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Abu Dhabi Moves to Regulate ICOs Despite “Many Risks”

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Abu Dhabi’s financial watchdog has granted regulatory approval of initial coin offerings (ICOs), but has warned of “many risks” involved in the new crowdfunding model.

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ICOs Get Approval in Abu Dhabi

The Abu Dhabi Financial Services Regulatory Authority (FSRA) has published guidelines on ICOs and cryptocurrency. The regulator said any ICO bearing a resemblance to a security will be governed accordingly.

Under the new protocol, startups wishing to go the ICO route must see FSRA approval. Companies will also be required to publish a prospectus, just like any initial public offering (IPO).

In regulating ICOs, the FSRA warned of an increased “risk of fraud and loss of capital.”

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The FSRA adds: “This is particularly likely to be the case where a token issuer promises extremely high investment returns that are disproportionately high relative to those generally available in the market.”

The warning mirrors that of neighboring emirate Dubai, which recently issued a statement clarifying its position.

Abu Dhabi has also labeled cryptocurrencies “commodities” in the same basket as precious metals and energy. As such, they will remain unregulated. However, the watchdog says it may be willing to change its position on cryptocurrency in the future.

Regulatory Response to ICOs Mixed

ICOs have emerged seemingly without warning to become one of the most popular methods for capital raises. More than $2.3 billion has flowed into ICOs this year alone, surpassing early stage venture capital.

However, regulators have struggled to define and effectively control the market, with China, South Korea and more recently Russia issuing a ban on ICO raises.

Russian President Vladimir Putin has warned that cryptocurrencies pose “serious risks” and allow individuals to “launder criminally obtained money, evade taxes and even finance terrorism, as well as, of course, perpetuating fraudulent schemes that obviously may affect ordinary citizens.”

Meamwhile, Japan earlier this year recognized bitcoin as a payment method, but has yet to comment on ICOs.

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Regulation

Kazakhstan Is About to See Its First Cryptocurrency Backed by Fiat Money

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Cryptocurrency is coming to the Republic of Kazakhstan, according to a recent press release from the Astana International Financial Centre (AIFC), a developmental body established by President Nursultan Nazarbayev.

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Kazakhstan Gets Its First Cryptocurrency

Astana is teaming up with Exante Investment Company to develop the Eurasian country’s cryptocurrency market. The announcement came by way of memorandum, where Exante agreed to cooperate in spearheading AIFC regulation pertaining to digital assets.

Exante is an investment services company specializing in Direct Market Access (DMA), an electronic trading facility that gives investors entry into order books. The company has offices in at least seven jurisdictions, including Moscow, Dubai, Riga and Cyprus. Exante has several blockchain projects under its portfolio.

A public-private partnership to streamline cryptocurrency regulation is certainly a unique proposal. Governments around the world have taken a more adversarial approach to digital assets, with some issuing outright bans and others seeking to limit the spread of blockchain-powered currency.

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According to the AIFC press release, “leading financial regulators are actively working to create favourable conditions for the development of financial companies” in hopes of transforming Astana into a global fin-tech hub.

Kazakhstan isn’t the first country to express interest in launching its own digital currency. This past summer, Estonia proposed its own state-backed cryptocurrency. Japan has also signaled interest in launching its government-backed digital asset, called J-Coin. It also appears that Russia is set to move forward with the CryptoRuble, according to the TASS news agency.

Stasis

Kazakhstan’s entry into the cryptocurrency market will be backed by Stasis, Exante’s new blockchain platform. Unlike other digital ledger projects, Stasis is backed by fiat money. This setup is intended to facilitate transactions between cryptocurrency and traditional finance.

Antoly Knyazev, co-founder of Exante, has joined several working groups on cryptocurrencies, having held meetings with the governments of Malta, Cyprus and Kazakhstan. This suggests that the Stasis project, or others like it, could become more common in the future.

