It’s been a trying yet exhilarating year or so for Initial Coin Offerings (ICOs). Riding largely on the back on the industry’s pioneer Bitcoin, other players have rapidly joined the playing field to reap similar success. One would be hard pressed to find any US$5 investment that grows to US$4.4m over 7 years. Enough said.
As with any new entry that promises exponential returns on investment, reactions to the phenomenon have been varied. Amongst the flurry of investors attempting to scale this new industry while trying to understand it, cryptocurrencies have also had their fair share of issues with local governments. Financial regulators have found themselves in unchartered waters and some have taken a somewhat hard-handed approach to rain on the cryptocurrency party. Governments have paid particular attention to new players who are in the process of raising funds via ICOs.
As mentioned above, certain countries have had rather extreme reactions to ICOs. Both China and South Korea have banned them outright, causing considerable unrest across the industry, not to mention (temporary) fluctuations in prices. China, for example, has already experienced 65 ICOs in the first 6 months of the year, raising more than US$400m of funds from over 100,000 investors.
It would seem that the extreme measures of banning them – with equally serious penalties for circumventing these regulations – make convenient sense to these nations. The cryptocurrency world is one that is hard to regulate due to the fact that digital tokens are difficult to define in the traditional spectrum of financial vehicles. Due to their ambiguity, governments are cognisant that they can also lead to the financing of illegal activities such as money laundering and aiding terrorism – two areas no country can afford to facilitate.
Singapore’s Measured Approach
Our government regulators have taken a commendable and measured approach in-line with the country’s position as a global business hub. That being said, the Monetary Authority of Singapore has clearly elucidated that ICOs will be regulated “if the digital tokens constitute products regulated under the Securities and Futures Act (Cap. 289) (SFA).”
Cryptocurrencies in the U.S. have been known to fall under the umbrella of being securities if they (1) encompass an investment of money in a common enterprise, (2) are invested in with a reasonable expectation of profits, and (3) derive their profits from the managerial efforts of others. That being said, almost every regulator that still allows ICOs has agreed that the classification is gray at best and does not fully encompass the complexity of different types of cryptocurrencies.
This puts the onus somewhat on the companies planning to raise funds to ensure that they stay within the parameters defined by the regulatory body. The fact that Singapore has not banned the activity has been a testament to its dedication to evolve into an innovation and fintech hub.
A Viable ICO Hub
The ICO scene in Singapore has gone from strength-to-strength, with more and more companies leveraging the city-state as a base for token sales. The industry has already seen millions of dollars being poured in by investors this year, showing no signs of slowing down anytime in the near future. Aside from the fact that this will add to the money that flows through the country, it will also bolster Singapore’s focus on becoming Asia’s fintech hub.
In addition, Chinese companies wanting to raise funds via ICOs will be looking elsewhere for viable alternatives, and Singapore provides a tax-friendly environment, strong intellectual property frameworks, technologically advanced culture, as well as a pro-business environment. The city’s safe and orderly surroundings is another plus point when companies decide on where to launch their ICOs.
It will be a wait and see situation to fully ascertain the ramifications of China’s recent ban – what can be assumed is that Singapore does offer an extremely viable alternative as long as companies comply with our regulatory frameworks.