To choose the most ICO-friendly countries, let’s examine the nature of the ICO. With constant cryptocurrency market development, the Initial Coin Offering (ICO) has recently become one of the most popular means and methods of raising funds for various types of startups in the blockchain community. The ICO has proven to be an effective way to launch new projects, especially for small businesses and entrepreneurs, due to its independence from local authorities and bank regulations. An ICO is conducted in shorter terms in comparison with an IPO, and investors get their rewards faster, as well.
However, a lack of regulations may not always be beneficial, as accessibility to the funds opens new paths for fraudulent activities. In addition, we have to admit that not all ICO projects are successful, and some of them fail due to poor organization. Consequently, the issue of regulation in the ICO process arises. 2018 promises better developments in this sphere to provide greater security. Let’s take a look at the regulatory policies of different countries and check out the best ICO-friendly countries in 2018.
Countries Banning ICOs
Financial authorities are warning investors worldwide, explaining that initial coin offerings may lead to losses because of vulnerability to fraud. Consequently, many countries impose bans and restrictions, considering ICOs to be fertile ground for scammers. South Korea, for instance, banned all forms of ICOs in 2017, joining the wave of global financial regulations. The Financial Services Commission believes that such startups are unproductive, and should be banned to eliminate risk.
The People’s Bank of China (PBoC) first issued warnings about Bitcoin, but in September 2017, they focused their attention on ICOs, as well. The authorities sharply claimed that token sales are disruptive and illegal, influencing the stability of the financial market. After this restriction, almost $35 billion U.S. disappeared from total capitalizations in just four days! No doubt, this influenced cryptocurrency rates all over the world. Moreover, completed ICOs were requested to refund raised funds. The PBoC also continues to investigate all cases of rule violations.
What are the consequences of such bans?
- Bans and restrictions implemented by Asian regulators may lead to an economic bubble burst, especially in the western market. As soon as any cryptocurrency is used as an investment in securities, regulations will become a must, which will lead to a fast bubble burst.
- Other countries may not follow such rules. Resisting the ban wave, it is possible to show the advantages of an alternative transaction system and prove its efficiency. All that has to be done is the implementation of better-developed regulations.
- Validation will be applied in all cryptocurrency spheres. Of course, government attention will be focused on ICOs. Still, it is important to understand that these campaigns are the future, and they are here to stay. Therefore, such attention will only influence the better-developed blockchain infrastructure.
It must be emphasized that in the general opinion, it is believed that these bans will be dropped. After enforcing their policies and establishing regulations, even Asian authorities are expected to drop their bans on ICOs.
Japan’s financial services industry, for instance, has officially endorsed 11 companies to operate cryptocurrency exchanges, without restricting ICO campaigns.
Though located in China, Hong Kong is an autonomous territory that does not have ICO restrictions. However, the topic is subject to future regulations. As of today, there are particular indications concerning the nature of altcoins. Some of them can be treated as securities when others don’t fall under these criteria.
Countries Allowing ICOs with Future Regulations
Cryptocurrencies are considered to be a future option in the financial industry. According to Coinschedule, more than 200 ICOs have raised over $3 billion in 2017.
As many countries begin to understand its potential, they are seeking ways to legitimize virtual currency and organize ICOs wisely so as not to fall behind in global evolution. To choose the right country for an ICO launch, let’s discuss various nations and their regulatory policies toward ICOs.
The United States of America
The U.S. allows ICOs, but heavily regulates them. On the federal level, there is no specific restriction against running ICO campaigns. However, rules vary from state to state.
Here are some states that are defined as Bitcoin-friendly, protecting blockchain transactions and enabling smart contracts.
- Nevada has approved a blockchain-friendly bill in which currency transactions are tax-free. Local authorities believe entrepreneurs should use ICO technologies and drive the economy forward.
- Arizona is the next state to follow this friendly attitude. It has enacted a bill recognizing smart contracts and blockchain activity.
- Texas and New Hampshire promote cryptocurrency transactions as well, focusing on honesty, integrity, and validity.
Other states, in contrast, may require licenses for businesses to engage in cryptocurrency activities, including registering with the SEC. They claim ICOs should be treated as securities, too.
- Washington legislators issued a bill that enables cryptocurrency exchanges only within the state. In addition, it requires personal information from consumers. As a result, a number of startups had doubts about running their ICOs in the state.
