Regulation and Taxes for Cryptocurrencies — Part 2

Check Regulation and Taxes for Cryptocurrencies — Part 1

Go the bottom of the matter: ICO Regulation by country

China
In September 2017, Chinese the authorities banned all ICO activities in the country. According to the Announcement, ICO financing that raises so-called ‘virtual currencies’ through the irregular sale and circulation of tokens is essentially public financing without approval, which is illegal. As part of the ban, any organization that had already concluded or begun an ICO was instructed to return the funds raised through ICO.

Canada
Canadian Securities Administrators (CSA) has outlined some substantial regulatory frameworks establishing a four-factor test in determining whether a cryptocurrency has to be registered as a security. The CSA has also developed a regulatory sandbox specifically for Fintech companies aimed to allow firms to register and obtain relief from securities laws requirements.

The CSA Regulatory Sandbox is part of the CSA’s 2016–2019 Business Plan to gain a better understanding of how technology innovations are impacting capital markets, assess the scope and nature of regulatory implications and what may be required to modernize the securities regulatory framework for Fintechs. ICO falls under these regulations.

Switzerland
Switzerland is trying to establish itself as a hub for cryptocurrencies and blockchain startups creating a regulatory environment that would safeguard genuine ICOs. On February 16 2018, the Swiss Financial Market Supervisory Authority (FINMA) published guidelines on the regulatory treatment of ICOs.

According to this, ICOs may be subject to financial market laws depending of the nature of the token. FINMA describes three token-categories: 1) Payment token 2) Utility token and 3) Asset token. Depending on the token issued the ICO might be subject to AML law (Anti money Laundering), Securities law or banking law.

While there remains a grey area around the definition of utility token, the FINMA guidelines and the overall friendly trend of Swiss government are clear sign that Switzerland will remain a top location for ambitious and qualified tech entrepreneurs to launch an ICO.

USA
The Security and Exchange Commission has stated that most blockchain based asset would be categorized as securities, regardless of whether those securities are purchased with virtual currencies or distributed with blockchain technology. In the report issued on July 2017, ICO are not expressly prohibited but it’s stated that have to be compliant with the US federal securities laws. All ICOs are required to be KYC/AML compliant. If an ICO fails to comply requirements it can face legal action.

Because of the heavy regulatory measures many US entrepreneurs go overseas to conduct an ICO and or the same reasons US citizen are often banned from ICOs, smart people prefer avoiding dealing with SEC.

Russia
Surprising Russia has been one of the most proactive country in studying the blockchain ecosystem, President Putin has pushed blockchain technology as part of his new “digital economy” program, saying that the country can’t be “late in the race” for blockchain dominance. The Central Bank of the Russian Federation confirm that they continue to monitor the ICO landscape in the country and they are considering to have a regulatory framework.

Evolution of regulations
The regulatory landscape with regards to blockchain technology, and in particular to initial coin offerings (ICO’s) is always changing. Quoting a famous film “Regulation is like a box of chocolate — you never know what you’re going to get.” So here an easy table to sum up what we talked about.