ICO legalities in 2020?

[CjMapope]

Even though ICO's have lost the appeal lately.

I was just wandering about the legalities. The SEC website confuses me. In the eyes of the SEC are true utility tokens still classed as securities in the USA? Is this why many companies avoid the USA when it comes to ICO's?

If a company from outside the USA releases a token, do they have to comply with SEC regulations to enable usa investors?

I am not from the usa but live here now. Is it a resident or a citizen issue?

Its a citizen thing, "illegal aliens" dont need to follow SEC rules i would imagine
The SEC just wanted to stomp on the uncontrolled fundraising that was running rampant these last few years, so many cash grabs that had no plan but get money
So its MEANT to be confusing really, to deter scammers and allow them time to properly regulate (which they now are with massive rollouts of KYC for US custys)
If a place avoided it they just never registered with the SEC, or they worded it right. some projects really are NOT securities as well of course

[isaac_clarke22]

if your country prohibits cryptoqurrency then the main problem is the government in that country. residents or citizens generally will always follow the regulations of their respective countries. if the American state legalizes the cryptoqurrency industry and the citizens welcome it well then that is positive news for the crypto market especially for users in that country.

Banning the use of decentralized cryptocurrencies and banning initial coin offerings are 2 different subjects. SEC is saying that it's trying to prevent fund raising (that can be scams) that profit centralized companies. Banning something decentralized on the other hand is next to impossible.

Indeed.
There's quite a misconception between the two. Initial coin offerings doesn't really happen only inside cryptos. It could occur anywhere in the internet, and I think certain countries could regulate that.
Bitcoin, as a decentralized coin, is quite impossible to regulate unless people are thinking of connecting it with 3rd party financial institutions like their local remittance centers and it is almost like 100% guaranteed that it is gonna be under regulation of the government.

[Aabcde]

To my knowledge, the SEC will intervene if the ICO is open to US citizens. But most ICOs forbid US citizens from participating.
Besides, ICO is no longer in my opinion. the steps taken by the SEC to protect its citizens are indeed quite good because they want to reduce fraud and scams. Maybe there are so many investors from US that they can generate fast funding for a project.

[FaithInCrypto]

Its better for most projects to avoid selling tokens to the U.S regardless if its security or utility. US has very tight regulation they really put pressure on projects who sells any tokens within their territories or its citizens.

This.

As far as I know, they do have tight regulations when it comes to crypto-related business ever since.

To OP, good to know that you still trust ICOs even if it leaves a bad impression on most investors nowadays because of what happened in the past years. I hope you are doing the right thing in investing though. Good luck!

[Adriano2010]

Maybe in future will also this apply to IEOs but i don't know, well if ICOs will fail what can do SEC about it? I reffer here on a project who will do all and will reach exchange but investors will not buy the coin and price drop and drop. Or SEC only protects investors in case of scam right?

[release]

Thank you for the great thread guys. A lot of good info here.

So if a company registered its token with the SEC it would obviously be a sign that its legit considering the steps and huge cost involved with registering not to mention the legal implications?

If a UK company wants to enable USA investors to trade their tokens, they also have to register with the SEC?

In 2017 all of these ICO's came out with 'utility tokens' without any real utility function. These fake utilities are being targeted also.

Part 2 of the question: is there any real utility function that the SEC doesn't consider a security?

[bgaf]

I think it depend on the country where that particular ICO launch.  US is strict on ICOs but the scope of their strict approach should only be apply on their country. Like what they did on Libra and Gram projects. They are over confident if they step up on other countries cryptocurrency projects. As if they own the whole world. See if they can do that to China, I imagine the looks on Chinese faces about trolling US. Hate those people from SEC keeping blockchain in the shadows. Get a life buddies!

[bitvalak]

For now the ICO has lost its glory, many things caused it to happen. Even if that the US government would not want to gamble by joining the ICO project. Surely they will use new ways to get into the cryptocurrency ecosystem to find loopholes to carry out surreptitious centralization. In addition they have realized that if China has begun to conduct research on cryptocurrency, it is not impossible that the US will also anticipate it. Legality will apply when several large countries have started to adopt crypto.

[TheUltraElite]

Is the USA the only country like that?

Blanket bans on trading crypto is present in some countries. Check the legality of bitcoin here -
https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory

Am I best not to invest in ICO's at all considering I now reside in the USA?

In your best interest, No.

So if a company registered its token with the SEC it would obviously be a sign that its legit considering the steps and huge cost involved with registering not to mention the legal implications?

SEC may change its steps again. They are also evaluating stuff as things go on. But overall the market for ICOs has become a bit less hyped than what it was some time ago, so anyway your risk is high on both side - either the Feds come knocking on your door or you invest in a shitcoin that abandons the project after a few years.

If a UK company wants to enable USA investors to trade their tokens, they also have to register with the SEC?

That would be a security token if done or just ban USA participants.

In 2017 all of these ICO's came out with 'utility tokens' without any real utility function. These fake utilities are being targeted also.

Part of the crackdown on fake projects. ICO market is risky business.

Part 2 of the question: is there any real utility function that the SEC doesn't consider a security?

I dont think we have encountered such a project. Correct me if I am wrong.

