iComplyICO Launches New Whitepaper Examining Crypto Regulation

iComplyICO (iComply Investor Services Inc.) has launched a new whitepaper examining the state of play in digital currency regulation. The document focuses not only on cryptocurrencies, but the growth and widespread adoption of initial coin offerings.

The report chronicles the development of blockchain regulation in recent years, focusing on the evolution of North American securities laws. In particular, the report highlights several regulatory milestones that have occurred within the blockchain arena this year. The most prominent of these include:

  • The Coinbase framework
  • The ‘Howey’ Test
  • SEC Ruling on Slock.it
  • CSA announcement on cryptocurrency offerings

Utility vs. Security Token

One of the biggest regulatory hurdles to token issuance has been whether to label an ICO as a utility or security token. Much of the regulatory headaches stem from security tokens, which fall under specific regulatory guidelines stipulated by the Howey Test. If a token is deemed to be a security, it will be regulated as such.

Although utility tokens that are used to finance a customer’s future purchases should not be considered securities, there is a legal grey area since many of these tokens can be traded on a third party platform. Coinbase has attempted to provide clarity by issuing a tool that helps developers understand whether their tokens are securities or not.

In its whitepaper, iComplyICO proposes a new regulatory framework that is based on a “systematized version of the Howey Test” to determine if a security token can have a quantitative element for validation and legal review. This includes automated KYC and identity verification – similar to the SAFT structure – on the buy and sell side of each transaction.

The report concludes by stating that “cryptocurrency tokens issued as securities offer a much more efficient way to raise capital and form a community of investors with a vested interest in the product. The increased speed, efficiency, and pre-facto compliance opportunities may serve to improve upon the existing financial system…”

ICO and cryptocurrency regulation is a hotly debated topic, with nation-states drawing entirely different conclusions in response to widespread growth. Japan has been heralded for its laissez faire attitude toward cryptocurrency payments, but as industry experts note, this might not extend to ICOs.

Despite the regulatory uncertainty, the ICO market is booming, albeit the pace of growth appears to have slowed. Hacked reported last month that ICO token raises have generated more than $3.2 billion in funding this year, including more than $800 million in September alone.

Featured image courtesy of Shutterstock. 

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi