upstripes | Crypto | ICO/STO paradises on Earth

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ICOs have made it possible for startups to circumvent the complex and mostly unattainable funding models employed in the traditional financial markets.

However, during the ICO boom of 2017, a number of jurisdictions introduced regulations designed to protect consumers from scams populating the ICO market. Unfortunately, the success witnessed by some blockchain-based startups in their crowdsales led to unscrupulous parties launching ICOs with the sole intent to defraud investors.

Following the regulatory response to widespread scamming facilitated through the ICO funding model, some countries became unfavorable for this approach. The regulatory environment of a country of origin will, therefore, likely have a significant impact on the failure or success of a crowdsale.

With this in mind, it is imperative to carefully consider the jurisdictions with the most favorable climate for holding an ICO or STO. While the regulatory environment is an important factor in this decision, other factors such as taxation structures, set up costs and availability of skilled labor are other vital aspects to consider.

Switzerland

Switzerland is one of the most favorable jurisdictions to conduct an ICO or STO. While the European country has imposed some regulations over these funding models, it remains committed to keeping the regulatory climate attractive to the blockchain sector.

The Swiss government oversees ICOs and STOs through its regulatory body, the Financial Market Supervisory Authority (FINMA). Before holding an ICO, a startup must register with the regulator after which FINMA decides whether the token issued is a payment, asset or security. The most regulated token is the security token which is governed by Swiss security law. Moreover, all startups holding ICOs or STOs must adhere to KYC and AMLregulations defined by the country.

Malta

Malta has adopted a fairly lenient stance on ICOs. As long as the token issued in the sale is a utility token, the sale is free to continue without interference from the authorities. For platforms whose tokens fall outside these realms, the European country has laid out clear laws to follow. These laws are designed to support innovation, however, and many startups will find their stipulations reasonable and easy to adhere to.

The country also has packages designed to attract startups to it. Some appealing features include its tax refund policy which may result in the reduction of the 35 percent tax rate levied on corporates to zero.

Cayman Islands

The Cayman Islands is a favorite for many startups looking to hold their crowdsale. The country is known for being conducive to high-value offshore businesses in many industries and has broadened to include the blockchain sector. As a result, a number of blockchain-based startups have held their ICOs in the Cayman Islands. For instance, it is home to the most successful ICO ever held.

The country is attractive for ICOs because its definition of securities is not comprehensive and encompassing. This means that most ICOs can escape the security tag and can proceed without much oversight from the regulator.

Singapore

Singapore is a very conducive place to hold an ICO. To launch an ICO in the Asian country, a startup must register as a foundation and comply with the necessary KYC and AML regulations after which it is free to hold its crowdsale.

If the token is not a security, the legal requirements are quite small. However, if a token is deemed a security, then it must adhere to the nations security laws. Despite this, Singapore is still very popular with startups holding their ICOs because its rules are fair and do not stifle innovation.

Furthermore, tax in Singapore is a flat rate of 17 percent for corporates with no additional gains tax. Lastly, startups looking to set up a home base there will have access to a large pool of tech-savvy professionals familiar with blockchain technology. This negates the costs associated with moving talent from other countries.

United States

Despite its stricter regulations, the United States still holds the number one spot in terms of highest number of ICOs held within its borders. However, following the U.S. Securities and Exchange Commission’s (SEC) negative stance on ICOs, the Security Token Offering (STO) has become a popular move for many crypto startups based in the country.

All startups looking to hold either and ICO or STO must first register with the SEC and comply with the regulations relevant to them. Additionally, depending on the state where the startup is based, there may be more regulations to follow. However, if found to be in contravention of any regulations, the SEC may shut down your token saleand initiate prosecution.

United Arab Emirates

The country is now trying to revamp its economy by decreasing dependence on fossil fuels and instead empower it by encouraging free trade and boosting business opportunities in other sectors such as technology.

April of 2018, marked the official entry of the United Arab Emirates into the blockchain-crypto space with the government launching its Emirates Blockchain Strategy 2021. According to the announcement, by 2021 a whopping 50% of all government transactions would be made using blockchain network and this move alone is estimated to save around $2.97 billion.

The Emirates Blockchain Strategy 2021 demonstrated the benign attitude of government towards these technologies and this open the floodgates for private companies to take the wheel.

The future ahead

To a degree, blockchain resembles the AI industry in the 1980s. At the time, many researchers in the field overpromised and underdelivered, which led to a general sense of disappointment with the industry and a slump in government and VC funding—an era that became known as the "AI winter." Companies and organizations refrained from attributing their work to "artificial intelligence" for fear of disenchanting their audience and associating themselves with an industry that hadn't delivered on its promises.

But there's more than enough reason to be skeptical of blockchain startups. During the 2017 ICO boom, blockchain projects raised insane amounts of money by providing little more than a flashy website and a whitepaper. Predictably, many of those projects failed to deliver on their promises, while others turned out to be exit scams. And with little regulatory oversight, the industry has become the subject of many questionable practices, like onboarding celebrities to create hype and manipulating prices through artificial pump-and-dump schemes.

In spite of the current downturn, blockchain technology continues to plod forward at a steady pace, and a lot of innovation is still happening in the field.

"The technology is moving at an amazing pace, and it's inevitable that the funding will catch up," Devlin said.

The AI winter came to an end with breakthroughs in deep learning, the flavor of AI that has become the bread-and-butter of many online services and companies in the past few years. From self-driving cars to facial recognition and medicine, the many practical applications of deep learning revived interest in artificial intelligence and poured billions of dollars into the industry. If history is any guide, the fortunes of blockchain will eventually take a positive turn.