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French Regulator Approves First ICO

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  • French regulators have approved a first ICO in France as Europe gains traction in legitimizing ICOs and blockchain projects

French markets regulator AMF (Autorité des marchés financiers) has announced that it has approved the first initial coin offering (ICO) in the country, provided it fulfills basic conditions. Token sales until now have been legal in the country subject to regulatory clearance from the AMF but until now, no ICO has received it. A company called French-ICO has been granted the status of approved after several months of deliberation on the matter.

However, AMF cautioned further cryptocurrency projects in the country as they stated that they do not regulate the issuers but rather the ICOs themselves. The extent of the clearance is only for six months and after that, the ICO will need to apply for further extension.

In addition to giving clearance certificate to ICOs, AMF also maintains a blacklist and whitelist of ICOs. The purpose of this new approach is to help facilitate the industry while at the same time rein in dubious projects and scams that attempt to con people.

France remains one of the most crypto progressive countries in the world and is setting the bar higher and higher for others. Germany is also expected to approve ICOs in the near future while in the USA, ICOs are still almost outrightly banned.

 

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3 ICO Companies Miss SEC Deadlines for Repaying Investors

Three initial coin offering (ICO) companies have missed Securities and Exchange Commission (SEC) deadlines to repay investors, including Gladius Network, Paragon, and Airfox.

Collectively these companies owe USD 40 million to the investors who participated in the ICOs, since the SEC ruled that the investors must be refunded, in addition to the companies being required to register their tokens as securities with the SEC. The Paragon and Airfox cases were actually considered the seminal cases on ICOs, since the SEC declared that ICO companies prosecuted in the future would be treated in a similar way.

However, by the time the SEC ruled on the ICO cases, the companies had already spent most of the investor’s money. Airfox owes USD 15.4 million to investors and only has USD 6.1 million of assets, while Paragon is in an even worse position with USD 14.9 million of liabilities but only USD 95,000 of assets.

Paragon and Airfox received reduced fines of USD 250,000 each for agreeing to deadlines for repaying investors, and Gladius received no fine because it self-reported its violations. It is unclear if the severity of the fines will be increased now that these companies have missed their deadlines, and it is also unclear what will happen next.

 

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ICO Founder Agrees to Pay SEC $9.5 Million after $8 Million Hack

Veritaseum founder Reggie Middleton has reached a settlement with the United States Securities and Exchange Commission (SEC) for USD 9.5 million, which includes disgorgement, pre-judgement interest, and a civil penalty.

Further, Middleton is banned from ever having a public company or participating in an ICO. Although this penalty is monetarily heavy, Middleton was able to settle without admitting guilt and will not be going to jail.

The Veritaseum initial coin offering (ICO) raised USD 14.8 million, despite having a relatively vague mission of building blockchain-based peer to peer capital markets. Soon after the ICO, a hacker supposedly stole 36,000 tokens worth USD 8 million at the time. Indeed, the price of Veritaseum skyrocketed in January 2018 to nearly USD 500 with a market cap of USD 1 billion, which was simultaneous with the ICO boom and the Bitcoin rally to USD 20,000.

The SEC alleges Middleton conspired to manipulate the market during that time, in addition to misappropriating USD 520,000 of investors funds for himself.

Despite Veritaseum essentially being nuked by the SEC, it still has a market cap of USD 38 million, although liquidity is low with a volume of only USD 20,000 per day.

 

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SEC Shoots Down Kik’s Defense in $100 Million ICO Court Case

The United States Securities and Exchange Commission (SEC) has been in an intense court battle with Kik messaging company over the USD 100 million Kin initial coin offering (ICO) that occurred in 2017. Apparently Kik spent so much money on the court battle that they had to close down their messaging app, which was the meat and potatoes of their business. Despite spending so much on this court case, Kik is now on their last stand, betting everything on the void for vagueness defense.

Essentially, Kik claims that its ICO does not count as a security, and therefore is not under SEC jurisdiction. However, the Howey Test, which is the rule that determines if something is an investment contract, states that if an investment is made in expectation of profit then it is an investment contract and therefore a security.

