Bitcoin Forum

ICOs have become quite popular to bypass rigourous processes put in place by institutions for startups to raise money and thus finance their activity/project.

However, with no consensus on their legal status and the regulation that should apply, many countries and their institutions are advising people to be cautious due to the high volatility and level of risks linked with cryptocurrencies. Shall ICOs be regulated as IPOs and obey existing securities regulations? In order one to make his own opinion about it, here are some of the pros and cons of such a regulation:

-Disadvantages: if money raising fraudulent, no jurisdiction to protect the investors, no equitable ownership, no rights equivalent to being a shareholder, companies have not produced yet any real or tangible results, anonymised transactions

-Advantages: in an ICO, the company may not be subject to direct tax, very little regulatory oversight, firms can raise funds through individuals trading fiat or other virtual currencies, if the money raised does not meet the required amount, the campaign will be written off as a failure and money returned to backers

Companies have raised $180m in ICOs so far in 2017. The question remains if they will still remain so popular whether the regulations will be tightened and whether tokens would be more considered as stocks/shares. Past ICOs should actually be used as a model or a reference to identify good practises and failures and use it to suggest further improvements from a legal point of view. So far, so good.

Yes or we can soon be a hot bed for multi-million dollar scams

Yes, and more countries are trying to do just that. There always needs to be somesort of oversight and consequences.

I think that idea of ICO is really a good for the present market.
but the main problem is that a lot of ICOs turn to be a simple scam, so majority of ICO organizers just deceive people

To prevent investors from any kind of loss and fraud ICOs must be regulated somehow.
Of course when this will happen..talking about regulation of ICOs..
the margin of profits for investors will drop and the general price of ICOs will rise because of taxes implementation.
So i think that as long as things keep working like they have been till now it's a very good time for investors
but at the same time the risk of loss is very high.

Its really hard these day's with so many clever people to know if an ICO is a scam or not. Also seems that most coin's when they list on exchange are very close to ICO prices so maybe just wait for it to list and get some.

The answer to your questions is yes, the ICOs should be regulated somehow at least, not exactly like IPOs, because of the elevating amount of scam ICOs it is required to take precautions and ensure investors' funds to the most possible extent.

Right now it's not regulated, but diligence checks by individual investors plays apart too. So I suggest investors have to do their diligent checks and research before every ICO they plan to invest in.

ICO's not should be but will be regulated not exactly like a IPO.SEC,China etc are working on ico's regulation
SEC must to regulate ico's becouse of demand from institutional investors like godan&sachs
Main condition will be token utility

while I do believe "better" information or due diligence is required for any ICO, I doubt its simple to just regulate it.

I mean there is no border or control on Crypto, you can buy BTC and ETH and what not and send to ICO. Regardless of you're from the regulated country or not.

I think the ICO should be regulated to prevent more and more scams, but it should not be in a IPO way since there are many differences between.

Yes, I agree with you. ICO is more friendly to common investors with no too much money and they should be protected by the regulations.

When I read "regulation", I don't understand "less scam", I understand "more taxes".

exactly it should be regulated to prevent developer fron creating coins over and over again to be used for scam. the big challenge is how and where should be the regulator considering the scope of crypto currency is world wide then who will be the regulator? that would be a big challenge and the time it will take to pas the said regulation :(

ICO regulation should be just an option and not become obligatory. The investor has the right to decide wether to invest in a high risk/high reward unregulated ICO or a low risk/low reward regulated one.

it should be regulated to assure that investors will be protected and funds will be well taking care to developed such project, with some rules
it will really helps both side if the project is legit for sure the developers won't have any argue or any problem with regulations.

Based on those previous replied, it should be regulated in order to minimize the incident of scams so that the funds of investors would be safe and secured but of course we are dealing with this type of investment it will still be our fault to risk our money to those projects which we do not know either regulated or not .

ICOs should be regulate similar way as IPOs.
As public money is involve with the ICOs similar as IPO and if not regulated there are a lot of chances of scam. ICO are spread world wide so there should be an international platform to regulate the ICOs. Because single country individually can't watch & regulate this matter.

Many countries are already in the process of regulating ICO's as almost all of them are here to make a quick buck.

