An Overview of ICO Regulations by Country
The regulatory environment for ICOs is not uniform from country to country. Understanding ICO regulation on a global level can help investors in their decision-making process. Here is what ICO regulation looks like:
|Country Name||Status||Other Information|
|Algeria||Not permitted||Banned use of virtual currencies in 2017 – “The purchase, sale, use, and holding of so-called virtual currency is prohibited. Virtual currencies is that used by internet users via the web. It is characterized by the absence of physical support such as coins, notes payments by cheque or credit card. Any breach of this provision is punishable in accordance with the laws and regulations in force.”|
|Argentina||Permitted||Altcoins recognized as money but not legal tender|
|Bosnia and Herzegovina||Permitted|
|Cambodia||Permitted||Discourages use of altcoins|
|Canada||Permitted||ICOs are managed by the Canadian Securities Administrators, which has determined that ICOs and altcoins are securities and subject to regulation on a case-by-case basis. There is a “regulatory sandbox” in place to regulate fintech projects that are outside of the normal regulatory scheme.
As for altcoins, they are recognized as intangible assets. Commercial altcoin dealers must be registered and treated as a money service business in the future. Canada’s largest banks are temporarily banning purchase of altcoins.
|China||Banned||People’s Bank of China has banned ICOs for all businesses and individuals. ICOs in the country that have completed their funding cycle must refund altcoins raised. The Bank will investigate entities found to violate the ruling. Altcoin trading is also banned, but individuals can hold the altcoins.|
|Ecuador||Not permitted||Ecuador developing its own national altcoin|
|Estonia||Permitted||The country is considering to start its own ICO for fundraising, but there is a split opinion on how the Eurozone rule on nation states affects the ICO fundraising campaign.|
|European Union||ICOs permitted but subject to future regulations||The EU permits ICOs, so long as they comply with Anti-Money Laundering/Know Your Customer policies. In November 2017, the European Securities and Markets Authority adopted a strict position on ICOs, determining that they are a high risk to investors – as a result, firms must adhere to the regulatory requirements.|
|France||Permitted but regulated|
|Germany||Permitted||Though permitted, the Federal Financial Supervisory Authority issued a warning on the risks of ICO investments, which states, “Due to the lack of legal requirements and transparency rules, the consumer is left on their own when it comes to verifying the identity, reputability and credit standing of the token provider and understanding and assessing the investment offer. It can also not be guaranteed that personal data will be protected in accordance with German standards.”|
|Gibraltar||Permitted but subject to regulation||Regulators planning on offering regulations for ICOs by January 2018 to permanently codify legal protections for altcoins|
|Hong Kong||Permitted but subject to regulation||Certain altcoins should be treated as securities|
|India||Permitted but very regulated||Use of altcoins is discouraged. Reserve Bank of India banned altcoin use in banking system|
|Indonesia||Permitted||Permitted as commodity – but not as money|
|Iran||Permitted but subject to future regulation|
|Isle of Man||Permitted by subject to regulations||Seeking to forge regulations in the future to establish and protect ICOs legal status|
|Israel||Permitted||Altcoins subject to a 25 percent capital gain tax. Miners and traders must pay corporate income tax and a 17 percent value-added tax (VAT).|
|Jamaica||Permitted||Publicly announced support of altcoins as growth opportunity|
|Jordan||Permitted but very regulated||Banks and financial institutions are not permitted to use altcoins|
|Kyrgyzstan||Permitted||Prohibits use of altcoins as currency|
|Luxembourg||Permitted but regulated||Supports Bit License for altcoin business|
|Malaysia||Permitted but subject to regulation||Country was scheduled to ban altcoins|
|Mexico||Permitted but regulated||Nation’s FinTech law recognizes altcoins as virtual assets|
|Morocco||Not permitted||Bitcoin introduced as payment conduit. In 2017, the government warned that the use of altcoins violates exchange rules for the Office des Changes and the use of such devices could be used for illicit purposes.|
|Namibia||Permitted||Altcoin exchanges are forbidden and altcoins cannot be used as payment – but these stances do not have the force of law|
|Nicaragua||Permitted||No official position on altcoins|
|Nigeria||Permitted||Use of virtual currency banned. Central Bank released a statement to correct perception that it banned altcoins – bank takes the position that it cannot regulate the internet, and therefore it cannot regulate altcoin use.|
|Pakistan||Not permitted||State Bank of Pakistan banned altcoins to all organizations and institutions – ban not enforced judicially.|
|Philippines||Permitted but subject to regulation||Regulators recognize bitcoin as a form of remittance payment – but country also feels that regulations addressing AML/KYC protections may be needed. Companies offering exchange services must register.|
|Russia||Permitted but very regulated||Five orders have been issued by the Kremlin requiring altcoin miner registration and taxation, application of securities laws to ICOs, and use of altcoins to create a “single payment space” in Eurasian Economic Union to oppose Eurozone. Position is shifting to altcoins being “probably illegal” but no official policy et.|
