Understand the basic framework of the ICO policy abroad

ICO and blockchain are two different things. Blockchain this decentralized distributed ledger is an Internet underlying technology, its application still take years to fall. The ICO, a kind of financial mechanism innovation, is essentially an improvement on the internet crowdfunding model because it combines very powerful kinetic energy with TOKEN. Although most ICOs are now built on blockchain smart contract systems such as Ethereum, ICOs can be fully implemented on Internet projects without blockchain technology. This is why there are so many "pseudo blockchain" projects.

New Law Xu Kai: Understanding the basic framework of the ICO policy abroad

Regulators are trying to understand the ICO and blockchain technology, and as far as possible to separate the two, such as the US Congress the last two hearings on the ICO and the blockchain as the theme, not the two confused. For China's regulators, the ICO is essentially an unapproved public financing act (the central bank and other seven ministries and agencies in September 2017, "on the prevention of financing risks of tokens issuance announcement"), and therefore prohibited, and blockchain Technology was listed by the State Council "" Thirteen Five "national informatization plan.

Although ICO is completely banned in China, handling of ICO may not be as easy as or may not be so easy for countries and regions outside the country that have not completely banned ICO. MAS, the Swiss Financial Market Regulatory Authority (FINMA) and other agencies have issued ICO-related guidance documents.

Combined with the contents of the congressional hearing, we can summarize some of the common issues that foreign regulators deal with ICOs that collectively form the basic framework for understanding ICO's regulatory policies: tokens, tokens, regulatory approaches, and regulatory agencies.

First, the token classification

ICO, that is, Initial Coin Offering, COIN is generally translated into tokens, but the word can also be completely replaced by TOKEN. TOKEN can be translated into tokens and can be translated into tokens and passports (from the translations of YuanDou and Meng Yan). However, no matter what concepts are used, they need to be classified within the existing regulatory framework.

FINMA Swiss ICO into the token into payment, utility and asset class three categories:

Paying for class tokens: This type of cryptocurrency, which is equivalent to bitcoin, is intended to be used as a means of payment and the issuer does not claim any rights over tokens themselves;

Utility tokens: vouchers for blockchain services or products;

Asset class tokens: vouchers representing claims or owners' equity, corresponding to equity, bonds and derivatives.

The above classification is incomplete and inadequate. A token may also constitute any two or three of the above tokens, depending on its actual structure and characteristics.

Second, tokens qualitative

The core issue of tokenization is whether tokens constitute "securities" under the securities laws of different countries.

According to MAS's guidance, MAS will review the structure and characteristics of digital tokens and their accompanying rights to determine whether digital tokens belong to the capital markets products under the Securities and Futures Act of Singapore. As long as the token represents owner's equity (shares / equity), or a bond, or a standardized share of investment interest, it may constitute a securities / capital market product and should therefore be governed by relevant financial laws that need to satisfy registration / registration / Information disclosure and other securities law mandatory requirements.

In Switzerland, pure payment of a class tokens according to the above classification is not considered temporarily as a security; however, an asset tokens, as well as a utility tokens with investment purpose, are considered tokens.

The securities law of the United States is implemented in a wide range. According to Howey Test, established by the U.S. Supreme Court, investments that satisfy four conditions constitute an "investment contract" (a type of security): 1) capital investment; 2) investment in a common business; 3) Look forward to profit; (4) Do not rely directly on the operation and rely on the promoters or third-party efforts.

According to the testimony of the chairman of the SEC in the parliamentary hearing, he believes many ICOs meet the above characteristics. Therefore, the relevant parties should be supervised by the Securities Law of 1933 or the Securities Exchange Act of 1934.

Third, the regulatory approach

Circulating digital tokens, regardless of whether they are recognized as securities or not, should be subject to the AMLA regulation in each country. Once they are recognized as securities, mandatory regulations such as registration, disclosure of information and application for licenses are all inevitable under the securities laws and regulations .

For example, many virtual currency issuers now claim to be "market makers" that provide liquidity. But the problem is that the "market maker" under the securities law needs to meet the conditions and requirements of the regulatory authorities. However, the "market maker" of the virtual currency is usually employed solely by the issuer or exchange and how to avoid the liquidity How to manipulate prices?

The Japanese government has clarified the use of virtual currency as a means of payment under the revised "Capital Settlement Law" and requires the trading institutions to register. Although the law does not specify the issue of ICO, according to the report issued by the FSA in October last year, A statement, "The ICO may be regulated by the Funds Settlement Act or the Financial Instruments and Exchange Act, depending on the structure of the ICO project." If an ICO project has the characteristics of an investment product, the purchase of tokens through a virtual currency Actually equivalent to the purchase of legal currency, such ICO projects will be regulated by the Financial Instruments and Exchange Act.

In addition, ICO projects may apply for entry into regulatory sandboxes for testing in countries that allow "sand box regulation" pilots, such as the United Kingdom, Singapore, Australia and others.

Fourth, the regulatory body

Because there are no specialized ICO regulators in various countries, most of the voices are currently voiced by financial authorities in various countries, such as China's central bank, the Russian central bank, Switzerland's FINMA and Singapore's MAS. Regulators involved in big powers are more complicated. For example, China announced in September 2017 that it involves seven ministries and commissions such as the three banks and one bank. The United States, in addition to the Securities and Exchange Commission, includes the Commodity Futures Trading Commission (CFTC), the Office of the Ombudsman and other state government agencies.

Any existing regulators to obtain full ICO regulatory power must be authorized by the legislature. Do not rule out the future there are some countries or regions to ICO special legislation.

Due to the inherently global nature of ICO projects, cross-border regulatory cooperation may be an important trend. Some media reports said that at the G20 summit in March this year, France will propose the supervision of the virtual currency issue.

Like the market, regulatory policy itself is under great uncertainty, which is both risk and opportunity. On the one hand, it is recommended that ICO project issuers strengthen their research on global regulatory policies and, on the other hand, establish channels of communication and communication with local regulatory authorities. Because only jurisdictions with good regulatory regimes can produce truly great ICO projects.