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German Regulators demand unified regulatory efforts against ICO

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BaFin has called for international efforts to control and monitor the sky-by-night cryptocurrency projects issuing non-secured ICO.

On Sunday,  BaFin, the highest ranked financial regulatory body in Germany has called for international efforts to control and monitor the sky-by-night cryptocurrency projects issuing non-secured Initial Coin Offerings ( ICO). The call for a stringent monitoring framework has been on the rise from regulatory bodies of several nations where cryptocurrencies become a dominant financial product. The United States, the regulatory institution has already been denouncing the impact of these defunct-ICOs and the need to better monitor offerings.

 

Federal Financial Supervisory Authority (BaFin) Chairperson, Felix Hufeld in a conversation with the financial publication, expressed that:

“The number (of ICO) and the volume (of money) per ICO are both getting higher. Investors have mostly minimal rights…I can thus only recommend private investors keep away from such things.”

 

Germany’s perspective about cryptocurrency has been about asking for international-level of regulations, where other countries also collaborate, and there is the simultaneous imposition of these rules.

 

Back in January 2018, the country’s largest bank Bundesbank’s Board member Joachim Wuermeling had said,

“Effective regulation of virtual currencies would therefore only be achievable through the greatest possible international cooperation because the regulatory power of nation-states is obviously limited.”

 

In the US, the SEC has been acting down strongly against companies involved in crypto-based crimes and blockchain operations which have exploited vulnerabilities of the investor community. Texas is one of the states in the United States to work at controlling these crypto-risks at the state levels.

Other countries such as China have already banned operations of cryptocurrency exchanges in the country. The result of the strong action was that Chinese traders simply moved their operations to neighbor Japan and South Korea-based exchanges.

 

Disappearing ICO

Much of the concerns raised by heads of regulatory bodies worldwide stems from the fact that markets across the world are witness fraud and scams related to ICO offers.

Typically these offers disappear after the initial phase of fund-raising. Investors wanting to cash in on the opportunity to invest early and ride the early-adopter price benefit, as these tokens eventually gain at prices in crypto markets has been the reason for the prolonged success of these ICO scams.

Hence, there is value in the latest appeal made by Hufeld. He proposes that as regulators the respective institutions should focus on self-regulation before asking for a mainstream blanket ban on these financial products. Hufeld opines that ICO could well be niche product or issue. It is yet to be seen if these ICO will eventually grow to be a financial product which will have a sweeping impact across economies.

Until then, these products will be small instruments which require monitoring and scrutinizing for their fraudulent practices. Additionally, it is the most conducive environment to develop a framework for ‘long-term’ protective practices to introduce international or standardized regulation which will ensure that there is sufficient and constant pressure on such firms and companies to engage in such practices. Multiple “international forums” would be the ideal platform for curtailing the activities of such offerings.

#SEC

Spanked by the SEC: Paragon and Airfox ICO

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The Securities and Exchange Commission has ordered penalties of $250,000 each against two Initial Coin Offerings: Paragon and Airfox.

SEC Orders against Paragon and Airfox

The Securities and Exchange Commission has ordered penalties against two Initial Coin Offerings: Paragon and Airfox. According to SEC, both the companies failed to register their ICO tokens as securities under the securities and exchange act 1929. Thus both companies Paragon and Airfox (CarrierEQ) have reached out for settlement with the agency where each of the company have to pay $250,000 to the securities and exchange commission. Notably, all the investors of the initial coin offerings have got an opportunity for a refund.

 

Press Release by SEC

According to the press release published by Securities and Exchange Commission, the agency has imposed a fine of $250,000 against Paragon and Airfox which includes the amounts which will be used to compensate the investors in both Initial Coin Offerings which are being termed as Illegal Offerings. Also, the agency has ordered both the companies to register their respective tokens as securities under the securities exchange act 1934.

 

Steven Peikin, the Co-Director of Securities and Exchange Commission Enforcement believes that the following action against both these companies will help the agency to encourage the other United States based Initial Coin Offerings to register with the federal securities laws.

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#Stellar

Stellar Wallet to Airdrop $125 Million Crypto: Will Airdrops also go the ICO Way?

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A Stellar-Wallet keeper, named simply as Blockchain, has announced on Tuesday the launch of an airdrop of Stellar Lumens (XLM).

A Stellar-Wallet keeper, named simply as Blockchain, has announced on Tuesday the launch of an airdrop of Stellar Lumens (XLM).  The airdrop it is valued at $125 million, making it probably the largest such consignment ever to be distributed to users in following months.

Each user shall receive $20 and thereby draw them into owning or trading in these decentralized assets. The estimated value of one lumen to the dollar stands at $0.2538 varying by 5.05% in trading times, according to market charts. The Stellar Lumen is the six highest in market cap rankings currently.

