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EU Watchdog Looks to ICOs to Formulate Appropriate Regulation

The European Union’s securities watchdog has a new initiative to develop suitable regulations for initial coin offerings (ICOs) and it requires investigating every single ICO.

The European Securities and Markets Authority (ESMA) looks to be following the lead of the US on this front, which has notably tight restrictions on the industry that saw the Securities and Exchange Commision (SEC) shutting down a number of ICOs this year, including that from Dallas-based AriseBank and Centra Tech.

Chair of ESMA Steven Maijoor told the European Parliament’s economic affairs committee that he is interested in finding out how ICOs fit into existing financial regulation, and what the implication will be for the general capital raising sector.

As he says, however, this task has been particularly challenging as each initial token sale can differ in nature, and not all of them fall under the category of a ”financial instrument”. Those that do, fall under the current regulatory framework but those that don’t, raise the question ”what do we do with those ICOs that are outside the regulatory world’,’ as Maijoor puts it.

His colleague Andrea Enria, chair of the European Banking Authority, previously told officials that he thinks the correct path for action is to avoid stifling innovation, proposing that ICOs should be allowed to prevail without any influence from the EU.

However, he now says that the outcome is not as he hoped, predominantly because the warnings that the EU issued to retail investors regarding cryptocurrency assets have not been sufficient to raise awareness. Regulators across Europe have tried to inform potential crypto customers that there is no safety net should their investment not go as they expect, but apparently, this message has been largely lost.

US SEC chairman Jay Clayton thinks that the way to combat this is to regulate the sale of new tokens as securities are, but admits that not all will fall into this category. Bitcoin and Etherum have been decided as not falling into the category of securities.

 

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Swiss Company Goes for Gold with Precious Metals Backed Tiberius Coin

A Swiss-based asset management company is to launch a new digital asset, backed by the price of copper, aluminum, nickel, cobalt, tin, gold and platinum.

The Zug based company, Bullion Vault Ltd, which also trades commodities, follows in the footsteps of struggling Venezuela’s Petro, which is backed by crude oil reserves, but hopes this project will be far more successful than President Maduro’s iconic digital currency.

Recent research carried out by Reuters revealed that the Petro itself seems to have disappeared with no signs of users, investors or verifiable resources that back the crypto. However, the CEO of the Zug-based crypto company Giuseppe Rapallo is convinced of its future success, commenting that diversification will add to its stability, unlike the Petro:

“Instead of underlying the digital currency with only one commodity, we have chosen a mix of technology metals, stability metals, and electric vehicle metals. This will give the coin diversification, making it more stable and attractive for investors”

Christoph Eibl is the founder of the Tiberius Group, founded in 2005, with Philip Zimmermann, as Chief Scientist and Security Officer of the company. The coin which will be known as “Tiberius” will be powered by blockchain technology, offering a variety of opt it to be used as a virtual currency and payment of utilities.  The company has suggested that it will be possible to convert coins into commodities such as gold and platinum, but that such transactions will incur fees, as commodities are traded by the ton rather than small amounts.

However, Adrian Ash research director at Bullion Vault Ltd doesn’t share Rapallo’s optimism, suggesting that several companies have made similar commodity-backed moves to link coins in this way, most of them unsuccessful:

“There are dozens of firms who launched stablecoins linked to metals, and so far none of them have gained any traction,” he said. “They’re trying to solve a problem that doesn’t exist – all of this can be achieved without the additional cost of a distributed ledger.”

The coin is set for its launch next week on LATOKEN, an Estonian based cryptocurrency exchange with company’s CEO maintaining he has every faith in the credibility of that platform’s adherence to Switzerland exacting regulatory standards.

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Crypto Startups, US Lawmakers Discuss Legislation

A new round of talks is taking place in Washington today between US financial companies and cryptocurrency startups entitled “Legislating Certainty for Cryptocurrencies” with ICOs as a major focus.

