
Bitmain is known for manufacturing the processing chips and miners used to mine for a wide variety of cryptocurrencies, which include Bitcoin, Ethereum, and Monero. The release of Antminer last March led Monero to upgrade so as to preserve their ASIC-resistant nature.
Jihan Wu, Bitmain co-chief exec, told Bloomberg in an interview that because “artificial intelligence requires lots of computations,” it would be a good fit for the company.
“As a China company, we have to be prepared.”
The executive continues.
Bitmain’s recently launched BM1680 chip, released October of last year, is a more cost-efficient alternative to those made by NVidia and Advanced Micro Devices, albeit less powerful.
Wu – predicting that AI chips would in the future account for 40 percent of the company’s revenue – told Bloomberg that Bitmain is “just trying to do something that they cannot take care of well enough.”
Reports show that four-year-old Bitmain made somewhere between #3 and $4 million last year in operating profits, compared to 27-year-old rival, which made around $3 billion last year.
A cryptocurrency project has been scuttled by Chinese law enforcement for allegedly soliciting investments with fraudulent claims.
In a report from the Guandong Daily, a provincial media outlet, Shenzhen police arrested six individuals last Monday. They were accused of defrauding 3,000 Chinese investors out of $47 million by selling a cryptocurrency they claimed was backed by a commodity.
The suspects allegedly set up a firm based in Shenzhen called PEB, which beginning in January 2017 issued a blockchain-powered token dubbed Pu’er Coin, according to reports.
The project’s website says holders of the token were entitled to hold a contract which represented ownership of an amount of Pu’er Tibetan tea the firm supposedly had in stock, which the firm claimed to be worth billions of dollars.
While the token could be exchanged in a secondary market called Jubi.com, another website later claimed the contract could bring in a 12 percent annual return if investors choose to lock their funds for 12 months.
Police reports say that, though the firm had only a “very limited amount of the tea in stock,” it also promised high short-term returns to investors in social media promotions and roadshows at high-end hotels.
The police also said the project succeeded in attracting investors via manipulation of the secondary market, using it’s own funds to drive up the token price during the course of 2017.
The arrests mark another notable crackdown on alleged cryptocurrency fraud in China as law enforcement in the country have taken a hardline stance against illegal fundraising.
Previously, Xi’An Police have arrested the founders of an alleged nationwide crypto pyramid scheme that is said to have collected $13 million from over 13,000 people.
A lawsuit directed against Ripple Labs Inc. was filed at the Superior Court of California. The company allegedly led a game plan to raise hundreds of millions of dollars with unregistered sales of its XRP tokens. They were further accused of creating billions of coins “out of thin air” and selling them to the public in “what is essentially a never-ending initial coin offering,” according to Bloomberg.
In the case of the Norwegian cryptocurrency exchange Bitmynt AS. It has lost its case against the Scandinavian financial services giant Nordea. Bitmynt AS sued the bank for closing its account due to poor safeguards. However, it was the other way around for the Chilean crypto firm Buda who won its case against two banks who closed its account.
In Israel, the cryptocurrency mining company Israminers brought legal charges against the Union Bank of Israel for allegedly stopping the cryptominer from receiving payments from crypto exchanges and sending back payments already received in the account.
Is this emerging trend of “exchange vs. bank” clashes a sign that crypto is getting so big that it tends to disrupt the existing laws and legal standards?