The SEC’s Jay Clayton has stated that his organisation has regulatory power over ICOs because “every ICO I’ve seen is a security.”
This perspective has characterised much of the approach adopted by regulatory authorities across the world including those in the US, the UK and France.
Trying to use existing legislation to deal with coin offerings has largely been criticised by leading analysts who see the approach as one of seeking to fit a square plug into a round hole.
UK-based chartered accountant Aidan Markey, a leading UK crypto tax specialist, who has referred to the UK’s tax legislation as largely inadequate, has stated that lawyers, accountants and investors are currently having to second-guess the position adopted by regulatory authorities on a case-by-case basis.
Gibraltar Follows Russian Example
Gibraltar, on the other hand, is trying a different method. Much like Russia, instead of trying shove ICOs into an ill-fitting existing framework, they are treating them with a bespoke approach.
Gibraltar’s government and Financial Services Commission (GFSC) have announced that they are to discuss a draft law covering the regulation of ICOs in the territory. The bill will cover how ICOs may promote, sell and distribute their tokens. Gibraltar’s Minister for Commerce, Albert Isola, says that the law is motivated by a wish to “protect consumers and the reputation of our jurisdiction”.
In January a licence for blockchain companies was introduced. According to Siân Jones, Senior Advisor on DLT (Distributed Ledger Technology) at the GFSC, “token regulation is the natural progression.”
One of the innovations in the proposed legislation is the introduction of authorized sponsors, a designated person at each ICO who is “responsible for assuring compliance with disclosure and financial crime rules.”
The tiny British overseas territory of Gibraltar has become an unlikely ally of the ICO community. Seeking to diversify in advance of Brexit, it has decided to actively encourage blockchain companies and ICOs to set up under its jurisdiction.
The Gibraltar Stock Exchange had its own ICO this month to set up a subsidiary, the Gibraltar Blockchain Exchange, whose project was partly predicated on the future implementation of an ICO-friendly regulatory framework on the small island and whose public sale sold out within 10 seconds.