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Where in the World to ICO Part 1: Singapore

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The market has suffered a huge downtrend this week – a period filled with mostly government rumblings. The SEC has changed its tune. It is becoming a lot more vocal, which is certainly throwing prices off course. As an investor, these are the prices I want to buy in to. Ethereum is below $600, Ripple was playing in the $0.60s and NEO is still currently sitting at $68. However, I am not putting a dime into any of these exchanges. All government senses are in hyperdrive right now. They smell money, and they want their cut of it.

If I go into Coinbase with more cash, I do think it’s going to be treated a lot differently than it was when I first invested. Coinbase, along with Kraken, Gemini and others, are being harassed from all angles to start acting like a securities exchange and give people tax bills. We knew this was coming, but it wasn’t done as we were promised in the first congressional meeting in February.

There is no reason to start handing out subpoenas to ICOs and exchanges before rules have been set. Once there are rules surrounding primary and secondary offerings of cryptocurrency, then there can be enforcement of the rules. Overall, it was a very disappointing week for the United States and its role in cryptocurrency. As in any democracy with powerful government agencies, there is a vested interest in making something bigger than it is.

Crypto Countries

I wanted to take a look into countries doing things correctly when it came to cryptocurrency, and how they were doing it. I looked into the best countries for primary offerings. Having a place to spend your bitcoin is great, but if there isn’t blockchain commerce taking place within the country, there is always the risk of having those liberties taken away from you. The ideal countries are ones that have an endorsed ICO culture, and have a population of interested parties already operating. There is strength in numbers.

Cryptocurrency has lifted the veil for a lot of people on the capabilities of governments restricting them from doing things. This has not sat well with the new generation. We are seeing people traveling all around the world to government endorsed blockchain meet-ups to sniff out how well the country would treat them. The countries that are openly welcoming that change may be in for an inflow of capital through employment, investment and migration. I will be doing a series on the different countries best poised to be a friendly place to settle down with your earnings, and maybe start a DAPP or two.

Background

We are going to assume that our hypothetical ICO has a working prototype that we would like to launch as a utility token. In order to get on a Binance, Kucoin, etc., you will need to (1) be a utility token and (2) have a written document from a lawyer from your jurisdiction that definitively says that you are a utility token.

To be a fully compliant utility token, you must not have taken funding prior to the ICO, there must be a use case at the time of ICO (if you want to be safe), and have no U.S. investment. The SEC has made sure that any money made off its citizens is going to have a very bright light shined on it, and that they will label it as a securities offering. There is no reason to get involved with that.

Singapore

One of the most technology-friendly places that one can go is Singapore. This country is ranked 7th in GDP per capita at $90,500. With a population of 5.1 million, Singapore is in the same class as countries like Monaco and Lichtenstein. The government and regulatory authorities have been way ahead of the game, having already made definitive statements on how their country defines tokens and securities.

The reason they have been able to do this is their size. There is only one regulatory body that oversees all financial institutions, and that is the Monetary Authority of Singapore (MAS). Because of this, the government relies holistically on MAS to determine the most progressive and forward thinking laws to continue to promote business in the country.

MAS

Created in 1971 to oversee monetary functions related to banking and finance, MAS has since grown to oversee all investment, insurance, banking and monetary policy within the country. Think of this as the Fed, SEC, FINRA and CTFC rolled into one single regulatory body. Ironically, MAS has so much strength that it doesn’t use it aggressively. They want markets to be autonomous enough to be entrepreneurial. They have even invested in technology that would limit their role!

MAS has been the overseeer of “Smart Nation,” a government initiative to innovate Singapore’s infrastructure. Smart Nation was created in 2014 by Prime Minister Lee Hsien Loong. His plan was to spend $2.4 billion in the private sector by engaging with start-ups, not funding them. Rather than having them work with no connection to the country, he wanted them to build the technological infrastructure of Singapore. MAS was tasked with creating the sub-initiatives within the country that different entrepreneurs could work on.