- The state of Illinois is optimistic about blockchain technologies, but has also issued digital currency regulatory guidance, which heavily controls various activities involving digital money.
- In California, in order to engage in blockchain technologies or set up ICOs, one has to be officially licensed by local authorities. Taking into account the New York regulations example, such action may result in a loss of position in the cryptocurrency market, especially considering that California is the capital of innovative technologies.
The United Kingdom
The U.K., like many other countries, has warned its citizens about the unstable nature of ICOs. It must be stated, however, that they do support successful projects, but treat ICOs as entities early in the development stage. In order to keep their investors safe and protect them against losing their funds, they are testing out ICOs by recognizing altcoins as private currency. Nowadays, companies eager to launch ICOs are free to use the existing laws suitable for private property. Let’s take a closer look at the General Data Protection Regulations and what they actually mean.
The European Union
The EU mostly supports ICOs, especially in the areas of AML (anti-money-laundering) and KYC (know your customer) policies. Each initial coin offering function is supposed to be licensed, and each company dealing with an ICO must be registered, as well.
However, these rules do not influence monetary flow to ICO projects launched in the EU. European ICOs have raised more money in recent years here than any other nation. Almost 40% of all ICOs are based in the European Union. 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.
In Australia, ICOs are allowed but regulated. It is one of the first countries where regulations were formally issued. If a campaign needs combined investments, it has to follow Corporations Act requirements. Local authorities believe that blockchain technologies are innovative and influence capital market development. They offer ICO guidance that shows how new startups can fit into the regulatory framework. An innovation hub launched in Australia assists and guides users through the framework, ensuring investor/consumer confidence and security.
The most successful ICO conducted in Australia is the payment network system Havven. It has raised approximately $30 million!
Ukraine appears to be another option for ICO launches. There are certain regulations to consider, but in general, it is absolutely possible to launch successful startups here. The local government is establishing a working team of specialists to issue legally-compatible proposals to work with cryptocurrencies, extend the crypto-market, and monitor safe, secure transactions.
Examples of the best ICOs are Dmarket (a marketplace for entertainment), which raised over $19 million in the token sale, and DreamTeam (Esports and gaming recruitment management network), which raised approximately $6 million.
If you have any questions about how to launch an ICO, the Applicature team experts will help and coordinate with you!
Which Countries Are ICO-Friendly?
In order to stress the best countries for blockchain startups, it is necessary to analyze their ICO history. The best country is considered to have the highest number of successful ICO launches. Therefore, let’s consider successful ICOs to be those that:
- have a stable position in the market
- are not involved in legal issues
- are still active
- have not been recognized in fraudulent schemes
- have raised over $10 million.
Here is the list of countries where ICOs raised over $10 million.
Why is Singapore the best location for an ICO? Several key features make Singapore an attractive place for businesses engaged in blockchain activities. The Monetary Authority of Singapore issued clarifying information on token sales as well as ICO guidance, stating when ICOs are to be treated as securities and when not. It all depends on circumstances and economic transaction situations. In general, Singapore is neutral on cryptocurrency activities, though it does warn of possible risks. Its favorable attitude encourages blockchain businesses to launch their ICOs and develop innovative projects. Furthermore, the structure, as supported by the government, has proven to be reliable, which opens great opportunities to entrepreneurs.
The Enjin Coin (ENJ) is a bright example of an effective ICO launched in Singapore. It is a gaming platform that offers customized currencies and goods.
Because the coin fails the Howey Test, it is not classified as a security. In addition, transactions within this platform remain trustless, and are verified on Ethereum. In any other country with heavier regulations, this ICO could be questioned. However, in Singapore, it has raised more than $20 million, and has become the biggest gaming community.
Without a doubt, one of the main hubs for an ICO launch is Switzerland. If you want to choose a country for launching an ICO, consider it an option! Due to its blockchain-friendly policy and the Crypto Valley ecosystem, it attracts many prosperous ICO campaigns. The four largest ICOs of 2017, Tezos, Bancor, Status, and the DAO, were hosted in this country. The local government is eager to support technological innovations and develop a blockchain sector.
From the chart below, we can see how much money ICOs like Bancor, Tezos, the DAO, and Status have raised after launching in Switzerland. In the opinion of many, Switzerland is thought to be the most ICO-friendly country.