Now Kik is saying that the Howey Test should be voided because it is too vague, and allows the SEC to regulate the crypto space in an arbitrary and discriminatory manner.

That being said, it seems unlikely that Kik will be able to nullify the Howey Test since it has been the law since 1946. The SEC calls Kik’s void for vagueness claim “untenable”.

 

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SEC Halts $1.7 Billion Telegram ICO

The Securities and Exchange Commission (SEC) of the United States has announced that they have filed an emergency action and obtained a temporary restraining order against Telegram for the USD 1.7 billion Grams initial coin offering (ICO). Apparently, during the ICO 1 billion Grams tokens were sold to 39 investors in the United States, violating federal securities regulations.

The reason this emergency order coming now is that the Grams purchased in the ICO were to be distributed on October 31, at which point billions of Grams would have illegally flooded the United States market.

The SEC is seeking a complete disgorgement, i.e. refund, of the USD 1.7 billion raised during the ICO, in addition to civil penalties, retroactive interest, and a permanent injunction.

Telegram was seeking to create a blockchain-based ecosystem called the Telegram Open Network (TON). However, this SEC lawsuit has the potential to kill TON and the associated Grams token before it ever launches and actually puts Telegram itself at significant risk. This case is perhaps similar to the SEC lawsuit against the Kin ICO, which was operated by the popular Kik messaging app. In that case, Kik ended up having to shut down after losing vast sums of money in a legal battle with the SEC.

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Bitcoin Dominance Percentage Climbs to Highest Levels Since March 2017, What Does This Altcoin Contraction Mean for Crypto Market’s Future?

Bitcoin Dominance Percentage Climbs To Its Highest Levels Since March 2017, What Does This Altcoin Contraction Mean For The Future Of The Crypto Market?

The Bitcoin dominance percentage is now approaching 70%, its highest levels since March 2017, and up 37.5% from its all-time low of 32.5% in early January 2018. The Bitcoin dominance percentage is calculated by dividing the Bitcoin market cap by the market cap of all of the other cryptocurrencies combined and therefore is a good indicator of the strength of the Bitcoin market versus the strength of the altcoin market. The 37.5% rise in the Bitcoin dominance percentage since early 2018 indicates that altcoins have on average lost 37.5% of their value relative to Bitcoin during the past year and a half. This article explores why this increase in Bitcoin dominance percentage is happening, and what this means for the future of the cryptocurrency market.

Bitcoin dominance percentage and the dominance percentage of various altcoins courtesy of CoinMarketCap.com

A Brief History of Bitcoin’s Dominance Percentage

Before discussing why Bitcoin’s dominance percentage is rising while the altcoin market is contracting, it is important to recap the history of the Bitcoin dominance percentage. At the beginning of crypto, when Bitcoin was created by Satoshi Nakamoto in 2009, Bitcoin had a dominance percentage of 100% since it was the only cryptocurrency. By 2013, the Bitcoin dominance percentage declined to 95% as Litecoin and several other alternative cryptocurrencies entered the market. The rise of Ripple towards the end of 2014 caused the first major decline in the Bitcoin dominance percentage, to as low as 77%, while the Ripple dominance percentage peaked near 15%.

In early 2017, the Bitcoin dominance percentage was still as high as 87%, but that drastically changed due to the rise of Ethereum and the associated initial coin offering (ICO) bubble. By June 2017, the Bitcoin dominance percentage dropped as low as 37%, and the Ethereum dominance percentage hit an all-time high of 33.5%. This was the first time that Bitcoin’s dominance percentage declined below 50%, and the closest an alternative cryptocurrency came to overtaking Bitcoin’s dominance percentage.

During the major Bitcoin rally at the end of 2017, when Bitcoin hit an all-time high of USD 20,000, the Bitcoin dominance percentage rose as high as 66%. However, Bitcoin soon crashed as the bear market started, and the Bitcoin dominance percentage fell to the all-time low of 32.5%. This was partially due to the ICO bubble peaking about a month after Bitcoin began to crash, so while Bitcoin was crashing alternative cryptocurrencies were still rapidly gaining value.