ITMs

The end product of MAS and other government agencies was Industry Transformation Maps (ITMs), which are roadmaps for almost every industry within Singapore. A total of 23 ITMs are to be launched with different characteristics and incentives attached to them based on industry.

The Financial Services ITM was launched on October 31, 2017. Spooky. It did not disappoint, and has already mentioned that blockchain will be actively used (and incentivized) within their insurance industry for better risk management, placements and offerings. I think they were very careful not to mention cryptocurrency within an ITM. Both MAS and broader government are actively watching it, but they are watching politely. Not making noise, and trying to make the buffers wide.

Government Timeline

August 2017

August of 2017 was a hot time in the ICO market. Singapore and MAS were one of the first governments to come out with a direct interpretation of cryptocurrencies. Case in point, MAS clarified its position on the matter in the following quote:

“MAS’ position of not regulating virtual currencies is similar to that of most jurisdictions. However, MAS has observed that the function of digital tokens has evolved beyond just being a virtual currency. For example, digital tokens may represent ownership or a security interest over an issuer’s assets or property. Such tokens may therefore be considered an offer of shares or units in a collective investment scheme1 under the SFA. Digital tokens may also represent a debt owed by an issuer and be considered a debenture under the SFA.”

This allowed for active utility token primary offerings within the boundaries that were set after this statement. With MAS being the only voice needed, there was an immediate public sector response to private sector innovation.

October 2017

A member of the Singapore Parliament asked a “parliamentary question,” which apparently makes it a public question that requires a public answer. On Oct. 3, 2017, the Deputy Prime Minister of Singapore then responded via blog post.  Let’s just say this blog post was something that had Twitter cheering.

“MAS does not and cannot regulate all products that people put their money in thinking that they will appreciate in value.”

This was one of the key quotes that came from the Deputy Prime Minister, indicating that they were letting the crypto market play out with minimal intervention.

December 2017

MAS came out with a caution against cryptocurrencies on Dec. 19, 2017. Remember, this was around the time that the EOS ICO shocked the pants off investors by raising $800 million within weeks.

“MAS considers the recent surge in the prices of cryptocurrencies to be driven by speculation. The risk of a sharp reduction in prices is high. Investors in cryptocurrencies should be aware that they run the risk of losing all their capital.”

That sounds like a Twitter post from a blockchain advocate to me. Even during a period where there was money flooding into coins that didn’t even make sense, they still held their ground and determined it wasn’t their place to intervene.

February 2018

The Prime Minister (AGAIN!), came out and had a discussion with the public his stance on cryptocurrency and regulation. This made him one of the only government officials bold enough to come out and state his exact stance on how everything ought to be regulated. There are probably two or three world leaders who can have an intelligent conversation blockchain, and he is the best of them.

“Cryptocurrencies are an experiment. The number and different forms of cryptocurrencies are growing internationally. It is too early to say if they will succeed.”

Once again, another cautiously bullish stance. He also clarified he still sees no reason to limit the activity on cryptocurrency exchanges within the country. This is a unified voice. There aren’t congressional hearings with irrational and irrelevant opinions being offered. The prime minister has relied on MAS to keep the country safe, while endorsing any type of commerce that the country could take part in.

March 2018

Managing Director Ravi Menon of MAS spoke on crypto currency at the Money 20/20 Asia Conference held in Singapore on Mar. 15. It seems as if every person within both MAS and the government itself are unafraid to make their stance known on a technology that most people are scratching their heads about.

“Some of the best minds in the field are applying their creative energies to make crypto tokens mainstream. With technology, never say never,” Menon said.

During his speech he even said that he was in active discussions with government officials to monitor the situation with “great interest” but also “not stifle innovation.”

Implementations

The crypto market has seen broad implementation within Singapore. Below are a few examples.