Agree. The unregulated environment of ICO enabling them to run as arbitrary units. They aren't subjected to anyone. As a result,  in today's scenario 90% ICOs are non-serious projects whose only objective is to collect money from people and then vanish away.
Regulation has become necessity for the safeguards of investors. Hence I would only suggest people to invest in those ICOs, which have proper KYC system.

For sure! There plenty of ICOs which has any chance to bring an investor profit. The only aim for them — collect first money of believers and disappear.

Surely there should be difference between the ICO projects which used to be launched like hippie. No regulations nothing, just anyone can come to the market with so called bright ideas and can start up the ICO to raise those million of dollars. I'm sure changing this with some regulation applied on them will benefit us and nobody.

I think it should be handled in two ways. If the ICO targets general public then it should be regulated. If the ICO chooses to avoid regulation, then it should have a set of disclaimers and be offered only to accredited or sophisticated investors.

The method to determine sophistication or accreditation will be a whole new other topic..

Some of the Due Diligence done by a regulation committee is way above and beyond what a private individual can do.

This is related to what we're building and my background so I will allow myself an answer.

1) ICOs should be regulate but not like IPOs.
First of all, let's keep in mind that each exchange has different rules for what's needed to list an IPO. There is A LOT of inefficiency in the market which causes incredible time delays and additional fees meaning that a lot of good projects with great potential don't have the ability to launch their IPO.
2) For the investors, these additional fees mean lower profits. It means less access to people who do not have an already high net worth so the rich more easily get richer.
To solve this (and deal with the tax issue too amongst a few other things), we are building a financial exchange built on the blockchain. Regarding the regulation, some entities will be regulated onshore, others not regulated and offshore (offshore does not mean illegal!) so as to be able to provide an umbrella service to companies wishing to launch an IPO/ ICO and the investors.
The way we built the coin to provide stability and security is just an added bonus. (Read here to understand what I mean -> https://www.kela.io/the-coin-that-wont-make-you-rich.html (https://www.kela.io/the-coin-that-wont-make-you-rich.html) )
I would love your feedback and response to this.

ICO's are creating so many new opportunities. This is how new ventures start.

Take the one I am currently backing with my signature. Its a bunch of young guys from Maryland university, brilliant minds who will probably make a massive change to the security of the Internet at reasonable price. A fantastic way to utilize block-chain for the Internet.

The problem with regulating cryptocurrency is that the same rules would then have to apply to FIAT currencies. FIAT is in actual fact a cryptocurrency - the difference is the technology with old style encryption. IE water marks and difficult to copy patterns on bank notes.

Considering that not even IPOs in fiat currencies are regulated in the same way everywhere, we certainly can't assume that ICO regulation would be the same (the same as which IPO regulation). And yes, it is my background and yes, it is related to our own ICO and what we're working on.

Good ideas, SEC wants to such things, so maybe in one day, ICO will be regulated like IPO

I think that idea of ICO is really a good

Keep in mind that there are many types of regulations and exchanges worldwide. Not just the SEC and the NYSE.

So this could happen before they get involved and it probably will, if we look at the data.

I'm afraid regulation can bring only decrease in profits and increase the level of inefficiency  :(

Depends how it's done.

I agree it's a risk, but the way things are going now, it will happen.

ICOs should definitely NOT be regulated.
The massive fluctuations we see in the cryptoworld are possible only as a result of the unregulated environment ICOs and cryptocurrencies are immersed within.. regulate it and you'll get something like the stock market where the only ones who make profits are insider traders and hedge funds.
Regulators please leave our cryptos alone..

Actually, that's not the reason for the fluctuations in price. The reason behind the massive fluctuations in price is because there is no ecosystem behind it and the price is based purely on a speculative model. Nothing else. Whereas, fiat currencies, stocks, commodities have financial ecosystems behind it - be it import/ export (for currencies), a company's products/ services (for stocks) and supply/ demand and use in industry (for commodities). All of these have nothing to do with regulation. Regulation would change a few things, but definitely not that.

No way. That ruins the crypto world and its decentralized nature. Yes, some ICO's scam and some steal from the investors, but that is something we have to learn to live with. The benefits of decentralization way overpower the issues. This is the line we must draw in the sand and never cross. If people fear being scammed, then simply avoid the ICO markets. It is better in the long run to keep to our values and not falter.

