Policing the ICO highway

Regulators around the world are struggling to grapple with increasing demand for digital tokens, partly prompted by low interest rates and diminishing margins in other markets. The valuation of most tokens is volatile, spurring concerns of an uncontrollable bubble.

For some regulators, an all-out ban is the easiest way to tackle uncertainty. But what is viewed as a threat by Chinese and South Korean regulators, is seen as an opportunity for others. Companies that were planning to issue tokens in China and South Korea have tacitly relocated to other jurisdictions, notably Hong Kong and Singapore. The latter is attracting innovators through its regulatory sandbox, which permits fintech experimentation for a limited period of time.

Similarly, Japanese regulators have taken a light-touch approach. Japan was one of the first countries that recognised bitcoin as legal tender and has since become a major cryptocurrency trading centre.

Regulators in EU and US rarely adopt a heavy-handed approach to digital affairs, and banning ICOs is not a feasible option for them. However, they have to walk a tightrope between inertia and overregulation.

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