OBike: This is a Singapore version of Barclay’s Bikes/Citibank Bikes that are all over London and New York City, respectively. They have partnered with Chinese company Tron to work with them on launching OCoins, their own currency within the network of bikes. Users can both buy OCoins and generate them from using the service. The CEO of OBike believes that OCoins could be the proper incentive for people to continue using the bikes, and find new reasons to hop on one. This type of offering could never take place in the United States. Each of the bike users would have to get their lawyer to overlook the Private Placement documents every time they wanted to use the bike.

Enjin Coin: This Singapore Operated ICO raised $12 million in September 2017. The purpose of the coin is to act as digital incentives within the game Minecraft. It has since performed quite well, with its success raising the prospect of new jobs within the country. They average 60 million views per month on their gaming creation platform, and this has still yet to be implemented within the game.

Ripple: The ITM of Financial Services expressed Singapore’s essential role as wealth management and forex leader of Asia. That was the dinner bell for Ripple, whose technology can drastically lower the costs of transacting in different currencies and sending across borders. Standard Charter Bank, a Singapore banking incumbent for over 150 years, recently trialed Ripple’s XCurrent product for cross border payment processing. There was no use of XRP (yet), but this is one of the most well-developed banks in the world using new technology at a time when there is a lot of negative publicity surrounding everything in cryptocurrency.

Project Ubin: One non-ITM MAS initiative was to re-design the monetary infrastructure of the country through distributed ledger technology. This could reduce total reliance on central banking in the future. Processes and data are distributed across all users of the network. MAS would be tasked with making sure that all nodes were behaving properly, and updating their software for security and performance purposes.

Phase 1: Distributed ledger technology trials began in May 2017. The main purpose was to try to digitize the Singapore dollar onto the blockchain. They wanted to assess the different productive functions it could have with transactions, storage and security. They worked with different institutions with the help of consulting firm Deloitte.

Phase 2: MAS updated Project Ubin in November 2017 with the next phase: bank to bank transactions. MAS is the epicenter of all financial transactions, settlements and currency exchanges. This phase was going to limit the costs they already incur, while also seeing what types of options were available. I guess the Ripple meeting makes sense.

Conclusion

Singapore is perhaps the only country that has such well-read blockchain regulators. They are making decisions carefully, and not trying to interfere. Of course, there are frauds and scams that must be dealt with. I am extremely confident that a government like this has already found ways to make sure that there are at least some guard rails within the marketplace.

There is clear evidence of legislation, and continuous public re-enforcement of that legislation. Most countries are hurting their chances at a technological migration each day. Inaction and fiery rhetoric have already caused many to leave their home countries in search of a more favorable climate for this new technology. Singapore is certainly putting up a true fight to become that landing spot.

 

I will be making this a series, so I will continue to write about the crypto climbate of each country. Clearly no recommendations to buy or sell cryptocurrency. But, perhaps a recommendation to move with all your Bitcoins. Best of luck and trade safely- @Raijincrypto

Sources

http://www.straitstimes.com/singapore/transport/obike-partners-blockchain-platform-tron-to-launch-cryptocurrency-ocoins-for

http://www.mas.gov.sg/News-and-Publications/Media-Releases/2017/MAS-cautions-against-investments-in-cryptocurrencies.aspx

http://www.mas.gov.sg/News-and-Publications/Media-Releases/2017/MAS-clarifies-regulatory-position-on-the-offer-of-digital-tokens-in-Singapore.aspx

http://www.straitstimes.com/business/companies-markets/tharman-no-strong-case-yet-to-ban-cryptocurrency-trading-in-spore

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 27 rated postsMythological God of Lightning. Cryptocurrency/Blockchain writer, evangelist, and friend. May the odds be ever in our favor.




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2 Comments

2 Comments

  1. johnnyquid

    March 18, 2018 at 2:43 pm

    Looking forward to the series.

  2. febrocas

    March 18, 2018 at 9:41 pm

    Thank you so much for this Raiden. This article is super useful to understand the global mindset of regulators. Nice work!

