The Gibraltar Financial Services Commission (GFSC) has jumped on the regulatory bandwagon along with numerous regulators around the world, warning consumers in a recent report that Initial Coin Offerings are essentially the Wild West and they should be careful investing. But it’s still a green light for their upcoming friendly regulatory environment planned for January 2018 for token sales.
The Gibraltar Financial Services Commission (GFSC) has noticed the increasing use of tokens or coins based on Distributed Ledger Technology (DLT) as a means of raising finance, especially by early-stage start-ups. The sale of such tokens is often conducted using terms such as initial coin offering (ICO), token sale, initial token offering and the like.
A new regulatory framework for DLT which will become operational as from January 2018 will regulate the activities of firms, operating in or from Gibraltar, that use DLT to store or transmit value belonging to others, such as virtual currency exchanges.
Gibraltar is committed to being a sound and safe place to do business with and is considering a complementary regulatory framework covering the promotion and sale of tokens, aligned with the DLT framework.
ICOs are an unregulated means of raising finance in a venture or project, usually at an early-stage and often one whose products and services have not yet been significantly designed, built or tested, yet alone made operational or generating revenue. Such forms of crowdfunding are often used by start-ups to bypass the rigorous and regulated capital-raising process required by venture capitalists or financial institutions. In an ICO, tokens are sold to early supporters of a project in exchange for cash or cryptocurrency, such as bitcoin or ether.
Tokens vary widely in design and purpose. In some cases, tokens represent securities, such as shares in a company, and their promotion and sale are regulated as such. More often, tokens serve some cryptocurrency or functional use that is unregulated, such as prepayment for access to a product or service that is to be developed using funds raised in the ICO.
New ventures are highly-speculative and risky, and early-stage financing is often best undertaken by experienced investors who are familiar with assessing the nature of a project and its business plan, the technical characteristics of proposed products, the market for those products, and the capabilities of founders and their team. Experienced investors know how to evaluate the likelihood of success and that more high-risk ventures fail than succeed, and they understand only to invest such sums as they can afford to lose.
Anyone considering investing in tokens through an ICO is advised to consider the following:
– Regulation: Do you understand that tokens and ICOs are unregulated and that you have no recourse to any regulatory authority, financial compensation scheme or ombudsman?
– Volatility: Are you aware that the value of a token may be highly volatile and there may be no way for you trade or sell tokens?
– Disclosures: ICO whitepapers are unregulated and may contain inadequate, inaccurate or misleading statements and disclosures. Are you satisfied you have all the information necessary to make an informed decision?
– Risk appetite: Recognising that investing in early-stage startups is high risk and speculative, can you afford to lose your entire investment?
In common with regulators around the world, the GFSC continues to monitor the use of unregulated tokens as a means of raising finance.
Here’s a list of other regulatory announcements, compliments of the brilliant Tim Swanson, at the Great Wall of Numbers Blog.
- Brazil’s equivalent of the SEC, the Comissão de Valores Mobiliários (CVM), published (July 13th) initial legislation instruction (Instrução CVM No. 588) regulating crowdfunding via ICOs: (Portuguese announcement)
- The United States SEC published on July 25th on ICOs: (Report on investigation) (Investor bulletin) (Investor alert)
- Monetary Authority of Singapore published its views on August 1st on ICOs: (Clarification statement) (Consumer advisory)
- Canadian Securities Administrators (CSA), including the Ontario Securities Commission, published its views on August 24th on ICOs: (Staff Notice)(Announcement)
- Israel Securities Authority announced on August 30th that it is forming a committee to look at ICOs: (Hebrew announcement) (English)
- The Financial Supervisory Commission (FSC) in South Korea announced on September 3rd that it held a joint task force meeting to strengthen regulations around digital currency trading, including fundraising with ICOs: (BusinessKorea)
- Central Bank of Russia issued a public statement on September 4th that included its views on ICOs: (Russian announcement) (English)
- The People’s Bank of China, along with 6 other Chinese government bodies including the national securities regulator (CSRC), publicly banned ICO fundraising in China on September 4th: (CN announcement) (English) (Bloomberg) (Reuters)
- SFC in Hong Kong announced its views on ICOs on September 5th: (Announcement)
- The UK Financial Conduct Authority (FCA) announced that it was keeping a close eye on ICOs on September 6th: (FT)
- The Securities Commission (SC) of Malaysia issued a press release cautioning investors in ICOs on September 7th: (DNA)
