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Monero 2018 Analysis - The Anonymous Cryptocurrency

Monero in 2018

Monero is a more private and anonymous cryptocurrency than Bitcoin and it has been around since 2014. Almost everyone knows about Bitcoin and how this is a virtual currency with a use that is similar to that of cash but we cannot see it or touch it. It is decentralized, which means that there is no regulation for it and it can’t be cloned and faked. In addition to this, has long been the favorite payment method of the Dark Web and will become ever more popular this year during 2018. Many of the top black markets underground have been using crptocurrency for their business.

Now things have changed and bitcoins are not anonymous enough for some criminals to feel comfortable with them. Even when the overall use of Bitcoin is quite goods for this purpose, it’s traceable to the place and the person who obtained or paid with the coin. 

Now they have found a perfect replacement in a cryptocurrency called Monero because of the anonymity factor that they provide.

What is it and how does it work?


The first thing that calls the attention on Monero is that it is based on a protocol called CryptoNote that appeared back in 2012. This is just one of many other coins out there, but it comes with a very special added advantage to it and that is anonymity. 

It is true that this new anonymous currency shares similarities with Bitcoin, but it has the difference of allowing users to maintain total anonymity and this makes them perfect for anyone who is looking to be as untraceable as possible. 

Bitcoins use a single virtual wallet and all transactions linked to the same wallet and can be observed by anyone. Monero creates unique addresses for each transaction, and only the person receiving it can see it. Monero also mixes currencies automatically. It does this by combining the data in a transaction with any that have a similar size. This only adds yet another layer of confusion for anyone who tries to track down an operation using the block chain.

Monero could be promising more than it can deliver as there is no way that a cryptocurrency could remain completely anonymous without some serious regulations coming for it. The number of illegal transactions that could start to take place because of this would be astronomical. The idea is for this to be created for the purpose of helping people who want to remain anonymous about certain legal purchases that could be embarrassing to them, but obviously criminals will capitalize on such an advantage and use it for bad things.

The best thing to do at a certain point is to ensure that everyone is able to get the best possible results from using this kind of coin in 2018, but the truth is that it might not end up gaining enough attention due to the shady uses that people are giving to it when they acquire this coin. This is probably the main reason why it might never have the kind of value that people would find optimal for their needs.

PlexCorps Initial Coin Offering Scam

PlexCorps

The relevant authorities monitoring these cryptocurrency entities in the United States of America announced the acquisition of an order to freeze assets that would be used to help PlexCorps. The order was issued after the SEC started to take legal matters against the company for activities that turned out to be scam related.

The scam come in the form of offering people the chance to earn 13 times the amount that they are going to be investing and this is exactly the kind of scam process that is being used by these fraudulent companies. The Commission had introduced the petition in the federal court of Brooklyn and they mentioned that executives of Plexcorps promised investors that the value of the PlexCoin would increase its value a 1,354% in less than one month. This sounded wonderful to the many people that decided to invest. 

The complaint further explains that the individuals involved also violated the anti-fraud provisions that had been set by the federal law in the US. The Commission is actively seeking permanent sanctions to any company that is conducting this kind of scam and they demand the return of the invested money with interest. In addition, they want to ban those who are involved from ever being allowed to start this kind of business again. 

This is not the first time that we see this kind fo thing happening, but the important thing is to remind people in general of the many dangers that come from the use of this kind of platforms. There are tons of people who are getting involved in these markets and the opportunity to scam a portion of that audience is very tempting for criminals and people with no moral values. 

This is one of those cases that has all the characteristics of a complete computer fraud and they will be making sure to act as quickly as possible in order to make sure that people can avoid this issue as quickly as possible.

Although Plexcorps wanted to announce the release of the coin as a viable investment, the scandals behind the platform have caused the price of the coin to go to minimal amounts that make it completely worthless in the exchange markets and this is not the kind of thing that will prove viable to anyone

Plexcoin has already been targeted by authorities because of its potential to distort things with the ICO. This means that this is a coin that was built for scam purposes from the ground up, but it was shut down quick enough so that the number of victims wasn’t as high as it could have been.

