Australia's Securities Watchdog Moves to Halt 'Deceptive' ICOs
The Australian Securities and Investments Commission (ASIC)
said Tuesday that it is taking aim at fraud in the initial coin offering (ICO) market. In a statement published May 1, the agency said that it is "issuing inquiries to ICO issuers and their advisers where we identify conduct or statements that may be misleading or deceptive." Additionally, the securities watchdog suggested that it was moving to halt unlicensed activity as well. "As a result of our inquiries, some issuers have halted their ICO or have indicated the ICO structure will be modified," ASIC disclosed, though it didn't say how many token sales have been canceled or changed in light of the agency's actions.
ASIC commissioner John Price explained:
"If you are acting with someone else's money, or selling something to someone, you have obligations. Regardless of the structure of the ICO, there is one law that will always apply: you cannot make misleading or deceptive statements about the product. This is going to be a key focus for us as this sector develops."
As CoinDesk previously reported, the move was perhaps expected. Price spoke about token sales on April 27, declaring the agency's intention to focus on overseas-based ICOs that target would-be Australian investors. "I cannot stress enough that if you are doing business here and selling something to Australians – including issuing securities or tokens to Australian consumers – our laws here can apply," Price said at the time.
In Tuesday's statement, ASIC indicated that it would be scrutinizing a popular aspect of ICO marketing – the white paper – as it looks into whether those behind such sales are in compliance with Australian law. "In one recent example, ASIC took action to protect investors where we identified fundamental concerns with the structure of an ICO, the status of the offeror and the disclosure in its white paper," the agency explained. "In addition to potentially misleading statements in the white paper, the offer was an unregulated managed investment scheme."
A member of CoinDesk's full-time Editorial Staff since 2014, Stan has long been at the forefront of covering emerging developments in blockchain technology. Stan has previously contributed to financial websites, and is an avid reader of poetry. Email: firstname.lastname@example.org. Stan does not currently hold value in any digital currencies or projects.
US: SEC Official Says ICO Regulation Should Be ‘Balanced’, Congressman Suggests Ban
In a hearing at the US House of Representatives
on Thursday, April 26, a regulator from the US Securities and Exchange Commission (SEC) and House Financial Services Committee members hotly disagreed over whether a “balanced approach” could be taken in regulating Initial Coin Offerings (ICOs). At the start of the hearing, entitled “Oversight of the SEC’s Division of Corporation Finance”, William Hinman, the director of the SEC’s Division of Corporation Finance, said that the area of digital assets and
ICOs “continues to evolve”:
“We are striving for a balanced approach, and one that ensures capital formation while maintaining a strong focus on investor protection.”
One purpose of the hearing was to discuss possible reasons for the declining number of Initial Public Offerings (IPO) in the country. Committee member Bill Huizenga asked Hinman if ICOs could be a solution to this decline, and whether all ICOs must be regulated. In response, Hinman said that “in theory, there is a time when a coin may achieve a decentralized utility in the marketplace, or […] there may be coins where that lack of a central actor may make it difficult to regulate.”
Hinman followed previous comments from SEC chairman Jay Clayton that most ICOs should be considered securities. According to Hinman, the SEC would be consulting with entities releasing tokens to verify that the offerings were either regulated or not qualified as securities. Committee member Brad Sherman (D-CA) disagreed with the idea that ICOs could replace IPOs, as an IPO “provides jobs in the real economy,” and
ICOs do “the opposite”:
“It takes money out of the real economy, it takes people willing to invest and risk, and says ‘don’t use that ability to risk, don’t use those animal spirits to help create a job for a person who needs one, let alone build a factory for thousands, sit there and trade back and forth in the ICO.’”
Sherman then asked why ICOs haven’t been “stopped,” noting that the “balance” mentioned by Hinman will negatively affect the economy:
“When you strike a balance between those who are trying to create a new currency to facilitate drugs, tax evasion, to deprive the Fed of its ability to market our securities and return 100 bln dollars or so to the US treasury, all the balances are for total investor protection, which could be achieved by totally banning.”