[samuraijin]

that is why many ICO projects forbid people in the US to invest in ICO, discussing the issue of ICO is actually not only thinking about legality as well, but the security of investors investing in ICO, just look at ICO only done on the project website where investors can directly buy their tokens through their website, obviously there are many opportunities for scammers to do this and eventually run away with investors 'money, ICO seems to have been very unfit for investors' money security and must replace it with a new system to support the project

[Apened]

Even though ICO's have lost the appeal lately.

I was just wandering about the legalities. The SEC website confuses me. In the eyes of the SEC are true utility tokens still classed as securities in the USA? Is this why many companies avoid the USA when it comes to ICO's?

If a company from outside the USA releases a token, do they have to comply with SEC regulations to enable usa investors?

I am not from the usa but live here now. Is it a resident or a citizen issue?

US are protecting their citizens from investing, i don't know what the main reason is but my friend said that it was because of the scam and the reason was they are not allowing the US citizen to contribute on any ICO even IEO i guess. SEC have a wide range of it handling every single ICO that collected a big amount of money. If the ICO or project failed to submit the worst is the project might stop and so to failed.

[leea-1334]

We still have to see if this is good for the industry. Japan I can say and even South Korea at least they did it step by step and learn from a lot of past mistakes. It looks good on paper but let us first see what happens when a licensed exchange gets hacked. What will happen to their users will tell us how the law truly protects people.

[ShowOff]

And now the OP seems to understand quite well how things actually happened in the US with regard to the ICO Legality. On one hand I can conclude that the US is not an ICO-friendly place and there are many companies that move if they dont want to be intercepted by regulations.

So it is not good if you force the will to invest because you will get two possibilities, namely being visited by the authorities or falling into a bad ICO. Now the decision is yours and I think the OP must accept the best advice so far.

[tianglistrik]

that is why many ICO projects forbid people in the US to invest in ICO, discussing the issue of ICO is actually not only thinking about legality as well, but the security of investors investing in ICO, just look at ICO only done on the project website where investors can directly buy their tokens through their website, obviously there are many opportunities for scammers to do this and eventually run away with investors 'money, ICO seems to have been very unfit for investors' money security and must replace it with a new system to support the project

ICOs will indeed be easier for scammers to get their place, so if the government takes steps to ban ICO it would be better to secure their citizens.
the fact that in the history of ICO there are many scams in it.

[TopT3ns]

that is why many ICO projects forbid people in the US to invest in ICO, discussing the issue of ICO is actually not only thinking about legality as well, but the security of investors investing in ICO, just look at ICO only done on the project website where investors can directly buy their tokens through their website, obviously there are many opportunities for scammers to do this and eventually run away with investors 'money, ICO seems to have been very unfit for investors' money security and must replace it with a new system to support the project

by using the ICO method a lot of scams are happening and it's better for now that you can use other methods like IEO which in my opinion are better because IEO works closely with a trusted and highly reputable exchange place so that the possibility of a scam will be very small.

[Eternad]

We still have to see if this is good for the industry. Japan I can say and even South Korea at least they did it step by step and learn from a lot of past mistakes. It looks good on paper but let us first see what happens when a licensed exchange gets hacked. What will happen to their users will tell us how the law truly protects people.

When banks get bankrupt in any country, government insist that there will be some percentage to give to their customers, however some banks can't really give it back and years passed that nothing happens, government might set rules but it's still the company situation will govern. It is good to have some support in crypto terms from government but it doesn't mean that when we got scam they are able to solve the problem.

[bobyhodob]

that is why many ICO projects forbid people in the US to invest in ICO, discussing the issue of ICO is actually not only thinking about legality as well, but the security of investors investing in ICO, just look at ICO only done on the project website where investors can directly buy their tokens through their website, obviously there are many opportunities for scammers to do this and eventually run away with investors 'money, ICO seems to have been very unfit for investors' money security and must replace it with a new system to support the project

ICOs will indeed be easier for scammers to get their place, so if the government takes steps to ban ICO it would be better to secure their citizens.
the fact that in the history of ICO there are many scams in it.

Is not solution for solution lol
Ban ico just for secure their citizens yes is true but government must have smarter solutions than just ban

[key4co.in]

I am not from the usa but live here now. Is it a resident or a citizen issue?

If you reside in the US, then you are also subject to the laws hence you are not supposed to participate in ICOs which didn't comply to terms of SEC. Unless there is no restriction for people in the US and also you are sure the ICO complies to SEC laws to avoid any issue. If you face any issue for instance after taking the risk of investing in non regulated ICOs, you have yourself to blame.

[kambaralikhan]

ICO legalities are much improved in 2020 as compared to 2019, 2018 and 2017 and the legalities will further improve with the passage of time. These legalities are much needed to prevent from scams and maintain the positive image of cryptocurrencies.

[Russlenat]

I am also hoping that ICO will be legalize because its the main reason why we have a lot of investors coming to crypto market last 2017.
I am aware that IEO is already here but the sites are small enough to cater the big demand of the potential investors especially in altcoins season or bull market. with the regulation of ICO, it will fast track the growth of the market which would be potentially help us to see a new ATH again.