With the ever-growing talks of regulations on cryptocurrencies – including them possibly being a major topic of conversation in this year’s G20 Summit – it does not come as a surprise when countries come up with regulations of their own every other week to control cryptocurrencies and their usage within their territory.
The most notable of countries in the past few weeks to do so has been South Korea, which imposed regulations on cryptocurrency activities and trading procedures, but that was nothing new seeing that almost every other country has done that to some extent.
However, Gibraltar, which has so far seemed a cryptocurrency-friendly territory, recently went one step ahead of such countries and announced its plan to introduce specific rules and regulations for initial coin offerings (ICOs) held within its territory.
This is a revolutionary move because while countries propose regulations on cryptocurrency trading, as mentioned above, ICOs do not get to see detailed regulations that are created just for them.
For instance, within the U.S., ICOs are treated as investment opportunities – most recently, seen as securities – and thus have their regulations derived from other sources. On the other hand, countries such as China have banned them altogether.
But Gibraltar now plans to address ICOs specifically with their own set of regulations and has planned to do so through its financial body, the Gibraltar Financial Services Commission (GFSC).
The GFSC will work towards devising a complete set of rules that will specifically address ICOs, including but not limited to regulatory procedures about their promotion, sale, and distribution of tokens to potential investors.
What the rules will include
One of the biggest concerns with ICOs that regulatory authorities have encountered is the way that they provide their initial information to investors, promising an unprecedented return on investment or not defining how any profits will be made. One of the most recent of such examples is BitConnect, which never specified its profit mechanism during its ICO, and shut down after regulatory questions started arising, but only after it completed its ICO successfully and even ran its operations for a few months.
The GFSC aims to address such issues and through its set of regulations will make it necessary for ICOs to follow certain rules about disclosure of information. This is to ensure investor safety so that their funds are not subject to being lost in case the ICO is halted in the middle or if the company stops its operations due to regulatory concerns.
Other aspects will also be included in the regulations, such as the introduction of investment best practices that will ensure that the investments in these ICOs remain protected.
This might provide a guideline to other countries
Since it will be a revolutionary move, it will certainly set a precedent for other countries, and we might see similar steps from other territories that are also looking to regulate certain aspects of cryptocurrencies without curbing the increasing investment activities that these assets bring to their region.