Stasis has been described as a transparent cryptocurrency because it is tied to physical assets and backed by fiat money and bonds. The cryptocurrency enables instant payments at lower fees and increased transaction speed. The platform has also been audited by the government of Kazakhstan.

Knyazev expects the market cap for Stasis to reach 2-3 billion euros or their equivalent.

With assistance from Anastasiya Ernays.

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Japan’s Mainstream Acceptance of Cryptocurrency Might Not Apply to ICOs

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Japan has quickly become the model for early adoption after regulators officially recognized bitcoin and other cryptocurrencies as legal tender. However, the same leeway may not apply to initial coin offerings (ICOs), the controversial but insanely popular crowdfunding model that has raised over $2.3 billion this year.

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ICO Ban?

Koji Higashi, cofounder of IndieSquare and prominent figure in Japan’s cryptocurrency scene, believes a ban on ICOs is within the realm of possibility. Several news outlets, including Forbes, have quoted Higashi as saying that a ban on on ICOs is a “definite possibility.”

Japan, which now trades nearly two-thirds of bitcoin, still faces a tentative regulatory climate, says Higashi. In a country known for conservative bureaucracy, regulators could start cracking down on new coin offerings as soon as problems arise.

The ICO market has already had its fair share of scams, with fraudsters copying other public raises and presenting them as their own. Earlier this month, Hacked.com reported extensively about ToTheMoon, an ICO that ripped off Giga Watt right down to its whitepaper.

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Investors looking to cash in on the next big thing are especially vulnerable, says Higashi. While not all ICOs are scams, many of them are clearly looking to capitalize on the hype.

The State of the ICO Industry

Token raises have generated billions of dollars in 2017. In the absence of regulation, the blockchain community to create a standard legal agreement for the ICO market. This effort led to the creation of the Simple Agreement for Future Tokens (SAFT) project, which attempts to standardize public raises by vetting ICOs and investors.

The open source movement is uniting technology companies, legal experts and members of the blockchain community to converge on a framework that gives rise to a self-regulated cryptocurrency market. – Hacked.com (Sept. 21, 2017).

It remains to be seen whether SAFTs can step in to fill the void, or whether governments will move in to control the market. Blanket bans on ICOs have already been issued in China and South Korea.

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Information on Russia’s Regulation of Cryptocurrency Surfaces

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Sony Russia Hacker

The Russian Federation has officially decided to regulate the circulation and mining of cryptocurrency, CCN reported Tuesday.

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Russia Outlines Scope of Crypto Regulation

A meeting of Russian officials that included President Vladimir Putin concluded that both the supply and mining of digital assets will come under the purview of central regulators. According to TASS news agency, finance minister Anton Siluanov stated that the government should “control the process of cryptocurrency emissopm and its circulation.”

According to reports, Russians will not be allowed to mine cryptocurrency, a process that will be maintained by a central authority. Holders of the digital asset will be allowed to exchange it for Russian rubles at any time.

Last week, Russian authorities said they would move to block cryptocurrency exchanges. It later emerged that the Kremlin decided to pursue a regulatory clampdown on the digital asset class rather than a blanket ban.

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Several nations have already chimed in on the cryptocurrency debate, each arriving at different conclusions. For example, cryptocurrency is a recognized payment method in Japan, but has been blocked outright (at least for now) in China. South Korea’s approach is somewhere in the middle: it has banned initial coin offerings (ICOs), but not cryptocurrency trading. The regukatory environment will further evolve as nations come to grips with the digital currency phenomenon.

Rise of the ‘CryptoRuble’

Earlier this week, Russian communications minister Nikolay Nikiforov said that a state-issued ‘CryptoRuble’ is set to be unveiled. Several news outlets, including CCN and Investopedia, reported the matter.

Nikiforov pointed to neighboring Kyrgyzstan as a chief motivator for moving swiftly on this matter. The Eurasian Economic Commission member is planning to launch its own gold-backed national cryptocurrency.

Despite all the regulatory concerns surrounding digital currency, Russia views it as a potential opportunity to diversify its economy away from oil.

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