The ICO bubble popped in early 2018, and numerous ICOs turned out to be scams or poorly planned projects, bringing about heavy investor losses and government regulations. The impacts of the ICO bubble collapse continue to this day, with the dominance percentage of ICO cryptocurrencies and Ethereum declining to 15% and 7.5% respectively. Ethereum was the most popular platform for ICO cryptocurrencies, and this is probably the reason it is losing market share as the ICO bubble deflates.

Aside from ICO cryptocurrencies and Ethereum losing value relative to Bitcoin, major alternative cryptocurrencies like Litecoin, Ripple, Monero, Dash, and Bitcoin Cash are also losing value relative to Bitcoin. This trend suggests that perhaps Bitcoin may eventually go back to the old regime of having 80-90% of the dominance percentage, while altcoins only account for a small fraction of the total cryptocurrency market cap.

Dot-Com Bubble Reveals How the Cryptocurrency Market Could Evolve

During the 90s, the internet first became available to average consumers, and this quickly led to the rise of the dot-com bubble as every possible internet business was created, and as investors rushed to put their money into these businesses. This is quite similar to the ICO bubble of 2017-2018 when every possible blockchain business was created, and a frenzy ensued as investors rushed in.

In 2000, the dot-com bubble burst, causing a majority of internet companies to go out of business, and simultaneously revealing that many of these internet companies were scams or poorly planned. Just like with the ICO bubble, government regulators jumped in to stop the practices that led to the dot-com bubble, further dampening the industry.

Ultimately, major corporations like Google, Facebook, and Amazon survived the dot-com bubble and went on to become some of the most powerful companies in the world. Essentially, instead of having a massive amount of companies launching and raising money, the internet industry consolidated into the hands of a smaller amount of companies that had good business plans and were fundamentally useful.

The striking similarities between the ICO bubble and the dot-com bubble perhaps reveal the direction that the cryptocurrency market is heading. Instead of having a plethora of cryptocurrencies that are launching and raising money, the cryptocurrency market may consolidate down to a handful of reputable major cryptocurrencies that are fundamentally useful. Indeed, the dominance percentage data suggests that this is exactly what is happening.

Bitcoin is the King of Cryptocurrency

As the ICO bubble continues to deflate, the expectations that any cryptocurrency will overtake Bitcoin has diminished to nearly zero. Indeed, the mentality during the ICO bubble was to invest in the next cryptocurrency that would become like Bitcoin, but now it seems no cryptocurrency can truly compete with Bitcoin. This is because Bitcoin performs the function of a cryptocurrency perfectly; Bitcoin enables users to send money anywhere in the world instantly and securely without using identification information, and the network is decentralized so no centralized entities like governments can attack Bitcoin.

Also, Bitcoin has a worldwide network of cryptocurrency exchanges, Bitcoin ATMs, and businesses that accept Bitcoin, making it easy to exchange the cryptocurrency with fiat currency worldwide, and enabling it to be a currency that can be used in real-life. Further, Bitcoin has the longest and most reputable track record, and is considered the most valuable cryptocurrency. This is causing newbies and average users as well as retail investors and institutional investors to generally choose Bitcoin instead of alternative cryptocurrencies, now that the ICO bubble has basically ended.

Thus, it appears the cryptocurrency market is heading towards a future where Bitcoin reigns supreme as the king, and perhaps there will be several other fundamentally useful cryptocurrencies that have some value as well. However, most of the thousands of cryptocurrencies that launched during the ICO bubble may continue to lose value until they cease to exist. Overall this will lead to a healthier cryptocurrency space where there are less scams and fewer investor losses. This can be compared to how a forest fire burns away the congestion of old-growth and undergrowth, paving the way for new and stronger trees to rise out of the ashes.

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IEOs, ICOs, Whatever the Name, Regulation is the Issue

IEOs, ICOs, Whatever the Name, Regulation is the Issue (1)

With Initial Exchange Offerings (IEOs) gaining in popularity, industry experts have been suggesting that their uncertain regulatory status doesn’t necessarily mark an improvement as a way of generating new capital.

