One of the things that make cryptocurrencies vulnerable to price swings is the lack of regulatory consensus among different countries. Can an ICO be considered as a security? Is a cryptocurrency a security as well? US SEC chairman Jay Clayton clarified that ICOs are securities while cryptocurrencies can be used as an alternative to fiat currency.
In parts of the world, ICOs are not yet truly defined whether or not it is a security or not. And it doesn’t help the crypto market as a whole especially when 1 out of 5 ICOs are considered a scam. Lithuania’s Ministry of Finance has recently issued guidelines that can be applied on initial coin offerings (ICOs). It is an outline that basically determines when the token can be viewed as securities. In addition to this, it also points out how the government can regulate token sale.
The important thing about the document that was published by the agency is that it features a framework whether a token “grants profits or governance rights” to investors who obtained the digital asset via ICO.
Tricky Financial Organizations
There are tricky financial regulations that can be applied especially if the token grants profits and governance rights to the investors. The good thing about the recent move of the finance minister is that it dissected an ICO into several areas. It includes the tokens that are issued, the entity that organized the sale, and whether there is a participation of the secondary market exchanges and if the ICO is a crowdfunding activity.
This move makes Lithuania as among the first countries to provide clarity on ICOs. Aside from Lithuania, France and Estonia have also come up with their rules and regulations that pertain to ICOs.
The aim is basically to attract businesses to invest in Lithuania. In fact, if you will ask Tom Lee, the reason why he remains optimistic regarding Bitcoin’s price is because of the possibility of regulatory changes.
According to the Minister of Finance Vilius Sapoka, “We should make our efforts for Lithuania to become the main headquarters for those ICO project promoters which are willing to operate in a transparent and orderly legal environment”.
What to Expect From the Guidelines
The guidelines have provided clarity on different things including indirect taxation, corporate taxation, accounting and even anti-money laundering protocols on ICO projects. Also, this can help prevent confusion in the market as to what should be considered as securities.
The effort of the Lithuanian regulators is not to take out ICO projects in the country. But rather, the government noticed that ICOs are registered in countries such as Switzerland, Virgin Islands, and Gibraltar.
To give you an idea just how big the ICO market is in the country, Lithuanian ICO projects have raised more than 400 million euros worldwide in 2017 alone. In the first three months for 2018 alone, ICO projects that have been managed in the country were able to raise around at least 250 million according to the Central Bank of Lithuania.
Though the guidelines aren’t exactly official yet, this could be a good start to get things going for the country to regulate ICOs.