Blockchain, Cryptocurrencies and Initial Coin Offers (ICOs) – A Regulatory Perspective
In Hong Kong, as elsewhere, financial technology or FinTech is transforming traditional financial services. Cryptocurrencies, Blockchain – the technology which underlies cryptocurrencies, and initial coin or token offerings (ICOs), are changing just about everything, from banking, payments and capital raising, to commerce, healthcare and education.
In 2017, the combined market capitalisation of cryptocurrencies surged to over US$60 billion from US$15 billion, while the price of Bitcoin, the first cryptocurrency, soared 1,500%. ICOs in the first three months of 2018 raised US$ 4.8 billion, suggesting that ICO funds raised in 2018 will far exceed the roughly US$4 billion raised in 2017, notwithstanding the substantial drop in cryptocurrency prices in 2018 from their December 2017 highs. There has been exponential growth in cryptocurrencies, also known as “altcoins”, over the past two years and there are now over 1,500 cryptocurrencies, with a combined market capitalisation of US$324 billion. Bitcoin’s market dominance has decreased due mainly to the increasing dominance of Ethereum.
Bitcoin, like other cryptocurrencies, depends on Blockchain technology – an “open distributed ledger” which records transactions between parties in a verifiable and permanent way. Its key advantage is that it allows transactions to be recorded in a digital format which are “stored in transparent, shared databases, where they are protected from deletion, tampering, and revision”.
The value of Bitcoin grew at a phenomenal rate in 2017 suggesting huge speculative appetite for cryptocurrencies. However, Bitcoins are still not widely accepted as a medium of exchange, making it unlikely that they will replace fiat currencies in the near term.
The potential of digital coins or tokens as a new mechanism for raising funds from the public has however been seen with the large number of ICOs.
- What is an ICO?
ICOs are a method of crowdfunding for a Blockchain-based technology, in which investors are offered newly-issued cryptocurrency coins in exchange for fiat currencies or other cryptocurrencies, typically Ether. However, as The Economist has noted, ICOs should not be confused with Initial Public Offerings (IPOs) which are very different in that ICO investors do not receive ownership rights or a share of the platform’s profits. Instead, an ICO coin or token typically gives the holder rights to use the technology once it is developed, and in some cases, is exchangeable for fiat currency if the cryptocurrency is accepted for trading by a cryptocurrency trading exchange.
Further, in contrast to IPOs which typically require the publication of a detailed prospectus which includes the company’s audited financial statements and has been subjected to due diligence, there are no regulatory requirements governing information disclosure for ICOs in most jurisdictions. Often ICO issuers are typically start-ups and information describing the technology and details of the coin offer is set out in a relatively short white paper.
- ICO Regulation
An underlying challenge with ICOs is that the legal status of coins is something of a grey area and there is little clarity as to how the regulatory regimes in most relevant jurisdictions apply. There are difficult legal issues involved in determining the potential application of currency and monetary laws, payment system laws, securities and commodities laws, and anti-money laundering laws. While some jurisdictions have introduced specific legislation and/or regulation governing cryptocurrency activities, such as the Virtual Currency Act in Japan and the New York State Department of Financial Services’ regulations on virtual currencies, Hong Kong has not yet followed suit.
At the beginning of 2018, prices of Bitcoin and other major cryptocurrencies dropped amid fears of tighter regulation. On 16 January, 2018, Bitcoin dropped 25%, Ripple fell 40% and Ethereum fell 26% as a result of a sell-off of cryptocurrencies attributed to fears of further regulatory crackdown in South Korea and China. At the time of writing, China and South Korea are the principal jurisdictions to have declared ICOs to be illegal. China also prohibits trading of cryptocurrencies on crypto exchanges. China has intensified its crackdown on cryptocurrency trading, particularly online platforms and mobile apps which provide services similar to crypto exchanges.
Japan was the first jurisdiction to legalise cryptocurrencies as a legal means of payment and bitcoin is widely accepted by retailers and also for payment of utilities bills in Japan. Financial intermediaries dealing in cryptocurrencies are required to be licensed and are subject to stringent capital and anti-money laundering requirements. Cryptocurrencies are also subject to Japan’s tax regime.