The British territory of the Cayman Islands is an interesting choice for any company launching an ICO. Its political and legal platform offers a regulatory framework based upon international standards, thus with fewer regulations. However, if you are interested in carrying out blockchain transactions in the Cayman Islands, you must understand the process of token-building. As mentioned above, if it is considered a security, it has to undergo a set of SEC regulations. According to the Cayman Islands definition, “security” is not applied to an ICO token, which is an advantageous feature that promotes the token sale procedure. Another benefit is that the local regulatory authorities have properly set the blockchain supervisory structure, and do not delay implementation, which attracts many entrepreneurs.
Block one is a prosperous ICO launched in the Cayman Islands that raised over $185 million in just a few days! It designs free market systems to secure life, liberty, and property. It has proven to be the most powerful infrastructure for applications independent of central authorities.
The Isle of Man
Though the Isle of Man is a self-governing country, it is a British crown dependency. Consequently, their policy toward token sales is compliant with anti-money-laundering strategy and know your customer (KYC) policy, as in the U.K. However, the dependency considers ICOs to be of high potential, and believes they represent a massive vertical market. Therefore, the authorities have developed permissive legislation to increase blockchain activity on the island, and would be eager to support all businesses through the token sale procedure.
The government of Gibraltar recently issued a white paper that classifies tokens as commercial products, not securities. Therefore, ICOs can be launched there easily. The Gibraltar Financial Services Commission also provides a regulatory framework in which each ICO issuer needs to have a supervisor who ensures that the campaign complies with all regulations. This is not a disadvantage; the regime supports issuers and helps to organize a secure, risk-free campaign. In addition, the market, not the regulators, outlines “good” token sales for investors.
This island country in the Indian Ocean is an international financial paradise! It boasts one of the highest incomes, and attracts many businesses eager to launch their ICOs. Due to its political and economic stability, Mauritius offers a reliable and secure banking system. A blockchain startup can be launched here in just a few days! It must be stated that the security laws are favorable; therefore, a token can be built without falling under that precise definition. The regulatory sandbox is favorable, as well, and is especially beneficial for startups that want to be regulated. As for taxation, there is a registration fee as well as an annual fee of $350. On the other hand, Mauritius isn’t as privileged as Switzerland or Singapore, as it has a reputation as a shady tax island.
Another beautiful place for blockchain startups! The country positions itself as ICO-friendly. Businesses can especially benefit from the taxation policy of 5% for foreign entrepreneurs, with 0% on certain token models. Malta offers an ICO-hosting platform covering all steps of an ICO launch, from token formation and ICO development plan to investment security in the multi-signature wallet. The launch process can take some time and effort, but the advantages are obvious, as all ICOs here are legally protected.
Latvia, Lithuania, and Estonia have committed to support blockchain development technologies in their countries as of November 2017. According to a Memorandum of Understanding, local governments desire to cooperate in order to develop regional capital markets.
All the Baltic countries support ICOs, for the most part. Factors like a favorable technological environment, the possibility of managing campaigns from abroad, and supportive local authorities make them ICO-friendly. Certain legal issues still exist, and should be considered when launching an ICO.
Russia also allows blockchain activities within the country. For now, there are no precise restrictions, but they are subject to future regulations. According to orders issued by the Kremlin, token registration and taxation are in place, in addition to security compliance. A plan for token use in a single payment system is specified, too.
Russia hosts a high number of successful ICOs! Here is a short list of those that raised more than $10 million in the token sale.
Having discussed the best countries to launch your ICO, it’s important to point out that all of them are different in regulatory attitudes toward blockchain technologies. Each one offers different ways of structuring frameworks. However, as we discussed, some regulations are really heavy, while others open new opportunities for ICO launches. To sum up, let’s outline the main features of the best countries for blockchain startups:
- ICO tokens should not be treated as securities in order to eliminate SEC regulations.
- The government of the host country should be supportive, and encourage blockchain development technologies.
Taking into account the features we’ve mentioned, as well as the sandbox regulatory policy, taxation and bank operations benefits, and, of course, the biggest number of completed ICOs (over $10 million raised), let’s outline the best ICO-friendly countries:
The advantages of an ICO launch are obvious. We hope that more countries will be welcoming startup businesses and become crypto-friendly. If you have additional questions or need full-cycle technical support for your ICO, feel free to contact the Applicature support team!