Sherman said of the decentralized nature of ICOs:
“Charlatans and scammers have always favored decentralized new enterprises.”
Committee member Tom Emmer (R-MN) took a different approach, saying that there “is a lot of of ignorance about how special this area is”,
“The typical attitude too that I get from so many elected officials is that have no idea what they are talking about […] everyone who is participating in [an area they don’t know] is either bad or dishonest, and an official must rush in and help people .”
The SEC and the Commodity Futures Trading Commission (CFTC) held a cryptocurrency hearing in February of this year. They reached the conclusion that ICOs need the most amount of oversight, digital ledger technologies (DLT) like Blockchain the least, with virtual currencies like Bitcoin (BTC) falling somewhere in between.
ILPs May Replace ICOs as
a New Form of Fundraising
Although initial coin offerings (ICOs) are seen as a legitimate means
of raising capital, there are no clear legal and technical controls. Initial Loan Procurements (ILP), are, however, an alternative to the risky ICO model. ILPs enable decentralized crowdfunding opportunities by creating a contractually bound agreement which minimizes the risk of ICOs.
According to Carey Olsen’s senior associate Luke Sayer, instead of coin acquisitions, borrowers and creditors “enter into a loan agreement through legally binding smart contract. With an ILP, a creditor’s investment is contractually tied to the performance of the company.” Therefore, if the company is profitable, the creditor receives annual returns.
Estonia-based startups Blockhive and Agrello have partnered to launch the first ILP called ‘Blockhive.’ Instead of issuance tokens, borrowers have a “contractual entitlement to 20 percent of their annual operating profits.” The goal is to continue decentralized crowdfunding with greater protection for borrowers, improved functionality without the interferences of government regulations.
Problems with ICOs
According to a report by Fabric Ventures and Token Data, startup companies raised $5.6 billion in 2017 through ICOs. While the ICO model of raising capital has great potential for high returns, it has become significantly scrutinized. “I think a lot of what’s happening in the ICO market is actually fraud, and I think that will (eventually) stop,” said Brad Garlinghouse, CEO of Ripple to CNBC.
Unfortunately, many ICOs were scams that extorted money from unsophisticated investors. While they pretended to have a genuine and viable product, once the ICO finished, the website and product information disappeared. Investors, therefore, receive a token that has little to no value. While many ICOs back “high-quality projects… there have been a lot of copycat projects where people copy all the same materials (and) don’t intend to deliver any value to the people buying the tokens,” said Joseph Lubin, co-founder of Ethereum, as he told CNBC.
In response to the high level of ICO scams, the Government of Gibraltar, a British Overseas Territory on Spain’s South Coast, and Gibraltar Financial Services Commission (GFSC) on February 12, 2018, confirmed that they were developing legislation in regards to tokenized assets. “Token regulation is the natural progression following the regulation of DLT Providers, being vital to the protection of consumers,” said Sian Jones, Senior Advisor on distributed ledger technology (DLT) at the GFSC. “One of the key aspects of the token regulations is that we will be introducing the concept of regulation authorized sponsors who will be responsible for assuring compliance with disclosure and financial crime rules.”
ILPs: an alternative to ICOs
Agrello, a legal startup that builds legally-binding contracts on the blockchain, and Blockhive are currently working together to launch the first ILP called ‘Blockhive.’ Blockhive will use the Agrello ID that provides support for all legal requirements which include Know Your Customer (KYC) and anti-money laundering solutions.
Agrello’s agreement also ensures that creditors’ data is encrypted and stored on the blockchain network. Users must register to receive the protocol’s Future Loan Access Tokens (FLAT – transferable loans assigned to third parties) as soon as they lend their funds to Blockhive. Once registered with the tokens, users can access and transact on the Blockhive platform. Unlike ICOs, ILPs can reduce instances of fraud and money-laundering. With new functionalities that prevent scams, ILPs may enable decentralized crowdfunding opportunities without restrictions from regulatory bodies in the future, if it becomes widely adopted.
