Black Cell Technology was forced to terminate its Initial Coin Offering(ICO) by Hong Kong’s Securities and Futures Commission(SFC). SFC cited their ICO as being “potential unauthorized promotional activities and unlicensed regulated activities.”
The Hong Kong based startup are developing a mobile-based food marketplace named Krops aimed at simplifying business for both farmers and shoppers. As the startup is in its initial phase, contributors would have been given equity shares in the company after the launch of the app.
Black Cell Technology has currently complied with the official verdict by discontinuing its tokensale and assuring their investors that their cryptocurrency will be returned. They are the first ICO to be hit by the regulatory authority and SEC has issued a warning to all cryptocurrency exchanges to refrain from trading unregulated securities. Whether they are an isolated incident or if we are going to see a series of such crackdowns on similar frameworks is yet to be seen.
This is following a series of regulatory decisions taken by the monetary regulators in Hong Kong. Last year SFC had issued a statement that they regard cryptocurrencies not as legal tender, money or currencies, but as “virtual commodities”, which is not subjected to regulation. However, ICOs were an exception to this as tokens carry rights to ownership or a share of the profits of the project. So ICOs in Hong Kong require SFC authorization as a securities offering. SFC has steadily been developing its approach and seems like they have an agenda to execute on.
While Hong Kong is relatively a crypto friendly nation, they have made it clear that consumer protection is their ulterior motive and ICO organizers should learn to follow the protocols before opening up public token sales. They are not the first regulatory body to start regulating ICOs that utilize tokens as securities and Futures Commission of US had also expressed similar motives.