This can be a perfect case for people to be cautious about the kind of platforms that they use and the kind of cryptocurrencies that they decide to invest on. There are many reasons why this is a great example of what you want to be able to avoid when you are looking to invest in the market.

Israeli Blockchain Firm Sirin Labs

With so many new cryptocurrencies coming out, it makes sense that those who know how to promote their coins are going to be using the most influential names possible. When a digital firm gets the support of a celebrity, there is much more appeal to it because people consider it to be a safe investment. 

Israeli Blockchain Firm Sirin Labs
Moshe Hogeg, co-founder and president of British-Israeli start-up, Sirin Labs AG
Sirin Labs, has headquarters in Switzerland and they also operate in London and Tel Aviv. This particular firm was founded in 2013 by Israelis who are known all over the digital world known for founding the venture capital firm Singulariteam and Mobli. They have managed to accomplish a lot of great things in the past few years.

They made international headlines last year for their development of very useful technology and their most recent, the FINNEY Smartphone is meant to be used as a friendlier way to create synergy with crypto wallets and a powerful operating system. All in the purpose of making the process easier for companies looking to get results. 

The operating system will support applications related to encryption, and being able to help cryptocurrencies turn into an easier and more manageable thing to deal with. These are all great things in their favor, but their greatest accomplishment has been to get the support of one of the most iconic sports figures in modern times. We are talking about no other than Leonel messi, the football superstar. 

When you are promoted by someone who is famous all over the world both online and offline, you gain a competitive edge that is very hard to match. Having a familiar and loved face like that of Messi saying that they believe in your products is nothing short of a marketing dream for anyone who conducts business at any level.

There is a lot that we can expect to see from this blockchain firm in the coming years. The most important thing is that they are creating a whole new world of possibilities now that other influential figures can see big names like Leonel messi are interested in promoting ventures that are related to the cryptocurrency phenomenon.

Messi was the perfect choice due to his ability to take his message to a much wider audience. This makes him a perfect spokesman for their firm and it will also be quite beneficial for the cryptocurrency world in general. The more influential people get onboard, the higher the chances that we are going to see a huge explosion in the world of cryptocurrency. 

Marketing is an essential part of globalization for any innovative idea and this seems to be the beginning of a truly outstanding marketing campaign that is going to take cryptocurrencies to a whole new level in terms of mainstream exposure. There is much we have yet to discover in terms of cryptocurrencies, but we can be sure that a large a number of positive changes are coming in 2018 and this is just the beginning of the cryptocurrency revolution all over the planet.

The Latest Bitcoin Price: The Value of Cryptocurrency Decreases Following Declaration of New Regulation by South Korea


Bitcoin is hugely unpredictable and has survived a chaotic year, shifting from below $1,000 in early January 2017 to $19,000 and more at the beginning of this month.

On Thursday, the bitcoin value reduced by two percentage numbers following the statement by the government of South Korea that it intends to implement new steps to control cryptocurrency trading speculation.

In London, mid-morning bitcoin was trading about $14,000 (£10,400) per piece, said some trading platform, after going beyond $16,400 when the week began.

“Several times, the government had issued a warning that virtual coins cannot operate as a real currency and could trigger massive losses because of too much instability.” According to Reuters, the South Korean government issued this statement. 

Many financial professionals have been advising prospective retail investors to avoid dealing with bitcoin. But others are making guesses that the currency will continue increasing in future months, attracting other cryptocurrencies like litecoin and ethereum.

Just before Xmas, three bitcoin exchanges were compelled to stop trading in the asset following its drop by 40% and more in value. Coinbase, one exchange like this stated at that period that purchasing and selling had been deactivated because of technical issues triggered by high traffic.