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Market News

Manipulation, Fraud and Abuse: New York Attorney General Issues Stern Warning Against Cryptocurrency Exchanges

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The New York State Attorney General’s office has ratcheted up its war of words against cryptocurrency exchanges, warning consumers of the myriad of risks they face in depositing money on these platforms.

Crypto Exchanges at Risk of Manipulation

In a lengthy report on the “Virtual Markets Integrity Initiative,”  New York’s Attorney General argues that online cryptocurrency exchanges are vulnerable to manipulation, fraud and other types of abuse. Consumers of these platforms therefore “face significant risks” from hackers and the exchange operators themselves, some of which have been known to exploit “deceptive and predatory practices, market manipulation, and insider abuses.

“[V]irtual asset trading platforms now in operation have not registered under state or federal securities or commodities laws,” the report says. “Nor have they implemented common standards for security, internal controls, market surveillance protocols, disclosures, or other investor and consumer protections. Accordingly, customers of virtual asset trading platforms face significant risks.”

The report, which examines ten cryptocurrency exchanges operating in the U.S. and internationally, concludes a six-month investigation that was initiated by New York Attorney General Eric T. Schneiderman. Back in April, Schneiderman sent letters to 13 exchanges requesting information on their operations and internal controls.

Several Exchanges in the Hot Seat

At least four cryptocurrency exchanges were outed by the Attorney General’s office as being most problematic and possibly operating illegally in the state of New York. Not coincidentally, these exchanges refused to participate in the Attorney General’s request for information.

The report reads:

“Customers should be aware that the platforms that refused to participate in the OAG’s Initiative (Binance, Gate.io, Huobi, and Kraken) may not disclose all order types offered to certain traders, some of which could preference those traders at the expense of others, and that the trading performance of other customers on those venues could be negatively affected as a result.”

According to Forbes, a representative from the Attorney General’s office has referred three of these exchanges – Binance, Gate.io and Kraken – to the New York State Department of Financial Services “for possibly operating unlawfully in New York.”

Kraken has been on the hot seat ever since the company’s CEO publicly denounced the Attorney General’s request for more information. In a series of tweets, CEO Jesse Powell called the request “insulting” and likened it to “abuse.”

He added: “The resource diversion for this production is massive. This is going to completely blow up our roadmap! Then I realized we made the wise decision to get the hell out of New York three years ago and that we can dodge this bullet.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 603 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Altcoins

Bitcoin, Ether and Ripple Up in the Air as SEC Delivers a Sobering Reminder

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The U.S Securities and Exchange Commission just delivered a sobering reminder to the crypto community regarding the legal status of Bitcoin and Ethereum. SEC Director of the Division Corporation Finance William Hinman originally told a San Francisco conference in June that:

“…based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”

SEC Clarifies Crypto Security Stance

Today the SEC Chairman Jay Clayton released this official statement in which he reminded everyone that media statements made by SEC personnel should not be taken as legal pronouncements. Clayton stated:

“The Commission’s longstanding position is that all staff statements are nonbinding and create no enforceable legal rights or obligations of the Commission or other parties.”

In a particular sentence that may have been included specifically to cool the enthusiasm generated from his colleague Hinman’s original statement, Clayton states:

“…our divisions and offices, including but not limited to the Division of Corporation Finance, the Division of Investment Management and the Division of Trading and Markets, have been and will continue to review whether prior staff statements and staff documents should be modified, rescinded or supplemented in light of market or other developments.”

The last part about ‘modifying, rescinding or supplementing’ future documents suggests that the SEC are starting to worry about the effects their own words have on the very market they’re attempting to regulate.

When the original statement by Hinman hit the headlines in June, Bitcoin immediately surged by around 6%. Ethereum benefitted even more from the news and spiked 10% within the space of an hour.