An IEO is conducted via a cryptocurrency exchange. Unlike Initial Coin Offerings (ICOs), an IEO is administered by a crypto exchange on behalf of the startup that seeks to raise funds with its newly issued tokens. ICOs raised nearly USD 30 billion over a period of three years until hitting a wall in 2018/2019 as the SEC cracked down on fraudulent activity and illegal offerings blighting the market.

Many analysts see IEOs as a way of sidestepping strict market regulation, but Peter Van Valkenburgh, director of research at advocacy group Coin Center in Washington, begs to disagree that there is any mileage in this argument. He suggests:

“I don’t expect IEOs to result in better outcomes… From a regulatory and legal standpoint, there’s not going to be much difference here… Calling it now an IEO is not going to change your obligation to the potential issuer of that token if the token fits the test for a security, which I think in many cases it will.”

Crypto advisory firm TokenMarket’s CEO Ransu Salovaara claims that whatever the method of raising capital, tokens still need to work as utility tokens in the long run. Cryptocurrency research firm InWara claimed that only 30% of IEOs launched this year had what it calls a “minimum viable product” at the sale with most offering simply a website and a white paper.

A recent InWara research report into IEOs found that many exchanges don’t screen new products launched on their platforms, often offering subjective evaluation:

“That’s the problem here: there is no standardized vetting process… And as long as exchanges have the freedom to decide where to draw the line, bad actors, and fraud crypto projects will always creep into the limelight.”

 

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Liquid Crypto Exchange First in Line for Telegram’s Gram Tokens

Crypto Exchange Liquid First in Line for Telegram’s Gram Tokens (1)

Crypto exchange Liquid is reported to be in the running for pushing to the front of the queue to host encrypted messaging app Telegram’s Gram tokens.

As yet, cloud-based instant messaging and voice over IP service Telegram has not commented on the report with no official statement due, and warned that the public need to wait to see how the Gram token is distributed.

Following Telegram’s ICO last year which raised USD 1.7 billion for its Telegram Open Network (TON) project gram holder organization, Gram Asia has come forward and offer an undisclosed number of tokens prior to a full sale in October.

“We share the vision for a more secure and open value transfer system in order to enable the mainstream adoption of cryptocurrencies,” Liquid CEO Mike Kayamori commented, adding:

“The TON Blockchain infrastructure can help enhance Telegram’s current capabilities as a peer to peer network of value, with the launch of their cryptocurrency light wallets for Telegram’s highly engaged user base.”

Liquid’s press release claims that Grams will be purchasable in USD and USDC with tokens available for sale to users in selected countries only.

Telegram is well known for its high-end encryption model as well as for being the go-to app for crypto-related community building. Its Russian founder Pavel Durov surprised followers when he declared that he was on a liquid diet, claiming he would come up with “new great ideas for Telegram” which will benefit his millions of followers.

 

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How the ICO Market Has Been Regaining Investor Faith

How the ICO Market Has Been Regaining Investor Faith

In 2018, funds raised from initial coin offerings (ICOs) fell dramatically from over USD 1 and a half billion in January, to under USD 75 million in December.

However, new data showing the activities of the month of May so far indicates that investor faith has begun to regain strength in the light of increasingly highly-rated ICO projects, with 85% of the total projects receiving a high rating between 3-3.5 stars. This is a significant increase, even from April 2019 which claimed an average of just 68% of projects gaining this trusted star rating.

As many viewed ICOs and similar token events as a groundbreaking new way to fund startup projects in the blockchain space, the slow fizzle out of popularity last year was highly disappointing. It seemed to be that these token offerings had collapsed under the weight of up to 80% scam projects flooding the market, as well as crashing prices across nearly all cryptocurrency.

ICO bench data shows that 157 ICOs have been launched in May so far, expanding the total number of published projects to 5,512. There are currently 287 ongoing ICOS, with a further 140 expected in the near future.

A summary of the ICObench ICO Market Half-Monthly Analysis May 2019 report can be accessed for free with a trial subscription on the platform.

Moving away from the established model

Trends away from the established ICO model are likely in reaction to the poor quality and trust standards that became prominent amongst ICOs, beginning in 2017.