The sector representatives will meet with Washington lawmakers in order to further discuss Congressman Warren Davidson’s proposed bill set to pass through the House of Representatives this fall. Representatives of the industry invited to Capitol Hill for today’s roundtable are listed as Andreessen Horowitz, Circle, CME Group, Coin Center, CoinList, Harbor, Intercontinental Exchange, Kraken, Nasdaq, Ripple, Union Square Ventures and some others.

Davidson sits on The United States House Committee on Financial Services, which is responsible for overseeing the entire financial services industry, including the securities, insurance, banking, and housing industries. Congressman Davidson describes the meeting as design to offer a “light touch” to current ICO regulation before the new bill goes to US Congress later this year. He commented:

“I intend to lead legislation for initial coin offerings to clarify the role of regulators, protect consumers, address national security concerns, and facilitate a pro-growth environment for businesses to raise capital.”

Davidson had forewarned participants in a letter that discussing ICO overregulation would be the main theme among other issues, writing that “your input is critical to helping us pre-empt a heavy-handed regulatory approach that could stall innovation and kill the US ICO (Initial Coin Offering) market”.

Countries around the globe have taken quite differing legislative approaches to ICOs. The US, through the SEC, has always taken a “legislate first, business later, approach”, dissuading many overseas companies from entering the US crypto market. The EU has implemented the General Data Protection Regulation (GDPR) this year of which the main focus is an individual’s right to control what happens to their own data, which has implications for blockchain.

In South Korea, a ban on ICOs was put in place last year as a safeguard to crypto related fraud but the blockchain community is flourishing. Earlier this year, the South Korean government invested KRW 4.2 million (USD 3.75 million) into improving public services using blockchain applications for customs clearance, history of cattle, and simple property transaction.

US Republican Tom Emmer, who is pushing for more interaction between government and companies working with new technologies such as blockchain, recently commented on a new bill he hopes to get passed through the legislature:

“The United States should prioritize accelerating the development of blockchain technology and create an environment that enables the American private sector to lead on innovation and further growth…”

Emmer, who is co-chair of the Congressional Blockchain Caucus, calls for a “hands off” regulatory approach to blockchain.

 

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Swiss Bankers Act to Correct Anti-Crypto Bias

The Swiss Bankers Association (SBA) have stepped in an attempt to curb banks in that country from rejecting financial services to cryptocurrency-related companies.

The SBA is an organization which claims that it aims to achieve the best possible operating conditions for banks in Switzerland and is the umbrella organization of the Swiss financial center. Its stated primary objective is to create optimal framework conditions for Swiss banks.

The SBA has released a new set of guidelines to banks to create a more cooperative environment in view of many banks’ reluctance to do business in the crypto sector. Earlier this year, the financial director of Zug called for the SBA to make it easier for blockchain companies to meet their banking needs.

Director Heinz Tannlerand, together with financial director of Zurich Ernst Stocker, suggested then that if some of the complexities weren’t removed for Swiss-based blockchain companies wanting to open bank accounts, there would be a strong likelihood that firms will look to do business elsewhere, in countries which have more crypto-friendly banking systems.

Adrian Schatzmann, strategic adviser of the SBA, stated: “We believe that with these guidelines, we’ll be able to establish a basis for discussion between banks and innovative startups, making the dialogue simpler and facilitating the opening of accounts.”

New suggestions by the SBA, aimed at ICOs, calls for separate AML procedures for both fiat and crypto fundraisers. Oliver Bussman of the Crypto Valley Association suggests that “this provides more clarity not only to banks but also to startups”.

This suggestion should help to alleviate the concerns of many banks who expressly targeted the AML as their principal concern in dealing with companies offering ICOs. Reuters recently cited sources in the banking community who maintained that “banks are worried because some of the companies that carried out ICOs did not do AML checks on their contributors, meaning the banks themselves could fall foul of AML rules”.

Bussmann estimates that 530 crypto and DLT companies have set up shop in Zurich and Zug. One reason for Switzerland’s success as a center for blockchain and fintech, according to Swiss law firm MME, is the country’s openness to new business concepts and innovation. Marin Eckert MME partner said, “Swiss regulators are among the few that really have a deep understanding of the technology and how it works.”