Consequences for Bitcoin, Ether and Alts

The reminder from the SEC is unlikely to affect the average bag-holder, who in all likelihood disregards much of what comes out of such traditional institutions as the SEC. The news is more likely to strike hesitation into the minds of large-scale, corporate investors who thought all of this uncertainty was already behind them.

It could also spell either good or bad news for Ripple, which is currently fighting five lawsuits – including two federal lawsuits – against claims that its token sale represents a security issuance.

Director Hinman’s original statement back in June suggested that decentralization was key to avoiding being classed as a security. He suggested that coins and tokens from centralized blockchains would have a harder time with the SEC:

“Over time, there may be other sufficiently decentralized networks and systems where regulating the tokens or coins that function on them as securities may not be required. And of course there will continue to be systems that rely on central actors whose efforts are a key to the success of the enterprise. In those cases, application of the securities laws protects the investors who purchase the tokens or coins.”

With XRP being the third largest capped coin in existence, its prominence has made it a prime target for those suspicious of the currency’s relationship to the Ripple company. As the lawsuits began to pile up, many began to question what Hinman’s words would mean for XRP.

Today’s clarification by Chairman Clayton could be seen as a reprieve for XRP, as it essentially shelves the decentralization issue for the time being. On the other hand, it could mean that even if XRP is proved to be wholly decentralized, it may have even larger requirements to fill before gaining a positive classification – as could the rest of the entire crypto market.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 58 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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U.S. Federal Judge Says Initial Coin Offerings Fall Under Securities Laws

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A U.S. federal judge has ruled that initial coin offerings (ICOs) may fall under securities laws, handing regulators a major victory in their efforts to rein in the multi-billion-dollar crowdfunding industry.

Landmark Decision

The decision, which was handed down Tuesday by U.S. District Judge Raymond Dearie in Brooklyn, came in a case against Maksim Zaslavskiy, a fraudulent ICO promoter accused of raising money for assets that never existed. According to Bloomberg, the businessman was charged with conspiracy and two counts of securities fraud related to two coin offerings purportedly backed by investments in real estate and diamonds.

Zaslavskiy’s lawyer argued that the coin offerings in question were currencies and not securities, placing them outside the jurisdiction of the U.S. Securities and Exchange Commission (SEC). The businessman also said that securities laws are not clear enough to apply to ICOs.

“Per the indictment, no diamonds or real estate, or any coins, tokens, or currency of any imaginable sort, ever existed — despite promises made to investors to the contrary,” Dearie said, as quoted by Bloomberg. “Simply labeling an investment opportunity as a ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract – a security – into a currency.”

While a jury will ultimately decide whether Zaslavskiy’s ICOs were securities, the indictment would support such a conclusion.

Zaslavskiy was charged in September 2017 for defrauding investors through several ICO scams, including REcoin, which was allegedly backed by real estate and diamonds.

SEC’s Jurisdiction

The ruling on Tuesday affirms the SEC’s long-standing position that coin offerings fall under federal securities laws. Previously, coin issuers had argued that there was a difference between “security” tokens and “utility” tokens.Under this classification, utility tokens fund the development of a project but are later used to purchase goods or services on the network. However, SEC Chairman Jay Clayton has repeatedly said he has not come across any coin offering that was not a security.

The agency uses the so-called Howey Test to determine whether an asset should be classified as a security. Using this as a baseline, an ICO is a security if it is an investment in money; invests in a common enterprise; expects to earn a profit; and whose profit is generated from the effort of others.

As a security, an ICO would have to satisfy provisions set forth by the SEC Investment Company Act of 1940 in order to raise funds. This means only accredited investors are eligible. What’s more, securities can only trade on regulated exchanges. To avoid getting bogged down by the SEC, many ICO projects have barred U.S. investors from participating in their crowdsale.

Roughly $7 billion has been raised this year by ICOs but funding has slowed considerably in recent months. The crowdfunding method raised in excess of $6 billion in all of 2017.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 603 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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