- UC Berkeley Opens New Blockchain Lab – Steve Chen Appointed to Co-Lead Newly Formed Berkeley Blockchain Lab - December 10, 2017
- Peter Vessenes Announces Deluge Network To Support a Safe and Direct Way to Contribute Bitcoin Directly to ICOs - December 5, 2017
- EXMO Launches Token Sale with Blockstarter’s ICO Solution - December 5, 2017
- AdHive, A Blockchain-Based Native Advertising Platform, Engages with WINGS DAO Platform - December 5, 2017
- Perkins Coie Adds SEC Attorney in San Francisco with Fintech and Blockchain Experience - December 5, 2017
- Cryptocurrency Monero Announces Breakthrough Online Shopping Initiative Featuring Top Global Artists’ Music and Merchandise - December 5, 2017
- Bitcoin for a ‘bit’ of Caribbean paradise - December 5, 2017
- With the Launch of SunCoin, Solar Bankers Takes On the World’s Energy Giants - December 4, 2017
- Blockchain News Is Merging With Token Report - November 30, 2017
- Mira launches Pre-ICO for Mira – an Easy and Convenient Way to Buy, Store and Send Cryptocurrency - November 23, 2017
- Dash and KuvaCash Partner to Fight Inflation in Zimbabwe with Cryptocurrency - November 22, 2017
- INS Ecosystem Partners with Ambrosus to Overhaul the Grocery Supply Chain - November 22, 2017
- Global Debt Registry Unveils Collateral Pledge Blockchain Proof of Concept - November 22, 2017
- Ripple Appoints Former New York State Superintendent of Financial Services Benjamin Lawsky to Its Board and Ron Will as CFO - November 22, 2017
- Advised by the Co-Founders of YouTube and Twitch, Theta Announces a Blockchain-based Video Delivery Network - November 22, 2017
- Modex adds top advisor from Google ahead of ICO - November 22, 2017
- Decentralized Ad Exchange AdEx Partners with INK to Handle the World’s First Blockchain-based Ad Auction - November 22, 2017
- Zilliqa Lowers Funding Cap Despite Heavy Demand from Investors - November 22, 2017
- Health Startup Etheal Combines Blockchain Technology with Micro-Incentives to Build a Peer-Reviewed Global List of Health Professionals - November 22, 2017
- Bitquence Rebrands as Ethos.io, Charting a Course to Unlock Crypto and the Future of Investment for the Masses - November 22, 2017
- Eidoo Introduces User Friendly ICO Engine – Allowing Crypto Startups To Launch And Manage Their Own ICOs For Fundraising On The Blockchain - November 22, 2017
- Simdaq Launches Social Platform for Democratisation and Development of Cryptocurrency Trading - November 22, 2017
- Gameflip Shatters FLIP Pre-Sale Goals, Sets Sights on December 4, 2017 ICO - November 22, 2017
- Golden Alliance Gold Mining Launches Token Sale - November 22, 2017
- Genaro and Storj Labs Announce Collaboration and Product Integration - November 22, 2017
- Metal (MTL) Now Available on the Chinese Cryptocurrency Exchange - November 22, 2017
- Mark.space & Jaguar Land Rover Announce Cooperation - November 22, 2017
- Exscudo – EON Testnet Was Successfully Updated - November 22, 2017
- Valorem Foundation Launches All-new Cryptocurrency Platform - November 22, 2017
- WAX Partners with Xsolla to Offer Its Platform to More Than 2,000 Video Games - November 22, 2017
- Brave expands Basic Attention Token platform to YouTube - November 22, 2017
- Narrative Launches Blockchain Based Social Network That Puts Revenue In Your Pocket, Not Mark Zuckerberg’s - November 22, 2017
- Gladius Uses Blockchain and Spare Bandwidth to Revolutionize Cyber Security - November 22, 2017
- Indorse Announces Partnership with App Store Cryptocurrency, AppCoins, ahead of MVP Launch - November 22, 2017
- Secutix And The Paléo Festival Nyon Announce The Success Of Their Blockchain Pilot Project - November 22, 2017
- ING launches major addition to blockchain technology: Zero-Knowledge Range Proof solution - November 22, 2017
- Cofound.it Announces Teams Participating in Upcoming Live Crowdsale Event - November 22, 2017
- PUBLIQ goes public: The blockchain and AI company that fights fake news announces the start of its Initial Token Offering - November 22, 2017
- Blockchain for Business SophiaTX Reveals New Details of Platform; Confirms Date for Token Generation Event - November 22, 2017
- BCShop.io Launches Partner Program - November 22, 2017
- World’s First Social Entrepreneurship Platform Moms Avenue Challenges Etsy by Gearing Up With Blockchain - November 21, 2017
- WAX Partners with Xsolla to Offer Its Platform to More Than 2,000 Video Games - November 20, 2017
- Pundi X integrates NEM blockchain to Bring Cryptocurrency Payments Into Retail Stores - November 20, 2017
- Fujitsu Develops Security Technology to Safely Connect Blockchains - November 20, 2017
- Jibrel Network Announces a Highly Successful Pre-sale Round - November 20, 2017
- KRAFTWERK on Blockchain - November 20, 2017
- MintHealth: Empowering Patients to Take Control of their Health and Data via Blockchain Technology - November 20, 2017
- IBM Completes PoC Of Blockchain-based Shared KYC With Deutsche Bank, HSBC, MUFG And Cargill, IBM Treasuries - November 20, 2017
- LetsEnhance.io to process images on Neuromation Platform - November 20, 2017
- Blockchain And AI Researchers Propose A New Model To Return The Control Over Human Life Data To The Patients And Accelerate Biomedical Research - November 20, 2017