The month of May 2019 has so far been overwhelmed by Bitfinex’s USD 1 billion initial exchange offering (IEO) — a relatively new model available to investors where they can participate in a centralized cryptocurrency exchange’s token offering. The exchange involved operates the sales, vetting both the project and prospective investors.

Bitfinex’s IEO has contributed significantly towards this month’s roughly USD 1.075 billion collected in token sales — the highest total funds raised in 2019 to date.

This year has also seen a rise in popularity of security token offerings (STOs). STOs claim to offer a more trusted model than the ICO as the security token issued to investors represents an investment contract, acting similar to ownership information given to investors in the stocks or bonds, just recorded on the blockchain via the token instead.

STOs can be seen as a lower risk than ICOs because they are protected by securities laws that the tokens must comply with, legally enforcing transparency and accountability from the project behind the token.

STOs raised USD 1 and a half million in March 2019; this figure jumps up to over USD 5 and a half million in May so far.

Indeed, because active ICOs have a higher average trust rating than one year ago, it enforces greater trust in investments made across the cryptocurrency market.

The move towards alternative token investment models such as STOs and IEOs could certainly be one reason investors are regaining trust in early blockchain project investment. However, May’s bullish market performance could certainly have also had a great impact on the number of investors willing to participate in token offerings.

 

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What Makes This Bull Market Different

What Makes This Bitcoin Bull Different

For the past several months Bitcoin has been on the up, increasing its value by 50% and hitting its highest price so far in 2019. And alongside it, altcoins have been enjoying a significant market boost. With indicators suggesting a bull market is back for cryptocurrency, there are many promising factors that mark this run as different than the infamous rise and fall experienced by Bitcoin investors during late 2017, early 2018.

Here are some of the major changes in the cryptocurrency and blockchain space that bode well for Bitcoin and altcoin’s market prices:

Market maturity: Less ICOs, more major names entering blockchain

Initial coin offerings (ICOs) and other token sales exploded in the wake of the 2017 Bitcoin bull market as companies looked to get in on the increasingly lucrative cryptocurrency market. Unfortunately, a significant number of the projects raising funds in this way either failed to deliver on their promises to investors or never tried to do so in the first place. In 2017, an estimated 80% of ICOs were reportedly scams. Of course, the mistrust that this sparked negatively impacted the performance of the cryptocurrency market as fewer investors held faith in many altcoin projects.

Last year the bear market wiped out many of the projects that lacked substantial promise or were unequipped to carry out their plans. While there is still an abundance of ICOs being held, investor attention has dwindled due to a continued lack of credibility.

The blockchain market has matured far beyond start-ups holding dubious ICOs, with the technology now being utilized by some of the biggest, most trusted names in technology, logistics and retail this time around. Such major players include Microsoft, Walmart, Pepsico, and Luis Vuitton.

The rise of state-backed cryptocurrencies, stablecoins, and the JPMorgan Coin

Again, these three rising trends in the cryptocurrency space represent growing levels of trust, or support in the technology behind them at the very least. A significant number of central banks including that of Saudi Arabia and the UAE continue to explore the option of launching their own state-backed cryptocurrencies in a bid to lower remittance costs and provide an additional reserve for domestic payments.

Alongside the growing prominence of stablecoins, both appeal to “another kind of investor”, one seeking greater stability than that the cryptocurrency market could offer in 2017. Indeed, although the first stablecoin was launched in 2014 the concept did not gain great notoriety until last year.

JPM coin was launched in February 2019 as the first major US bank to create its own digital currency. Indeed, it can be considered to be the first ‘institutional’ cryptocurrency. This won’t appeal to a lot of established cryptocurrency investors, but it may well expand the market into a new audience.

A transforming market?

What these changes to the market show, along with growing support for cryptocurrencies among mainstream investors, is that the cryptocurrency market is appealing to a whole lot of investors it probably did not reach last time around; there are many ‘safer’ options in the market today.

It was perhaps not surprising to experience a market turndown last year while sub-standard blockchain projects collapsed. What is different and promising about the market today though is the additional seasoned professionals that have joined the industry.

As long as the blockchain industry can continue to avoid a stifling regulatory ceiling, it would seem to put the cryptocurrency market in a far stronger position for 2019.

 

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