CEO of Blockchain Peter Smith made in his Tweet called the airdrop the “biggest digital giveaway,” adding that the introductory offer was on the back of adding XLM to the blockchain wallet.

 

Airdrops and their Ethics

Airdrops are the latest and most funky way to feed users with cryptos and get them to adopt the decentralized system. Airdrops are marketing gimmick or the generosity of spirit of wallet providers the question of ‘airdrops,’ and their genuineness looms large.

 

More by Blockchain

The Blockchain giveaway of XLM says it is encouraged by its “30M wallet users” and is excited that XLM is now available on their wallet platform with full support.” Additionally, the wallet has said that it will not keep any of the XLM for themselves.

According to Smith, the reason Blockchain chose the Airdrop method is because it will help drive decentralization as well as the adoption of new networks. For crypto users also, it is a highly useful option. It will allow users to trade, test as well as transact on crypto assets and will not have to worry about technical issues involved in buying these assets or mining these assets. The bottom-line is that the Blockchain Wallet is the safest method to use crypto.

 

Why Stellar was inducted

Besides, with the launch of Stellar on Blockchain, there is added scope, the CEO believes. The platform on which Stellar is built allows easy scaling solutions, which is just the base which Blockchain itself needs to move forward to meet strategic goals. Stellar’s token XLM is low cost, fast and easily lends itself to cross-border transactions despite millions of transactions happening in parallel.

The advantage with Stellar is that it is easy to create tokens which are customized for such use. They also allow real-world services or virtual services and more importantly a functioning ecosystem.

 

Airdrop Partners

The wallet provider has indicated that the airdrop will be in association with Standford d.school’s tech initiative called Code.org, along with Network for Good. These organizations will provide the necessary transformational technology for building a promising future, Blockchain authorities said.  The use of airdrop is to provide a stepping stone for the users to obtain and access tokens which will give them control over their financial future.

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ICO

Security Token Offerings: STOs Replacing ICOs?

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Security tokens offerings (STOs) are a regulated one and could possibly be the next big thing to be used as a tool to raise funds from the public.

The term initial coin offerings (ICOs) have become a synonym with mostly unregulated cryptocurrency market. As a result, there is skepticism that it is not a regulated one thus posing increasing risks. On the other hand, security tokens offerings (STOs) are a regulated one and could possibly be the next big thing to be used as a tool to raise funds from the public. The startups have always looked for funding from different segments such as angel investors, Crowdfunding and venture capitalists for their businesses.

 

New Method

In the last three years, a fresh method of funding has come into force, and different startups have even used a whitepaper in certain cases to raise funds. This was called as an ICO. The last three-year period has seen the ICO market generating $13 billion of money. Significantly, half of them came in the current year alone after the cryptocurrency market has hit dizzy heights in December 2017 when nearly all the coins have touched their life-time highs.

However, even the amount raised in 2018 is only a small piece for digital coins if the conventional stock markets are taken into consideration. At the same time, the ICO market is growing at a rapid pace since the blockchain-based startup could easily raise money simply by demonstrating a white paper before investors. These promoters supply tokens instead of shares to investors as they are launched from platforms such as EOS, NEO and Ethereum. The primary gains of using the distributed ledger technology (DLT) platform is the potential of including smart contract to execute terms.

 

Exchange for Products

The ICOs issuing tokens meant that investor will not get any equity or another form of asset. On the other hand, any digital coins or tokens issued would be exchanged for any future products or services from the company. There are some countries that are identified as preferred destinations for launching ICOs due to the favorable atmosphere. They are mostly either dApp or utility tokens only.

Despite significant fundraising exercising from the ICOs in 2018, the overall cryptocurrency market is in doldrums in the absence of clarity on regulations and treatment of it. The weak and continuous drop in sentiments on the virtual assets has only led to massive losses to investors. Significantly, 99 percent of the ICOs witnessed a loss after their highs.

 

STOs Backed By Asset

As investors started realizing the gamble of investing in ICOs, a fresh form of fundraising through STO has emerged for startups. There are some similarities with that of a conventional business launching an initial public offering (ICO). STOs, which is normally approved by the Securities and Exchange Commission (SEC), is backed by assets and legally binding investment contracts. As a result, it offers investors access to the company’s share of voice in the decision-making process.

The primary difference between the ICO and STOs are that while the former has failed to provide any rights to investors, the latter provides enough rights that are much similar to IPOs. In short, the misgivings that exist in ICOs will be removed from the STOs. On top of this, it removes any scam projects since it needed to comply with the regulations. Because of the surveillance, STOs are better served for investors compared to ICOs.

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