Cryptocurrency has become an important asset to many people. This has led to strong funding for many different ICO projects. You will find that many people are looking to the future, trying to find the next coin that might make their fortune. For example, Crypto Briefing talks about how Stratis has developed a token for their smart contract services. Introduced only two years ago, it skyrocketed from a starting price of $0.0073 to a market cap of $382,703,968.00
The one problem with these projects is that it is not a guaranteed win. Less than 50% of ICO projects have been so far successful, and that could mean heavy losses for early investors. Some have even gone bankrupt for their poor investments, as told by Market Watch and because cryptocurrency is so difficult to regulate, a safer solution could be found in security coin offerings. Here is a look at what these are and how they are moderated worldwide.
What are Security Coin Offerings (STOs)?
STOs are digital assets, which developers offer to customers as a form of investment. It operates on the principle that it will become more valuable in the future. Because this can exponentially raise the fortunes of buyers, it is required to follow a set of regulations. That means it has stricter requirements than those of ICOs in general.
For those wanting a more in-depth look into security tokens, you can watch the video below:
Africa is generally quiet about their use of cryptocurrency of any kind. This applies even to security tokens, mostly because they do not enforce many laws on it. However, the general consensus is that security tokens must be approved by the government. Places like Algeria have outright banned any use of cryptocurrency. While trading does happen in parts of Africa, like in Kenya, South Africa, Nigeria, Ghana, Uganda, Botswana and Zimbabwe, they are not allowed for banks or other financial institutions.
Asia has a more interesting attitude towards security tokens. There are strict rules and regulations being placed in countries throughout this region either for or against cryptocurrency. Compared to the rest of the world, Asia has the most mixed reception.
Countries that support security tokens are cautious at best. Japan, for example, has already begun setting up STO regulations. The government even sent out a warning to investors about altcoins. In Singapore, all altcoins must follow the Securities and Future Acts and are regulated by the Monetary Authority of Singapore.
The Philippines, on the other hand, does allow for the use of cryptocurrency, although the government is looking into regulatory laws. Meanwhile, companies within the country must register before they can conduct cryptocurrency transactions.
Those who stand against security tokens provide stricter laws for penalties. Some countries, like Thailand, outlaw it from banks and frequently dissuade citizens from using it. Other areas set specific bans, such as Indonesia. In this country, altcoins are formally considered as “commodities” but cannot be used as money.
Australia is one of the first countries ever to set up formal security token offering regulations. Because many startup companies rely on cryptocurrency for funding, the government issued registration requirements.
If you plan on using altcoins, you will need a license, disclosure, and investment tracking documents. This not only covers token use, but also financial advising. If the currency you use can have shares, you need to follow the country’s Corporations Act.
Formally, the European Union has accepted altcoins for financial purposes. Requirements for usage include registration and licensing. The cryptocurrencies must abide by their Anti-Money Laundering/Know-Your-Customers (AML/KYC) policies before they can be used for business transactions.
While that applies to the Union, countries within Europe have also developed their own individual standards.
In the United Kingdom for instance, all cryptocurrencies are considered as private currency. While they do not have any existing laws, they do have plans for regulatory sandboxes to closely observe these currencies.
Germany, another fine example, requires that the tokens follow several existing financial laws. This includes the Banking Act, the Investment Act, and the Payment Services Supervision Act.
Because security tokens can become a financial investment, some countries have even incorporated STOs for their citizens. For example, you can pay your taxes in Norway with it. This is because they signed a bill denoting tokens as a taxable asset.
In North America, regulation for all STOs is a must. Many states in the United States and Canada are strict with their monitoring, supervision, and usage.
isIn the United States, the national consensus is that these tokens are a viable asset for investment. This means that altcoins must be registered and licensed before they can be used. Some members of the government even state that the US Securities Law can be used to sue and prosecute ICO fraud cases.
Canada uses a regulatory sandbox to preside over all cryptocurrency issues. Generally, it requires registration and licensing before it can be used. However, when deciding on its penalties, the government uses a regulatory sandbox to preside over each case.
There is division in South America over the regulation of STOs. For the most part, many countries allow ICO use for free range projects. However, some have set special legal requirements already. In Argentina, the official definition of altcoin is money. That means you can buy and sell items with tokens. However, the country has excluded it from legal tender, meaning it cannot be used to pay off debts.
The only notable country with STO regulations is Mexico. The country has recognized them as virtual assets. For use, they are required to abide by their FinTech law. Parts of that law include a registration form, so you will need to be recognized by the government before usage.
Considering the many fraud stories and fears of others, security tokens seem to have a stricter and safer use when compared to some other online coins. These STOs need to abide by many different regulation laws. Places like Canada, the United Kingdom, and Mexico have only started with regulatory committees. Meanwhile, other countries have formally subjected it to their financial laws. This can make cryptocurrencies better protected and could even result in long-term use. Only time will tell what will eventually happen.