 

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Can Blockchain Crowdfunding Solve Football’s Financial Burden?

A day doesn’t seem to pass now without the announcement of a top-flight football club’s interest in a new blockchain or crypto project, or an endorsement by a high profile player, and now more are lining up with crowdfunding in mind.

The latest to join the “club” are two more English Premier League teams, newly-promoted Cardiff City and Newcastle United, the latter promoted a season earlier. Both teams are currently in conversations with blockchain-based crowdfunding platform SportyCo. The platform is gaining some prominence now since it formed with an aim to tackle the problem of funding training and international events, faced by many athletes.

Cardiff City, currently lying 17th in England’s top-flight league, were promoted from the Championship last season with high hopes to regain a permanent standing in one of the world’s most prestigious divisions. An ICO launch through SportyCo may be an approach they take in order to gain additional funds in order to strengthen their squad in order to compete at the elevated level. They currently have a debt burden of over USD 150 million.

Newcastle United is also suffering a shortage of funds under owner British billionaire retail entrepreneur Mike Ashley. Supporters are now asking “where has all the money gone?”, with the club being unable to account for GBP 200 million from gate and sponsorship money including some USD 125 million in prize money.

Brazilian football superstar Ronaldinho has already taken the blockchain route on a personal level with his RSC coin, and others have followed, including two Barcelona players Carles Puyol and Andres Iniesta, with a blockchain project which links players and fans.

It’s becoming clearer that there is plenty of scope for fans to form closer connections to their clubs through such projects via a rewards mechanism. For example, a practical system would reward investors as token holders with discounts for club-related purchases, such as season passes, tickets and items purchased through the club.

 

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Colorado Resort Breaks New Ground with Real Estate Security Tokens

A resort in Aspen Colorado has launched Ethereum-based tokens to encourage investor interest.

St Regis Aspen Resort has followed up on its August announcement of an intention to offer shares in the business through blockchain tokens. The tokens will replace the traditional idea of paper certificates of equity in the property. The resort is using Indiegogo, an online crowdfunding platform, to launch the offering.

The prestigious St Regis hotel set at the base of Aspen Mountain has rooms at USD 3,500  a week, offering its guests shops, spas and treatment rooms, beauty therapies and a private butler service. Most guests stay to access skiing at a range of slopes nearby including Snowmass, Aspen Mountain and Buttermilk.

Slava Rubin, co-founder of Indiegogo, explained the thinking behind such projects:

“From the beginning ten years ago, we always looked at democratizing access to capital and allowing people to get more involved in these opportunities and today we are talking about our expansion into security token offerings.”

The tokens, called Aspen Coins, have been offered through Templum Markets, a broker-dealer registered with the SEC and will be treated as security tokens for the purpose of the sale. The sale price has been set at USD 1 each with a minimum investment of USD 10,000, with a total offering of USD 18 million which closed on 14 September.

The resort claims to be one of the first major real estate ventures in the US to launch into the world of blockchain. Stephane De Baets, St Regis owner, sees such ventures as game-changing in the hospitality industry:

“We’ve lined up a substantial pipeline of global properties to bring to market subsequent to the first offering. A lot of people don’t want to sit on depreciating fiat cash in a bank account… high-profile trophy asset is something you can be emotionally connected to and build a little bit of your savings portfolio on.”

This hasn’t been Indiegogo’s first foray into cryptocurrency, as at the end of last year the company launched a fan-based football league ICO which fell short of its target, only raising USD 5.3 million. The company’s CEO sees this as a far more investable enterprise, commenting:

“Having a clear asset like the St Regis Aspen is the beginning of signaling a shift in how people think about tokenization and investing in blockchains and crypto.”

 

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Great Barrier Reef Resort Looks to Crypto for Funding $216 Million Rebuild

Great Keppel Island on the Great Barrier Reef may once again begin to attract Australian tourists and others from all over the world, through cryptocurrency.