Authored by Cindy Huynh
Cindy is a writer, digital marketer and content creator from Australia. She is currently a digital nomad fascinated by blockchain technology. Cindy believes blockchain technology and cryptocurrencies can disrupt existing industries and has the potential to revolutionize the world. In her spare time she enjoys learning new ideas and scuba diving with friends.
Cryptocurrency Market Surges to $365 Billion, Start of a Bull Rally?
Throughout this week, as CCN reported,
the cryptocurrency market has been eyeing a move towards the $350 billion region. Earlier today, on April 20, strong performances of major cryptocurrencies like bitcoin and Ethereum have led the valuation of the cryptocurrency market to surge to $365 billion.
Altcoin Season is Back
Throughout 2018, amidst extreme volatility and recovery, investors inclined towards bitcoin as the safe haven asset. With the deepest liquidity and largest volume in the global market, bitcoin was able to sustain some stability while many cryptocurrencies recorded a free fall. Most assets declined by more than 80 percent from their all-time highs and struggled to record gains against bitcoin. Over the past seven days, alternative cryptocurrencies (altcoins) and other major cryptocurrencies have consistently reported gains against the most dominant cryptocurrency in the market. The daily trading volume of the global cryptocurrency market crossed the $20 billion mark for the first time in April and the valuation of the market achieved a new monthly high.
In March and early April, investors were skeptical towards investing in cryptocurrencies other than bitcoin and Ethereum because they were uncertain about the short-term future of the cryptocurrency market. While altcoins tend to have intensified movements on the upside, it also has larger movements on the downside, and investors thought the risk was not worth taking. Traders have started to take more risk than before by investing in cryptocurrencies like Ripple, Zilliqa, Nano, OmiseGo and others. As the volumes of altcoins across major exchanges surged, altcoins began to outperform bitcoin on a weekly basis, and it is possible that ERC20 tokens outperform major cryptocurrencies on a monthly basis by the end of April.
The next major target for the cryptocurrency market is the $400 billion mark and by surpassing that threshold, the cryptocurrency market would achieve a two-month high. At this juncture, it is safe to conclude that bitcoin has bottomed out at $6,000 and the market has begun a rapid recovery to its previous levels. If the bitcoin price breaks the $9,500 level in the short-term, ideally within the next week, it is entirely possible that the cryptocurrency market surpasses $400 billion within April, in the next 10 days.
The Relative Strength Index (RSI) of bitcoin is in the 57 range and is signifying a neutral zone. Bitcoin is neither oversold or overbought based on current levels, as demonstrated by two momentum oscillators RSI and Williams’ Percent Range. Both simple and exponential moving averages are indicating buy signals for bitcoin, as it continues to gain strong momentum. From this point, traders are expecting the bitcoin price to cross $8,500 and potentially make its way into the $9 billion region.
Ripple, Rchain, Verge
Non-ERC20 tokens like Ripple and Verge were the best performers on April 20, with solid 20 percent gains. Both Ripple and Verge have performed strong against bitcoin throughout April and they are continuing to build momentum against bitcoin and Ethereum.
AUTHOR Joseph Young
Joseph Young, author of this article, is aHong Kong-Based Finance and Cryptocurrency Analyst / Writer. He is Contributing regularly to CCN and Hacked, Offering cryptocurrency news and Insights Into Asian Market (South Korea, Japan, and more).
1. First what has transpired in the last year and how Bitcoin saved my life
2. How Bitcoin (the entire industry) can save your life as well.
One year ago on February 23rd, I suffered heart failure and literally died at the Mayo clinic. Prior to that, I had earned a sizable amount of Bitcoin from a successful marketing campaign launching an ICO near the end of 2016. That money was going to be used to reengineer Markethive to relaunch as a 3 level affiliate program.