The main issue isn't being scammed (regulation doesn't do as much as it claims to prevent that), the problem is mostly about the legality of the funds.
There is still a way to keep things mostly decentralized and still have regulation.

Many tokens sold during ico are securities and therefore icos should be regulated so that a minimum amount of investor protection is assured.

However, i don’t think they should be regulated like ipos. Ipos are super expensive (it costs about half a million usd to do an ipo because of all the regulation) and i think it is regulatory overkill. It stifles innovation and makes small companies unable to raise the funds they need. There has to be a better way than what we have now (no regulation and so many scams) and ipos, which are only for big rich companies

Regarding the legality of the funds, KYC simply solved this, and there are also many projects that take an advice from a legal advisor to comply with the government rules. By that, I assume, there'll be no more problem regarding the legality of the funds and at the same time, could prevent money laundering.
However from my opinion, the regulation doesn't make the ICO's asset centralized, it's just regulating in such region.

The KYC asked is the minimal ass coverage required and no more, just like the legal compliance advice that they get. A bit of regulation would most definitely help. I say this from my experience in the financial industry.

As you just wrote - regulation does not make it centralized. I said that because of from your previous comment it seemed you thought regulation would make it centralized.

What I am talking about is that, assuming money is a zero-sum-game (which we, as investors, should do), in order for 100x opportunities to be there (see stratis, ethereum, monero..), there need to be several 0x scams. If the environment becomes more regulated, you definitely won't have as many 0x scams anymore that's for sure, but you can also forget about those other gems. That's how I see it - but you make a good point about the lack of an ecosystem being also what makes the price work for cryptos most often than not on a speculative model. Wouldn't say this always apply however; check coins with actual use such as monero and all those coming dexs which will use the token for their functioning (kyber eidoo etc etc etc).
My point is: if you create regulations, societies have to adhere to those in order to function, this create a steeper initial investment in order for a new token to exist and thus 'betting on the underdogs' becomes less interesting.

I half disagree with you ;)

Regulation does not have to be costly at all. I've helped companies get regulation and it cost them less than what most ICOs invest in marketing. So if done well it does not have to be a death sentence to the underdogs. Though the "if done well" part is the one I'm worried about :)
That's why it's something that we're addressing in our company. Because building it up correctly is SO important.

well, it's posternat that said such thing, I know from the start that all these cryptocurrencies' nature are decentralized and it's permanent.
Just like what you said, none of the regulations can make cryptocurrency which designed from the start to be decentralized changing.

Glad to see we agree.

By the way, this is the reason that our company is looking to be regulated since it won't affect the basic aspect of what the blockchain does for the crypto economics but it will offer some added protection.

Yes. All ICOs need some regulation. To prevent scams and protect investors. Would this guarantee their performance ? No!

What I'm talking about is sets of regulations imposed by governments and banks. Once those hit the crypto world, we can forget about the super gains like Stratis and Monero. Look at the USA, now American citizens are 'protected' from having 10x gains through ICO - a good example of regulations!

I am also talking about regulations imposed by governments (the only regulations banks impose are imposed on them) are not always costly, and I am saying this from experience. I advise a company that helps companies get regulated in many jurisdictions. Regulations don't HAVE to be costly nor do they HAVE to limit potential gains. The fact that some regulations do doesn't mean that it has to be this way.

So should there be regulations? Absolutely. Right now, it's too much like the wild west. But as I've said - smart ones. Not idiotic ones that do nothing to actually achieve something meaningful.

Regulations will be everywhere. China started the wave.. Russia will continue.. but Europe has chance to become more open for it even with regulations, since USA are killing it on the other side.

I agree we should pay taxes from ICOs.. its problem if you have money and you can't withdraw it without making some illegal activity. And simple as that pay tax, withdraw and be safe ;)

Besides crowdfunding MUST be regulated because of too many shitty projects. If we want quality we need filtering...just take a look at each day announcements.. its becomming annoying.

I don't want but it suppose ICO would be regulated by governments around the world next year. It won't be so strict as for IPO at the beginning at least.