Bitcoin differs from global currencies since it is not under central bank regulation. It means that a bunch of sell-offs cannot be stopped or controlled easily.

Best Features of Bitcoin Gold (BTG)

Bitcoin Gold referred to as Bgold or BTG came to use from November 12th, 2017. After Bitcoin cash, another fork of Bitcoin is the BTG. Bcash aimed to offer a solution with regards to the scalability of Bitcoin block size. BTG primarily focus on countering the Bitcoin’s withdrawal centralization.


Bitcoin Vs. Bitcoin Gold


The new coin works on the proof-of-work mining algorithm. Unlike Bitcoin uses SHA256, BTG makes use of the proof-of-work algo with memory-hard Equihash. Zcash uses the same algorithm and is considered to have a protocol to take care of the privacy of the transaction details. Bgold cannot be mined using the ASIC hardware. This feature is similar to that of the Bitcoin cash.

Insights about Bitcoin Gold


Bgold’s official occurrence happened on 25th Oct and people who have BTC then quickly exchanged to Bgold and with the additional features offered by the BTC. The private keys could now be imported promptly to a Bgold wallet in a dedicated manner. 

The Bgold block 491407 which is on the Bgold blockchain is the first block, and that will deviate from the actual protocol used in Bitcoin. To understand better, you must know that the first block that got spilt into Bgold was the block 491407 and became independent of BTC. 

It is also told that the 8000 blocks, in the beginning, will be mined by Bgold team and this will not be open to the public. It will be private. After extracting the 8000 blocks, the challenges in mining BTG will ramp up thus letting it open to be extracted by all the users. The remaining 100,000 BTG blocks will be used to mobilize fund for the development of project and much more. 

Thus, the plan is to use first blocks within internally and later to open for public and make money for future development.

Changes From Bitcoin in Bitcoin Gold?


There were few changes incorporated in BTG to differentiate from BTC and also to enhance the features in a better manner. The primary focus is to restrict the ASIC hardware and the next on the centralization. 

DigiShield - It is an algorithm, and it works towards adjusting the mining difficulty upon identifying the block every time. Unlike BTC does it once in 2 weeks.

BTG offers strong replay protection and makes sure that none of the users spends BTC at the time of spending BTG. This is also applicable for BTC users. 

The new address plan implemented by BGold will prevent consumers from spending on BTG to BTC and in reverse. 

Summary


BTG has got great support, and several exchanges favor it namely the HitBTC, Okex, and the Bitfinex. These players support both BTG and BTC. It is expected that Bitcoin Gold will get closer to the exchanges and will get an excellent rating from the users. In a nutshell, BTG is scheduled to stand one among the top five altcoins. It is good to migrate to BTG and all BTC users can shift without losing any currency and above all can get upgraded.

XM.com - XM Cryptocurrency Broker Review (XEMarkets)

XEMarkets, more commonly known as XM, is a professional Cryptocurrency broker established in 2009 and founded by a group of interbank Forex dealers who wanted to improve the level of quality and transparency within the trading community.

xm.com Crypto spreads
xm.com Crypto spreads

XM's headquarters are located in the Republic of Cyprus, where they are subject to regulatory oversight by CySEC. They are also registered with Germany's BaFin and the UK's FSA.

By trading with XEMarkets, you know you're dealing with a professional Cryptocurrency broker who holds high standards in regards to the safety of their clients funds and personal information.

In this quick broker review of XEMarkets we'll look at what makes this Cryptocurrency broker a magnet for European traders

Platform


XEMarkets offers varying versions of the commonly used Metatrader 4 platform. From a downloadable install to web-trading and even apps for Android, iPhones and iPads, XM offers several different charting solutions.

Design


The design of XM's website interface is inviting and has an organized layout. Apart from the access to trading assets, charts and configuration areas, XEMarket's also has an All News area that contains trending economic updates, reports and analysis of the financial markets. Traders who use fundamental analysis to form trade ideas will find this useful. XM's website has little to no lag or delays, and gives traders the option to decide between a dark or light theme.

