Page 22 - May 2018 Disruption Report Flip Book

REGULATORY MOAT JANMUAAYRY20128018
REGULATORY MOAT
The regulatory approach to ICOs differs significantly around the globe
Citi GPS analysts wrote:
FINMA, the Swiss Financial Market Supervisory Authority, has said that in assessing ICOs it will focus on the economic function / purpose of the tokens and whether they are already tradeable or transferable.
FINMA’s analysis indicates that money laundering and securities regulation are most relevant to ICOs; whereas projects that would fall under the Banking Act (governing deposit-taking) or the Collective Investment Schemes Act (governing investment fund products) are not typical.
At present, the classification terminology of ICOs/tokens is evolving, but FINMA categorizes tokens into three types which we believe is a useful framework that many market participants and policy makers will increasingly adopt:
Payments tokens – synonymous with cryptocurrencies and have no further functions / links to other development projects. In this case, FINMA requires compliance with anti- money laundering regulations and such tokens will not be treated as securities.
Utility tokens – intended to provide digital access to an application or service. Ordinarily these tokens do not qualify as securities if their sole purpose is to confer digital access rights to an application/service. However, if the tokens function as an investment in economic terms, they will be treated as securities.
Asset tokens – participations in physical assets, companies, earnings streams, or an entitlement to dividends/interest; similar to equities, bonds or derivatives and applicable to securities law requirements.
Below are some of the regulatory guidelines on ICOs issued by different countries:
China – PBOC announced all ICOs to be considered illegal and disruptive to economic and financial stability, putting a halt to all fund-raising activities.
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