Background -

Against the backdrop of the increasing prominence of cryptocurrencies globally, initial coin offerings or ICOs are becoming commensurately popular as a capital raising method. ICOs, essentially a method of crowdfunding undertaken through the use of blockchain technology, helped reportedly raise US$4.5 billion in 2017, nearly 20 times more than in 2016. Whilst a common criticism directed towards ICOs has been the lack of regulation, regulators in numerous jurisdictions have thus far been making an effort to communicate guidance to market participants. Moreover, regulators have, in some instances, clarified the application existing regulation to ICOs, or have expressed an intention to create new or broaden existing regulatory frameworks to apply to ICOs. In particular, a number of regulators (particularly in the US) have begun to seek enforcement against ICOs that do not comply with securities laws, undermining some of the early ICO exuberance that perhaps “utility tokens” would escape regulation as securities. In addition, regulators of exchanges around the world ranging from commodities exchanges to currency exchanges have begun assessing what rules should apply to the trading of coins or tokens, creating additional uncertainty about regulatory status and whether the exchange regulators and securities regulators will come to consistent conclusions about how to treat ICOs.

At the same time that many countries have reacted with a stated or implicit desire to curb ICOs, a number of countries have embraced the potential of blockchain and sought to develop regimes that will address some of the core concerns about ICOs but also foster the appropriate growth of their use.