Trading with XEMarket's


Traders can get set up with a live XM account with as little as $5. This is arguable the lowest required minimum deposit in the Cryptocurrency trading industry. With that type of financial flexibility, I had no problem with opening a new account and making an initial deposit to get familiar with the platform and its advantages.

As far as the trading instruments XM offers, this international Cryptocurrency broker carries more than 100 different tradable assets. This includes Cryptocurrency, Forex, CFD's, indices, energies and metals. XM's instruments have diversity, which is great for traders who want the highest possible opportunities to find profitable trades.

XM's super tight trading spreads made me want to trade with them even more. Sitting at an average spread of 1.7 pips, they never charge any additional commissions! And with a maximum of 1:888 leverage, trading with XM should be a no-brainer.

XEMarket's continues to be one of my most frequently used brokers to date – highly recommended.

ICO Regulation - Regulation of Initial Coin Offerings

This article was posted on lexology.com by White & Case LLP on the 15th of December 2017

With cryptocurrencies on the rise, start-up companies increasingly pursue a novel path to raise capital: the Initial Coin Offering ("ICO"). The frequent notion that ICOs are unregulated is misleading. Regulators have been making an effort to communicate regulatory guidance to issuers and investors. Determining an ICOs' feasibility and offering structure require conclusive consideration of various regulatory requirements across several regulatory environments on a case-by-case basis. Following a respective analysis, an ICO might also be a valuable add-on in the financing mix of larger companies.


What is an ICO?


ICOs are an increasingly popular method of start-up and other companies to raise capital. Investors participate in the fundraising by transferring fiat currencies, such as US dollar, Euro or Renminbi, or cryptocurrencies, such as Bitcoin or Ether, to the issuer in exchange for digital tokens ("Tokens"). Tokens represent a holder’s right of benefit or performance vis-à-vis the issuer. Tokens may also be used (exclusively) for payment to the issuing company for its services or products. Contrary to a traditional initial public offering ("IPO"), Tokens typically do not represent an ownership interest or dividend right in an entity. ICO investors seek to directly benefit from the issuing company’s future business, while investors in IPOs tend to pursue a long-term interest in the value-creation of the IPO entity.

The underlying technology of the Tokens is based on blockchain (an electronic distributed and therefore in general fraud-resistant ledger, in which transactions are protocolled in a documented and reproducible way without a central authority) which is maintained by a network of participants and computers. Utilising cryptography to record transactions, blockchains such as Bitcoin and Ethereum process, verify and track the trade of the relevant virtual currency (Bitcoin or Ether) securely across independent network components.

Similarly to IPOs, the issuer can use the proceeds of the ICO to finance its business operations and future growth. In the event that Tokens are exchanged for other cryptocurrencies, the issuing company can exchange them for fiat currencies like US dollar, Euro or Renminbi, as required. As the features of Tokens issued in ICOs can widely vary, every Token has to be assessed individually. Investors seem to place less emphasis on the individual features of the Tokens, but rather focus on the potential future upside. Tokens are typically tradable on virtual currency exchanges, creating a secondary Token market, which makes them fungible in the same way as shares.

To market an ICO, it is currently market practice that the issuing company publishes a whitepaper ("Whitepaper") on its website and certain virtual platforms. In the Whitepaper, the issuing company typically describes its business operations as well as the structure and features of the Tokens. The ICO documentation may also include a Token purchase agreement stipulating the terms and conditions pursuant to which investors can purchase the Tokens. While initially most ICOs were marketed globally, more and more ICOs are more restrictive and are only marketed to investors in certain jurisdictions or exclude investors in certain jurisdictions.1 While there is currently only limited reliable information available on the investors in ICOs, market participants suggest that many of these investors are in fact retail investors.