|Singapore||Permitted but very regulated||Monetary Authority of Singapore provided a guide on Digital Token Offerings, indicating how altcoins should be treated under current securities laws. The guidance states that any ICOs or altcoins that are “capital market products” under the Securities an Futures Act can be regulated under MAS. The regulation includes altcoins that either infer ownership of a corporation or product, debt, or a share in an investment scheme.|
|South Africa||Permitted||Altcoin are intangible assets|
|South Korea||Permitted||No explicit ban of altcoins, though the government has embraced a “zero-tolerance” attitude for malicious ICOs. Altcoin futures and derivatives trading is banned|
|Sweden||Permitted||No VAT for altcoins, but subject to the Swedish Financial Supervisory Authority – currently under appeal.|
|Switzerland||Permitted but subject to future regulations||Attempts to regulate ICOs have failed, but may occur in the future. Swiss Financial Market Supervisory Authority examines ICOs for possible breaches of securities law, which could be the first signs of a new wave of campaigning for regulatory oversight. Regulations may not be able to halt the current momentum to incorporate ICOs into Swiss culture.|
|Taiwan||Permitted||Taiwan’s Central Bank warned banks against altcoin use and altcoin ATMS are not permitted. Altcoin purchases permitted by three of the country’s four major convenience stores|
|Thailand||Permitted but very regulated||Financial institutions prohibited from investing or trading in altcoins, exchanging coins for fiat currency or other altcoins or commodities, from creating a platform for altcoin trading, from allowing altcoin purchasing via issued credit cards, and from advising about altcoin investing or trading. Government has not banned trading.|
|United Arab Emirates||Permitted but subject to future regulations|
|United Kingdom||Permitted but subject to regulations||Issued investor warning on unregulated nature of ICOs – even if the ICO acts in good faith, investors can lose their investment. According to the Financial Conduct Authority, “Typically ICO projects are in a very early stage of development and their business models are experimental.”|
|United States||Permitted but heavily regulated||States have their own ICO rules, which vary. There is no uniform regulation, but some states require deposits in equal to or in excess of all local transactions. Others require a license for businesses to engage in altcoin activities. On the federal level, ICOs are not banned, but are expected to be registered and licensed with the SEC if the ICO trades or sells securities. Further, SEC determined that some ICOs are securities and subject to its rulings. ICOs must also adhere to AML/KYC practices and failure to do so can lead to legal action.
United States recognized celebrity endorsement of ICOs to be illegal, unless compensation involved id disclosed.
Purchase of altcoins is not permitted by several credit card processors and banks.
|Vietnam||Permitted||Altcoins cannot be used as currency, but no laws prohibiting trading|
|Zimbabwe||Permitted||No official position on altcoin, but the government is skeptic. Altcoins currently traded in the country.|
The chart above shows that there is no uniform attitude toward ICOs. Further, it indicates that there are international concerns about malicious or fraudulent ICOs, a nationalistic cornering of the altcoin market, and the risks involved in the ICO space. Many nations and financial institutions have released their stance on ICOs and altcoins, which either recognize or don’t recognize the digital currency. On the other hand, there seems to be a positive reception of distributed ledger technology. Which is the technology behind altcoins,
Moreover, many countries’ issues with ICOs is that they work around establish regulatory schemes. Rather than initiating an initial public offering, businesses can preform seed funding, without proper due diligence, regulatory requirements time, or fiduciary permissions a traditional IPO requires. Further, small business often deal with untested or unknown technologies, a peer-based alternative may provide funding opportunities for businesses that cannot conduct a traditional funding scheme.
The trouble is, the above approach can include fraudulent practices. China is not a proponent, and it worries that scammers can use ICOs to defraud investors. As a result, it has banned the creation or sale of them. As for the SEC, it issued an alert indicating that public companies engaging in “pump-and-dump” practices tend to manipulate market prices.
As for countries that have a “zero-tolerance” position concerning fraudulent or malicious ICOs, have some mechanisms in place that show support for altcoins. For instance, Australia introduced regulations allowing the questioning and prosecution of malicious ICO operators. South Korea relaxed its bank on ICOs and is committed to punishing bad actors in the ICO sphere.
Countries are pursuing changes to regulatory policies to reflect an anti-money laundering/know your customer practices. ICOs may also require additional oversight, such as registration and disclosures.
As for investors interested in getting into the space, it is best to understand the changing nature of regulation. This will ultimately protect investors from running afoul of the regulations and it also reduces the risk associated with investments. Ultimately, the best practices for investors include research, preparation, and understanding the regulatory marketplace.