Nowadays, an Initial Coin Offering launch is becoming an increasingly popular method to raise capital for a variety of businesses and projects in the blockchain community.
It takes a shorter period of time to conduct an ICO, in contrast to an IPO. Also, ICOs provide investors with the ability to get their rewards much faster.
Independence from local authorities and bank regulations makes ICOs one of the most profitable ways of raising funds. However, such open access to funds can facilitate fraudulent activity, as well. One commonly-known reason for ICO failures is poor organization, which is unable to protect against fraud. An ICO becomes vulnerable to hacker attacks and faces pressure from the legislation of the country where it operates, and, as a result, becomes open to failure.
In practice, more than 90 percent of ICOs fail, and this is absolutely normal. Another problem is scam ICOs, which governments are trying to overcome by issuing strict regulatory policies.
Let’s learn the differences between different countries in terms of running an ICO, and define which are the ICO-friendliest for 2018.
Who Has Banned ICOs?
The financial authorities of some countries believe that ICOs are fertile ground for scammers, as ICOs are vulnerable to fraud, which can cause big financial losses. To avoid such unpleasant results for investors, nations sometimes issue and adopt new regulations banning all or almost all forms of ICO activity.
For example, South Korea decided to ban ICOs in 2017 in order to eliminate the risk of fraudulent cases.
Authorities from the People’s Bank of China (PBoC) stated that that token sales are disruptive and illegal, and that they’ve had a negative impact on the stability of the financial market in China. The PBoC investigates all cases of rule violations.
On the other hand, we have to remember that blockchain is the technology of the future, so it must stay — but protected by better-developed regulations.
In the general opinion, such serious bans and restrictions will be dropped after enforcing their policies and establishing regulations. For example, Japan’s financial-services industry continues to cooperate with 11 crypto exchange companies, regardless of any restrictions.
Which Countries Allow and Support ICOs?
More and more countries understand the potential of ICOs and their role in the future of the financial industry. They are taking special measures to legitimize cryptocurrency and all related blockchain-based projects to provide their admirers with more options.
The United States of America
The United States of America has no specific restriction on the federal level, as rules vary from state to state.
Let’s take note of the states considered to be ICO-friendly to find out how their policies restrict and protect the ICO environment.
Entrepreneurs in Nevada are applying blockchain technology in the running of their businesses through approval of a blockchain-friendly bill, which allows tax-free currency transactions.
Arizona has adopted a bill recognizing smart contracts and blockchain activity.
Texas and New Hampshire are conducting cryptocurrency transactions on the principles of honesty, integrity, and validity.
Additionally, some states treat ICOs as securities, and require licenses for businesses and registering with the SEC in order to participate in cryptocurrency activities.
In Washington, people can conduct exchanges only within the state. Also, they have to share their personal information, which leads to numerous doubts about running ICOs.
Illinois has also issued digital currency regulatory guidance to control all crypto-activities.
If somebody wants to launch an ICO in California, he or she has to be officially licensed by local authorities. However, such restrictions can lead to a loss of position in the cryptocurrency market, as in a case of New York.
The United Kingdom
The United Kingdom takes into account the unstable nature of ICOs and treats them as entities that are in the early development stage. To protect native investors from fraud cases, they test out all ICOs by recognizing altcoins as private currency. So companies can use existing laws suitable for private property from the General Data Protection Regulations.
The European Union
The EU members support ICOs, especially in the fields of AML (anti-money-laundering) and KYC (know-your-customer) systems. They require ICOs to be licensed and registered in order to operate. However, these regulations have not prevented raising the highest amount of money in recent years. Moreover, almost 40% of all ICOs are from European Union countries. According to Dealroom, the number of unique investors has increased by 31%, and the number of rounds multiplied roughly three times during the same period.
Australia was one of the first countries to issue formal regulations regarding ICO activity. If a company wants to involve combined investments in its ICO, it has to follow Corporations Act requirements in order to fit their startups into the regulatory framework.
Also, an innovation hub was launched to assist and guide users through the options and rules adopted by Australia.
Ukraine is another country to consider for an ICO launch. It provides some regulations, but in general, it is one of the most suitable countries to build a crypto-related career. There are a lot of specialists who can help control ICO activity.
For example, all companies that want to launch an ICO in Ukraine have a great opportunity to consult the professional Applicature team to meet all national and world requirements and to run their ICOs legally and officially.
The Best Countries for an ICO Launch
To define the most ICO-friendly country, first learn its history of ICOs. A significant indicator is the number of successful ICO launches.
ICOs are considered successful if they:
- have a strong position in the market
- meet regulatory policy
- are currently active
- haven’t been involved in fraudulent schemes
- have an income of over $10 million
Singapore hosts the biggest number of ICOs that have raised more than $10 million. There are several reasons that Singapore is such a suitable country for blockchain activity.
In general, it offers favorable options for ICO launches to entrepreneurs to increase their interest in blockchain businesses.
The Monetary Authority of Singapore accepted clarifying information on token sales and whether or not to treat an ICO as if it is a security.
Switzerland is considered to be one of the most ICO-friendly countries due to its blockchain-friendly policy and the Crypto Valley ecosystem, which encourages ICO campaigns to act within this country. The four largest ICOs of 2017, Tezos, Bankor, Status, and DAO, were founded in Switzerland.
3. The Cayman Islands
If you are looking for a suitable prospective country for an ICO launch, the Cayman Islands is a perfect choice. This country offers a well-set blockchain supervisory structure that allows implementation of transactions without delays.
It treats ICOs as securities, which means that they have to undergo a set of SEC regulations. Its regulatory policy relies upon international standards and does not apply the term “security” to an ICO token. This is very important in token-sale promotion.
4. The Isle of Man
As the Isle of Man is a British crown dependency with a policy quite similar to that of the United Kingdom. It implements AML and KYC strategies, as in the U.K.
Legislation on the Isle of Man was developed to increase blockchain activity on the island and support all businesses that are interested in applying token-sale procedures.
5. Gibraltar (U.K.)
A recently-issued white paper in Gibraltar states that tokens are commercial products, not securities, which means that ICOs are available for everyone. On the other hand, anyone who wants to launch an ICO has to hire a supervisor to ensure compliance with all regulations. This helps to support issuers and build a secure, risk-free ICO campaign.
Mauritius is a country known for high incomes due to its stable economy, which makes it a great place to launch an ICO.
One can easily start a blockchain startup in just a few days for an annual registration fee of $350!
The great advantage of policies in Malta is a taxation policy of 5% for foreign entrepreneurs, with 0% on certain token models. It also provides an ICO-hosting platform that covers all stages of an ICO campaign.
Such favorable regulatory policies positions Malta as an ICO-friendly country that protects all ICOs legally.
8. Baltic Nations
The Baltic nations also support the development of blockchain technologies. The main advantages of an ICO launch here are favorable policies and the ability to run an ICO from abroad.
Baltic countries like Latvia, Lithuania, and Estonia started to support blockchain-based projects in November 2017. They signed a Memorandum of Understanding in which governments are obligated to cooperate with each other in order to develop regional capital markets.
Russia is also open to ICOs. Today, there are no specific restrictions. The authorities require token registration, taxation, and security compliance.
Having discovered the best countries for an ICO launch, we can sum up by saying that each country treats the running of blockchain-related projects differently, and issues different regulatory policies, as well.
What is the situation with ICOs in your country?