The international ICO market is operating at its highest levels. In 2016, more than USD 100 million were raised through ICOs globally.2 In November 2017 alone, ICOs yielded an estimated USD 740 million,3 with a 2017 global issuance volume exceeding USD 3 billion.4 The estimates for 2018 vary greatly, but the market is anticipated to continue the increase, despite rising regulatory pressure. This significant market growth and the fact that ICOs offer limited investor protection have caught the attention of regulators all over the world. Although an ICO-specific regulatory framework does not yet exist, this does not mean that the market for ICOs is entirely unregulated. Regulators are progressively applying existing securities and financial market regulations to ICOs. Regulators in some jurisdictions, such as France, are in the process of drafting specific ICO regulation on the basis of a public consultation paper.5 An effort is being made to provide regulatory guidance to issuers, investors and financial markets as a whole.

For an ICO to be in compliance with regulatory requirements, potential ICO issuers should seek qualified securities’ counsel advice to conclusively analyse the applicable legal framework.

Legal Classification of Cryptocurrencies and Tokens


The regulatory status of cryptocurrencies, including Tokens, largely depends on the jurisdiction of the issuance and the rights associated with the cryptocurrency.

For example, the US Commodity Futures Trading Commission qualified Bitcoin, one of the most popular cryptocurrencies, as a commodity in 2015.6 However, this qualification is limited to Bitcoin only and does not apply to other cryptocurrencies or Tokens, which therefore have to be analysed individually on the basis of their individual structure and features. The US Securities and Exchange Commission ("SEC"), for the first time, took a distinct approach in determining the nature of a Token in July 2017 during an investigation into an unincorporated organisation called The DAO.7 Conclusively, Tokens of The DAO were qualified as securities as the result of the application of a test pattern by the SEC (see below "Financial Regulation of ICOs – United States").

In April 2017, the United Kingdom Financial Conduct Authority ("FCA") launched a consultation on virtual currencies. Following this consultation, the FCA held that, depending on the structure of the individual cryptocurrency, it may fall into the regulatory perimeter. In December 2017, it has been revealed that the UK Treasury will consider extending the applicability of anti-money laundering regulations to cryptocurrencies in 2018. This may cause an obstacle to, if not deteriorate, the degree of anonymity among participants in the cryptocurrency market.

Despite a high level of harmonisation of financial markets regulation in the EU, the legal qualification of cryptocurrencies differs among EU member states. The European Securities and Markets Authority ("ESMA") has recently issued statements regarding investor risks and firms involved in ICOs. Investors are explicitly alerted of the high risk of investment default, market volatility, insufficient information availability and vulnerability of technology.8 In addition, ESMA concluded that Tokens may, depending on their structure, fall within the definition of a transferable security or a financial instrument. 9 It is expected that ESMA will continue to monitor market developments and issue a regulatory statement when required.

France, among others, is trying to regulate cryptocurrencies by adjustments to their payment services legislation.10 The Swedish central bank is evaluating the feasibility of a regulated, national e-currency.11 In Germany, cryptocurrencies are qualified as units of account by the German Financial Supervisory Authority ("BaFin") and are thus considered a financial instrument.12

Regulators in the United Arab Emirates have backed the commodity-categorisation of cryptocurrencies, while individual Tokens, issued in connection with an ICO, may be regarded as securities, depending on the specific structure and characteristics of such Tokens.13

Canadian regulators concluded that many cryptocurrency offerings, including Token sales through ICOs, are to be qualified as securities, while not distinguishing between commodities and securities.14 In Singapore and Australia, Tokens are qualified as securities provided that the Tokens feature certain additional rights, such as ownership or voting rights.15 The regulatory guidance by the Australian Securities & Investments Commission is extensive, providing a thorough analysis on the applicability of national legislation, based on attributes of typical forms of offerings.16

Financial Regulation of ICOs


Existing legal uncertainties in relation to cryptocurrencies equally extend to ICOs. The specific crowd-lending regulation cannot be applied to ICOs as investors in an ICO do not grant a loan to the issuer. The purchase of Tokens issued in connection with an ICO can be qualified as a purchase of commodities, a purchase of rights or a purchase of securities which may ultimately subject ICOs and Whitepapers to prospectus or other disclosure requirements.