After ten years of sitting dormant, the island’s resort off Queensland’s central coast was recently demolished. It was last bought by Sydney-based company Tower Holdings in 2006 and was shut down by the developer two years later after becoming derelict.

The Great Barrier Reef is one of the seven wonders of the natural world, larger than the Great Wall of China and the only living thing on earth visible from space. The reef itself is found between 15 km and 150 km offshore and around 65 km wide in some parts. It is a gathering of brilliant, vivid coral providing divers with spectacular underwater experiences.

It boasts more than 400 different kinds of coral, also coral sponges, mollusks, rays, dolphins, over 1,500 species of tropical fish, more than 200 types of birds, around 20 types of reptiles including sea turtles and giant clams over 120 years old. It is a major boon to Australia’s tourism industry, bringing in tourists from all over the world as one of the world’s must-see experiences.

New life is now being brought back to the resort, once famous for its “Get Wrecked on Keppel” tag claimed in the 1990s when it was a magnet for party-goers. A new project between the current owners Tower holdings and a Sydney cryptocurrency consortium now plans to offer Great Keppel Island tokens to private investors in a round of public share offerings for a AUD 300 million rebuild.

Cryptocurrency expert Dr Philippa Ryan, who is also a Standards Australia Blockchain Technical Committee member, thinks the new idea is “brilliant” with further endorsements and backing from Australian regulators such as ASIC and the ACCC. She commented:

“Security Token Offering is a clever new name for this particular type of fundraising model because it clearly indicates the type of crypto token to be issued; it is a security token… This is much easier for ASIC to regulate than initial coin offerings, which do not issue coins at all.”

Once the white paper is released this next week, Dr Ryan expects that the company will begin to target investors with a minimum buy-in of AUD 100,000. The company began its marketing campaign already advertising the project on social media sites.

“I think it’s the more sophisticated investors who probably have done their research into crypto and are ready to put it into something of bricks and mortar, but I would say the more likely will be the managed investment schemes,” she said.

1,000 luxury villas and apartments, a 250-berth marina, a golf course, and an airstrip will be the new look if the project is successful. The owners had expected Chinese investment prior to the current plan. This may well revitalize that idea given China’s current mainland cryptocurrency clampdown and Chinese investors interest in Australian tourism.

Tower Holdings chief executive Anthony Aiossa commented on the new Great Barrier Reef development:

“The crypto solution that was put to us essentially involves the raising of private equity to fund the project, using the technology of blockchain to raise finance from around the world. People from around the world will be able to go online, view the offering, and if they wish to participate, will be able to buy tokens and essentially own part of the project.”

GKI Tokens will be tradeable on cryptocurrency exchanges, with each GKI initially being worth AUD 1 (USD 0.72).

 

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New EU ICO Rules May Fall Under Crowdfunding Umbrella

The European Parliament in Brussels has taken a further step towards clarifying rules for ICOs within the nations of the European Community.

The all-party group met yesterday to examine proposals for the launching of ICOs although as yet no formal statements of intent have been made regarding the outcome of the meeting. Nicolas Brien of France Digitale did urge for haste, however, arguing that “the market wants legitimization… from every jurisdiction. In the UK it’s particularly bad, none of the banks will bank you if you have crypto”.

Two weeks ago, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report that offers insights into new regulatory frameworks for crowdfunding. ICOs received a notable mention in the report stating, “It takes a much-needed step towards imposing standards and protections in place for what is an excellent funding stream for tech start.”

Brien went on to explain:

“Having the certainty, but also having that legitimization, I actually welcome having a European-wide proposal because it gives people the certainty to know. I think we need to be clear whether this is a utility token or a transferable security, or how the regulator regime looks at that, but I think this can be done because an ICO is another form of crowdfunding. It’s different, but it is a form of crowdfunding.”

