Icos and cryptocurrencies

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Either way, ICOs have been criticised by some including the Chinese government for their lack of regulation, which potentially encourages criminality and fraud. ICO fans respond that the initiative is simply a cheaper and quicker way to raise money.

Why Should I Care? Cryptocurrencies are being hailed by many as a revolution in the monetary system: a way of transferring borderless digital money in a secure manner, where everyone can see that the transaction has taken place and is legitimate. International payments can be made to any country for free, or subject to much lower fees than conventional bank transfers.

This is partly to do with them being a nascent phenomenon; questions remain over how people will use them, and how regulators will treat them. What Can I Do? Coinbase and Gemini offer bitcoin and ether. Note that some services offer digital wallets only and not exchanges, which allows you to hold your cryptocurrency but not buy or sell it. You can track the prices of cryptocurrencies on sites like Coinmarketcap and Investing. You can keep up to date with cryptocurrency news on sites like CoinDesk , CCN and Crypto Insider , as well as a host of other blogs, forums and podcasts.

The funds raised in the offering allegedly are not being allocated as allegedly represented in the offering. The complaint purports to be filed on behalf of all natural persons who purchased Tezos tokens in the July offering. The complaint asserts several causes of action, including the unauthorized sale of securities in violation of Section 5 of the Securities Act; fraud in the sale of securities under Section 17 of the Securities Act; false advertising; unfair competition; and alter ego liability.

Discussion With the filing of the SEC enforcement action and the criminal action described above, and now with the arrival of the class action lawsuit in connection with the Tezos transaction, the phenomenon of ICOs and the development of cryptocurrencies seemingly have reached a critical stage.

Yet despite what can only be described as adverse recent publicity, current and projected ICO activity seems to be continuing, apparently unabated. The calendar for ICOs is busy; over 30 offerings are scheduled before the end of the year. Perhaps even more importantly, on October 31, , the CME Group which includes the Chicago Mercantile Exchange announced that it intends to launch bitcoin futures in the fourth quarter of Along the same lines, earlier in October Goldman Sachs said that was weighing the establishment of a trading platform for bitcoin and other digital currencies.

There clearly have been excesses associated with ICO activity. However, notwithstanding the excesses, there is a good case to be made that the cryptocurrency activity continues to represent an economically significant and potentially important development that cannot be disregarded or written off as hazardous fringe activity.

A historical precedent may provide a useful perspective on these more recent developments. During the dot-com frenzy at the end of the 90s and in the early part of this century, there were undoubted excesses. In light of outside investment returns available at the time, dozens of companies were hurried through the IPO process, including some that were not ready for the rigors and requirements of public trading. There were a host of spectacular flops cue the picture of the Pets.

My point here is that notwithstanding the problems that often are associated with ICOs and that all too often dominate the dialogue, there are legitimate ventures that will succeed among the ICO companies. There is a good place to start in trying to think about the positive potential for ICOs. A recent action by the Ontario Securities Commission may point the way toward a more secure and reassuring pathway for ICOs themselves and for prospective ICO investors. On October 17, , the Ontario Securities Commission granted an exemption from registration requirement in order to allow Token Funder, Inc.

As discussed in an October 26, memo from the Bennett Jones law firm here , the agency granted the exemption subject to a number of requirements. The exemption also requires initial and subsequent financial reporting to the agency. Among other things, the SEC likely will have to become much more involved and express in defining when a proposed cryptocurrency transaction does or does not represent the offer or sale of securities subject to the U.

In any event, the prospect of a more regulated environment points the way toward a more orderly landscape for cryptocurrencies to develop. Ontario is not the only regulator to try to find a more accommodating approach. Japan, for instance, and by contrast to China and South Korea, has embraced digital currencies. In September , Japan licensed its first digital currency trading exchange. As discussed here , the Japanese approach is conservative, but obviously much more helpful than an outright ban.

An overview by the Freshfields law firm of the regulatory landscape in Asia for ICOs can be found here. Even in absence of more active regulatory approach, or at least in the meantime while a more structured domestic regulatory approach develops here, there are indicia to sort among the various ICOs budding out there. The SEC releases to which I linked above are good places to start in thinking about sorting criteria. In addition, investors will also want to ensure both that the blockchain is open and public and that there has been a cybersecurity audit.

Danger signs include guaranteed investment returns and hard sales pitches. There are a host of other considerations that are relevant when sorting among ICOs. Among other things, it is important that the offering organization have identifiable ownership.