Some issuing companies are launching their ICOs in what are perceived as "ICO friendly" jurisdictions, including Singapore and Switzerland. Such companies register their office in these jurisdictions and include a governing law clause in their ICO documentation, trying to limit the applicable regulatory regimes to the potentially ICO friendly regime. Uncertainty exists, however, whether this is a viable approach.

Applicable regulations are not necessarily limited to those of the jurisdiction governing the ICO. When marketed to investors residing or domiciled in another jurisdiction, financial regulatory rules of such jurisdiction may equally apply to the ICO. A governing law clause does not dispense the ICO issuing company from compliance with such financial regulation. Publishing the Whitepaper in a certain language may already be presumed as marketing of an ICO and consequently cause regulatory exposure. For example, a Whitepaper in German is likely to be considered as targeting investors in Germany, regardless of the issuers' residence, and would consequently subject the ICO to full-width German regulation. Existing investor-targeting regulation, for example in relation to market sounding, should be considered to reduce the risk of incompliance until further guidance becomes available.

Issuers of ICOs will be required to limit accessibility of ICO information and documentation to those residents of those jurisdictions that were pre-determined prior to launching the ICO on the basis of a regulatory feasibility analysis. Failure to do so is likely to increase regulatory scrutiny by competent regulators.

Regulatory environments for ICOs differ globally. The below outlines the current regulatory environment for certain jurisdictions:

Germany


The BaFin will determine the applicability of certain national legislation including the German Banking Act (Kreditwesengesetz), the German Securities Prospectus Act (Wertpapierprospektgesetz), the German Capital Investment Code (Kapitalanlagegesetzbuch), the German Capital Investment Act (Vermögensanlagengesetz) and the Payment Services Supervisory Act (Zahlungsdiensteaufsichtsgesetz) on an individual basis. The application of such legislation will therefore depend on the contractual arrangements of each ICO.17 Where Tokens resemble participations rights which might be classified as securities under the German Securities Prospectus Act (Wertpapierprospektgesetz) or capital investments under the German Capital Investment Act (Vermögensanlagengesetz), a prospectus for the marketing of the Tokens may be required. Any act of trading, including an arrangement for acquisition, sale or purchase of Tokens, when qualified as units of account, would, as a general rule, require a license by the BaFin.

United Kingdom


The FCA issued a statement in September 2017 which established that many ICOs fall outside the scope of existing regulations without indicating specific reasons, although the FCA seems to generally require a case-by-case analysis of facts.18 Consequently, an ICO could be considered as deposit-taking, e-money issuance, contract for difference, derivative or a collective investment scheme.

France


The French Financial Market Authority ("AMF") recently issued a public consultation paper indicating that ICO regulations will be drafted after the end of the consultation period in late December 2017.19 An anticipated regulation of ICOs is facilitated by certain framework propositions pursuant to which ICOs could be regulated. While the AMF neither defines ICOs or Tokens under French law in its consultation paper, the forthcoming definition of Tokens will determine their qualification under national legislation in the future.

European Union


The ESMA has explicitly set out the potential applicability of various regulatory frameworks in connection with ICOs. An ICO with Tokens that are considered to be transferable securities would be submitted to applicable EU regulations. In particular, compliance with the following regimes and obligations would be required:

  • Prospectus Directive: publication of an approved prospectus when securities are offered to the public with exceptions for offers (i) to qualified investors (as defined in the Prospectus Directive), (ii) to fewer than 150 natural or legal persons, (iii) of at least EUR 100,000 per investor and (iv) with a minimum denomination of EUR 100,000.
  • Markets in Financial Instruments Directive, as amended: licensing requirements, product governance rules, pre- and post-trading transparency requirements, requirements for adequate systems and controls, organisational requirements for trading platforms, requirements for companies active in algorithmic and/or high frequency trading, among others.
  • Alternative Investment Fund Manager Directive: licensing requirements, conduct of business and transparency requirements, prospectus and disclosure requirements, mandatory appointment of depositories and custodians, restrictions on the use of leverage, among others.
  • The 4th Anti-Money Laundering Directive: due diligence on customers and ongoing monitoring of customer relationships, requirements regarding systems and controls and record-keeping, reporting on suspicious activities and co-operation with any investigations by relevant public authorities.

Switzerland


The Swiss Financial Market Supervisory Authority has published market guidance in late September 2017. Depending on the structure of an ICO, the Swiss regulator determined, among others, that supervisory regulations, collective investment scheme legislation and banking law provisions may be applicable to specific ICOs.20 Accordingly, issuers should carefully asses these recent regulatory changes when structuring an ICO and marketing ICOs, particularly in Switzerland, may no longer be advantageous.

United States


The applicability of federal securities laws to ICOs depends on the classification of the Tokens. The SEC determined in a first evaluation that Tokens may be qualified as securities as a result of the Howey21 test. The DAO investigation report indicates that the SEC will conclude that Tokens offered in connection with an ICO will be classified as securities if the ICO is, implicitly or explicitly, presented to purchasers as an investment opportunity. Accordingly, Tokens may not be lawfully sold without SEC registration or an exemption therefrom, such as under Regulation S, which in itself requires registration. The public offering of Tokens that qualify as securities necessitates a registration statement and a SEC-approved prospectus to comply with US securities laws.22

China


In September 2017, the Chinese government declared ICOs to be illegal in China and asked all related fundraising activities to be halted immediately.23 Shortly thereafter, cryptocurrency exchange platforms were ordered to discontinue operations. However, the ban of virtual currencies and ICOs may only be temporary until the Chinese government passes specific regulation, which is currently being discussed.

South Korea


In late September 2017, the South Korean Financial Services Commission has determined that ICOs shall be prohibited.24 South Korea will follow the Chinese model and formally introduce legislation regarding the ban, though the enforceability of the current ban has been scrutinised by some.25 The operation and participation in cryptocurrency exchanges is expected to be regulated as well and the associated regulation drafts are in their final stages. Subject to stringent compliance with certain standards for consumer protection, these measures are also triggered by the growing international trading significance of cryptocurrency. 26

Documentation Requirements


Even when Tokens are not qualified as securities (or otherwise to legislation triggering prospectus requirements), ICOs and Whitepapers have to conform to generic anti-fraud and information requirements. Information requirements may apply to the issuer and any other party involved in the sale and marketing of Tokens. Going forward, determinations by the FCA, ESMA or SEC may provide more detailed regulatory guidance (see "Recent Developments and Market Overview" below).

Generally, transaction documentation must include all necessary information to permit an average investor to make a reasonable investment decision. The documentation must be accurate and not misleading, comprehensive, transparent and include potential risk factors as well as a description of the characteristics of the Tokens and the business of the issuer. Statements on future developments must be reasonable and disclosure on the use of proceeds is required. If qualified as general terms and conditions, the terms of the sales documentation must comply with specific local requirements.

Whitepapers relating to many previous ICOs may not always have complied with the above standards. Transparency and comprehensiveness of a Whitepaper are currently not examined by regulatory authorities in the above jurisdictions. Risk factors, if included at all, are frequently limited to vaguely standardised descriptions of potential conflicts. It is also doubtful to what extent a reasonable investment decision can be made in the absence of (audited) historic financial information, but conversely, ICOs frequently occur in the early stages of launching a business.

There is currently no established case law available in respect of inaccurate, incomplete or misleading ICO documentation. This may change as a result of recent SEC investigations (such as outlined below) or when investors are seeking damages for ICO investment losses.