As is so often the case at such meeting many regulators got on to discussing the need to prevent potential fraud and scams requiring a higher level of scrutiny than is currently the case. Laura Royle of the Financial Conduct Authority (FCA) echoed those thoughts at the meeting commenting:

“…we certainly do see a huge potential benefit in this space for firms to raise capital from a broad array of investors and without the cost of an intermediary, but there are risks associated [such as] the potential for fraud, with a lack of transparency and the volatility.”

There are current EU estimates that as many as 81% of ICOs could result in fraud. However, if new regulations result in a higher standard than is currently evident, then this may set the example for productive projects in the future within the EU. How this will apply to ICOs within the UK is still uncertain, given the country’s departure from the EU in March of 2019.

 

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French Regulators May Be Taking Next Step Towards Easing the Path for ICOs

The French government seems to be moving towards regulating ICOs in 2018, according to a recent Autorité des Marchés Financier (AMF) annual report, writes CoinGape.

According to AMF’s report,  ICOs are most definitely on the agenda for further regulatory framework as Robert Ophèle, President of the AMF indicated recently, suggesting that the government body will:

“…continue to reflect on changes in the regulatory framework in the face of new offers, in particular, the Initial Coin Offerings (ICO), and to promote at European level the French regulator’s approach to innovation.”

The AMF last published an update in February of this year with its analysis of the legal qualification of cryptocurrency derivatives, as well as ICO guidance resulting from a public consultation of the relevant actors on the French market, according to law firm Kramer Levin.

The AMF has now launched a program of research called UNICORN (Universal Node to ICO’s Research & Network) in order to give greater clarity to those involved and to better protect potential investors. The government body has also suggested that more academic research is necessary, although it has rather followed the direction of many governments globally of promoting awareness campaigns to point out the risks of Bitcoin to “unsuspecting” potential investors.

On a positive note, it appears that the AMF has accepted that ICOs may have a productive place within France’s financial structure in the not too distant future. Ophèle said:

“In parallel, considering that certain forms of ICO could in the future constitute an alternative mode of financing for a segment of the economy in connection with blockchain technology, the AMF has launched a program of support and research of ICOs.”

The French press is far more upbeat on the question of coin offerings, recently suggesting that France should become ‘la Capitale des ICO’. The recent AMF suggestions require that best practices should be clear and complied with, also that they could extend the scope of current regulations which treat ICOs as public offerings of securities. Another suggestion is to issue an ICO license based on the regulatory model.

In response to these suggestions, the AMF received 82 responses, most of which chose for the new regulation to be optional, with a specifically tailored framework.

 

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Estonian Startup Pops Up on SEC Notice Seeking $180 Million

A little-known company based in Estonia is looking to raise funds up to USD 180 million an obscure ‘GoWeb’ token sale, reports Coindesk.

The SAFT Project is a forum for the discussion of a compliant framework for token sales. Notice of the company using the fundraising sale was published through US Securities and Exchange Commission’s (SEC) EDGAR document system on 4 June.

The company, NewTech Myning OU, will become one of many blockchain startups and projects which have raised money using the SAFT model, by selling tokens with promises of the distribution at a future time. In this case, the offering is for the “sale and issuance of rights to receive GoWeb tokens in the future via a Simple Agreement for Future Tokens”.

The total of USD 180 million is significant as it would represent one of the larger recent token sales, but NewTech Myning is still a minnow in fundraising when compared to Telegram who raised USD 1.8 billion early this year, while EOS raised about USD 4 billion in a token sale over a one-year period starting in June 2017, according to MSN.

There is little information about the Estonia-based company which was only established in March, but startups are increasingly making a home in the country that has become a proactive space in the industry.

Estonia is becoming increasing crypto friendly, with its government previously linked to a national cryptocurrency project which has since been abandoned. The plan to introduce its own cryptocurrency was dumped, following the President of the European Central Bank Mario Draghi’s warning that no EU member can have its own currency apart from the Euro.

Many crypto companies are now doing business in Estonia with Lithuania, Latvia, and Estonia also experiencing an economic boom recently. Estonia’s widespread adoption of cryptocurrencies and fintech has become a breeding ground for new startups.

 

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