2017 was a year of change, struggle and overcoming, adversity. I should write a blog about it (actually this has turned into a blog), but in this summary some back story is required. Last year, new visions, new directions and new partners, I moved to a new home, got a new car, spent 6 months of intense physical therapy and diet to reverse the heart failure, the diabetes and the Lord and I persevered together.
My Health Insurance Company had also gone out of business (Thanks Obama and Pelosi) so I also got saddled with huge medical bills. During this time of challenge and adversity, I persevered and thanks to Bitcoin was able to pay the way through this adversity, keep the engineer at Markethive paid, keep the datacentre paid and come out of it, in good health, overcoming the diabetes and totally restoring the heart (A miracle) and impressed the doctors. Yaaaaaay!
I was praying for a vacation, so was this the vacation?
Because I was not able to do business, I was focused on restoring my health from ground zero. Thanks to my first ICO (A crypto thing) I made a fair amount of Bitcoin. And selling some every month against its meteoric price increases gave me the time and income to save my life.
When I was given the excellent diagnostics in June that I had overcome diabetes and heart failure, it was time for me to get back to business where as all my previous income had come to a halt.
My entry back to working was dogged with Bitcoin opportunities called Lending coin deals. “USI Tech”, “Bitconnect”, “The Trade Coin Club”, “Jetcoin”, “Gladiacoin”, “Laser Online”, etc. I am sure you have heard of at least one of these. With the losses these represented and the continued research I discovered mining options and got caught up in yet another scam (every one so far was a scam) called Mining Max and that is when I backed off and I took a new focus on what exactly I was doing and what was going on.
To be honest, I had been sidelined for over 6 months with this Heart Failure illness, and those I had entrusted to keep my businesses moving, webinars, 3 ways, support, etc. failed me. This left me coming back to a ship that was dead in the water.
Therefore I was a little too quick to jump and get the income rolling back in. I was guilty of the very thing I mentor others not to do. GUILTY! So I regrouped and repented and restabilised my faith back to the Lord (Jehovah, Yeshua, The Almighty) and trusted Him.
In my deeper research into Bitcoin production options I was tutored in mining by Joe Able (A founder in a mining DAO called Bitclub) and also began my own research into Day Trading, Arbitrage (Lending Coin Ponzis), Mining (both home, cloud and datacentre options), and a greater understanding of ICO (Initial Coin Offers).
My education of the blockchain technology began over 2 years ago including my education about wallets (I now have over 20 types of crypto wallets), coin exchanges (I have active high security accounts with all the top exchanges) and a solid understanding how to trade, how they work, the various interfaces etc.
But it was my discovery of faucets that caught my curiosity, and as I started down that path, it dawned on me; there is a vast resource for the disciplined, determined and clever to produce wealth if one could figure out the faucets that work, and pay. I was inspired to pursue this to build a semi-automated system so people who are flat broke, dirt poor, homeless, unemployed, under retired, etc. have a path to the promised land of the Bitcoin revolution and subsequent wealth.
Someone had to do it and apparently this project fell on my desk and I took it on. (In reality, which I visit often, I am sure others have put similar guides together for the same reason)
Some 500 hours later, and 6 months, I have emerged with a top ranked selection of Faucets and a 3 part 20 minute cycle which done consistently has the potential of producing upwards of 2 million dollars in a year of dedicated work and at least produce $300 – $500 per month with limited daily production.
The system is part video, part blog and part web based automation. Since this initial writing was to be an email, it has now become a blog, so now I can extrapolate a bit more, yes?
You need to stop fearing, you need to break out of the main stream mantra, you have an opportunity in front of you that has never occurred in the history of man and will not wait long for your action.
If you have money, invest in Bitcoin, if you do not, then learn about this new technology and put the time in to earn the free Bitcoin I have shown you how to do on my next blog.
For those that come to my webinars, I also have free incentives for you as well, free T-Shirts, Hoodies, and Gold and Silver coins. Just take action. Or you are going to miss the greatest opportunity to lift yourself out of your financial challenges.