Recent Developments and Market Overview


On 1 December 2017, the SEC filed charges against two Canadians, determined to be the individuals behind PlexCorp, who had issued an ICO in August 2017.27 For the first time, the newly established SEC Cyber Unit created to, among others, monitor ICOs more closely, filed a complaint. It was alleged that the individuals had made false statements to prospective investors prior to the ICO, and to have intentionally hidden the involvement of one individual, who, in the complaint, is referred to as a recidivist securities law violator in Canada. Québec authorities have allegedly asked a court to sentence this individual to a six-month prison sentence following investor solicitation. The SEC is investigating movement of the ICO funds to track funds flow and to, ultimately, step in to protect retail investors. It has summarised in its complaint that such ICO was in itself an illegal offering of securities due to a lack of registration. The developments must be monitored closely. Depending on the circumstances, findings of similar significance to The DAO investigation may follow and will set guidelines, presumably of explicit relevance in terms of documentation requirements.

With the United Kingdoms' push for applicability of anti-money laundering laws on cryptocurrencies described above and other regulators pursuing similar plans, a potential shift in jurisdiction of ICOs may occur in the near future. Due to a lack of international uniformity, it is unlikely, however, that ICO activity will decrease substantially for that particular reason.

On 30 November 2017, PricewaterhouseCoopers Hong Kong has announced that it will be accepting Bitcoin and other established cryptocurrencies as a satisfactory method of payment. An increasing number of customers in the digital-asset and cryptocurrency space have led to this decision, which it believes will evolve into a regular practice going forward.28

On 10 December 2017, Bitcoin futures contracts trading commenced on the Chicago Board Options Exchange, adding credibility to one of the most popular cryptocurrencies. The Chicago Mercantile Exchange has communicated it will follow on 18 December 2017.29 Futures contracts allow for hedging against currency-fluctuation risks.

Outlook on Future ICO Regulation


Regulatory authorities around the globe appear to pursue different approaches in the regulation of ICOs.

Some attempt to regulate ICOs by applying existing securities and other regulation. This approach is, for example, pursued by the SEC, the Canadian Securities Administrators, ESMA and regulators in Australia and Singapore.

Regulating ICOs under the securities legislation certainly has advantages. It will provide investors with a strong level of protection and could help establishing ICOs as an alternative way to raise funds. Considering The DAO investigation and the PlexCorp investigation by the SEC, it remains to be seen what impact these investigations will have on the ICO market as a whole. Some ICOs already exclude US citizens from an investment. In the EU, ESMA took the view that existing regulation should be sufficient to regulate blockchain technology. As the views of national regulators regarding the regulatory qualification of ICOs can differ, and as there is no uniform ICO or cryptocurrency regulation, launching an ICO can be very challenging.

It is primarily Asian regulators who seem to follow a different approach in their process by drafting and establishing ICO-specific regulation.

Despite these differences, nearly all jurisdictions do currently apply anti-money laundering laws to cryptocurrencies or the applicability is at least intended in the nearest future.

Conclusion


ICOs are an innovative and appealing method for companies to raise capital. The assumption of some market participants that ICOs were unregulated is misleading. Although there is currently no specific ICO regulation in place, blockchain technology does not liberate users from the need to comply with the existing regulatory framework. A diligent analysis of the regulatory framework is necessary to identify and ensure legal compliance with all applicable laws prior to launching an ICO. Legal challenges arise especially if an ICO targets investors globally. Regardless of the Token structure and their qualification, the issuing company needs to provide investors with sufficient and accurate information and disclose such information comprehensively and transparently to permit an average investor to make a reasonable investment decision.

Non-compliance with any of the above may impose a range of severe legal consequences for an ICO issuer. It is highly advisable to seek legal advice and guidance at all stages of an ICO, beginning with its structuring throughout its completion, including documentation thereof. With such a thorough analysis, structuring and documentation, an ICO might be a valuable add-on in the financing mix of corporate companies.