I get what you say, however in practical terms what I see around me is that most often than not regulations create socialist-like limitations to people's freedom in exchange of something which could be perhaps regarded as 'safety' but in reality is simply consolidation of the status quo.
I guess our different perceptions of regulations might also come from the countries we live in and we have visited; I have seen so many times the negative results of regulations that I much prefer to risk something by acting in an unregulated environment than having that 'security' around me.
Maybe this is also why I love EtherDelta ha!

Though it will lower the number of scams, that is not my main reasoning. Regulations do lower the number of scams but they do not eradicate.
The main reason I think regulation is good is because it limits the use of funds for criminal purposes.

It really depends in the country where you are situated in my opinion, just like in case of china regarding regulating of ICOs, it was triggered because of so too much scam ICOs and the government can stay silent so they impose a ban first but i think they change it to regulation.

China didn't regulate - they banned. Completely different.

A company can choose which jurisdiction to be regulated under. The country that will have the smartest regulation will have the most projects built in it.

I see - this explains the reasons behind your stance on regulations.
We could, however, argue around the following points:
1. Aren't gains always made as a result of the Greater Fool Theory anyway (criminally or legally)?
2. Criminality is simply the opposite of legality.
3. Is legality about justice, or about power?

1 - I agree about the greater fool theory, however I fail to understand how that's related?
2 - Yes, it is.
3 - I agree with you that in some instances it is about power, but let's agree that it can also be about justice. For example, when opening an offshore company/ account: they don't care about taxes you may be evading, or anything like that, they just want to make sure you aren't using the account for one of the big 4 - weapons, humans, terrorism, money laundering for one of the above three.

There should definitely be more regulation within the crypto markets. Both on exchanges and for ICOs. Right now there are so many ICOs and airdrops and whatever trying to bait people into spending money on a project they are planning on dumping as soon as they can get a good payout. People just price things up into the sky without even doing research because they want to join the next moon. For some it might be good, but a lot of people lose money on it.

People losing money translates in people making money. Higher regulated contexts don't offer +/-25% regular changes in price on a daily basis but rather annual and modern investors don't like to wait.

There is a need to regulate these ICOs as there has been so many scams in the name of ICOc, innocent people are being scammed by these people and authorities are unable to do anything. So there should be strict law to regulate such ICOs and avoid the possible scams.

By regulations, we will avoid scams and pay attention really  solid ICOs like Crowdholding (https://ico.crowdholding.com/)
1. the great concept of co-creation (worth to get familiar with the concept)
2. solid whitepaper, easy to read and clear
3. team: young and determined professionals

I could say yes ICO should be regulated like IPO's because i witnessed lots of ICO became scam after providing well written Whitepaper and strong Team finally end upto loss . So now there is lots of regulated ICO's are coming like UAHPAY its already registered with government of the country . Some more ICO really coming up with physical address and location and previous project . But there should be some more regulation required.

Do you think people who invest in scam are unaware of what they are doing? Not so often. Have a look at threads of shitcoins such as ethereum cash, ethereum dark and the like: everybody knows it is just a pump and dump shitcoin but they are still willing to invest on it 'because my x10'.

Agreed. That's why I say that the point of regulation is not to eliminate scams. It would minimize it and keep the money clean.

ICO's need regulation for the technology going forward but to put the same requirements on them as IPO's would be excessive. Regulation can kill innovation, for example a use case of an ICO could be issuing immutable concert tickets as tokens - do an 'ICO' - issue a new token each time there is a new event, IPO type regulation on tokens would kill this kind of use case.

Yes by all means. This will also filter out good ICO's from useless and without project/product to sell. ICO's sprung up like mushroom these days and leaving it unregulated can cause a lot of people who jump-in in the investment without research.

I think ICOs should absolutely be regulated. As it is now the small investors get screwed over a lot, and there's a lot of uncertainty with investing in an ICO. The creators of the ICO have to rules to play by, and they can just take the money and quit if they'd like.

Yeah it would reduce scams but I still think that those crypto investors who seem to be so fervent around regulating the ICO and altcoins market, should really get back to IPOs and stockmarket for a while and then come back to see if regulations is really what they want!
Where there's no risk, there's no opportunities.