In most other jurisdictions which have not issued cryptocurrency-specific regulation, the key legal/regulatory question in relation to ICOs is whether the coins constitute “securities”, the offering and sale of which is subject to securities laws. In some jurisdictions, such as the US, ICOs may also be regulated under commodities laws. In 2017, a number of regulators issued statements that digital tokens or coins which have the characteristics typical of securities (e.g. shares, debt and other investment products) will be regulated irrespective of the name ascribed to them. Other jurisdictions, notably Gibraltar, Malta and Switzerland, have implemented or proposed to implement specific ICO regulation aimed at fostering ICOs and their development as ICO hubs.
- Regulation in Key Jurisdictions
3.1 United States (US)
In July 2017, the United States Securities and Exchange Commission (the SEC) issued an investigative report in which it determined that “DAO Tokens” offered and sold by a “virtual” organisation called the DAO were “securities” under the Securities Act of 1933 and the Securities Exchange Act of 1934. DAO Tokens were offered in exchange for Ether (ETH) and the ETH raised would be used to fund projects. DAO Token holders stood to share in the expected profits from these projects as a return on their investment in DAO Tokens.
Under US securities law, a security includes an “investment contract”, which is an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.
The SEC found that the DAO was an investment contract:
- “an investment of money”
Investors in The DAO used ETH to make their investments. The investment of “money” does not need to take the form of cash, and investment may take the form of goods and services, or some other exchange of value. It had previously been held that an investment of Bitcoin meets this first prong of the test.
- “in a common enterprise with a reasonable expectation of profits”
Purchasers of DAO were found to be investing in a common enterprise and reasonably expected to earn profits through that enterprise when they sent ETH to the DAO’s Ethereum Blockchain address in exchange for DAO Tokens. Profits include “dividends, other periodic payments, or the increased value of the investment”.
Promotional materials distributed by Slock.it (the platform’s creator) and its co-founders informed investors that the DAO was a for-profit entity whose objective was to fund projects in exchange for a return on investment. Depending on the terms of each particular project, DAO Token holders stood to share in the potential earnings from projects funded by the DAO. A reasonable investor would thus have been motivated, at least in part, by the prospect of profits on their investment of ETH in the DAO.
- “to be derived from the entrepreneurial or managerial efforts of others”
- The Efforts of Slock.it, Slock.it’s Co-Founders, and The DAO’s Curators Were Essential to the Enterprise
The DAO’s investors relied on the efforts of Slock.it and its co-founders and curators to manage the DAO and put forward project proposals. The issue was whether their efforts were essential managerial efforts which affect the failure or success of the enterprise.
Investors’ expectations were primed by the marketing of the DAO as well as the active engagement between Slock.it and its co-founders with the DAO and DAO Token holders (via the DAO website and online forums). The creators of the DAO held themselves out to be experts in Ethereum, and informed investors that curators were selected based on their expertise and credentials. Through their conduct and marketing materials, Slock.it and its co-founders led investors to believe that they could be relied on to provide the significant managerial efforts necessary to make the DAO a success.
Curators vetted contractors who submitted proposals, determined whether and when to submit proposals for votes, determined the order and frequency of proposals submitted for vote, and determined whether to halve the default quorum for a successful vote for specific proposals. Thus, proposals were subject to control by the curators, and the curators exercised significant control over the order and frequency of proposals.
- DAO Token Holders’ Voting Rights Were Limited
Voting rights did not provide token holders with meaningful control over the enterprise. Their ability to vote was largely perfunctory, and there were indications that proposals would not have necessarily provided investors with sufficient information to make an informed decision. In addition, the pseudonymity and dispersion of token holders rendered it difficult for holders to join together to effect change or to exercise meaningful control.
DAO token holders’ voting rights were akin to those of a corporate shareholder.
It was determined that DAO Token holders relied on the significant managerial efforts of Slock.it and its co-founders, and the DAO’s Curators. Their efforts were the “undeniably significant” and essential to the overall success and profitability of any investment into the DAO.
The SEC stated that whether a particular transaction involves the offer and sale of a security will depend on the facts and circumstances, including the economic realities of the transaction.
Accordingly, where digital coins or tokens are securities, the offer must be registered with the SEC, unless it is exempt from registration. A registered offer requires the filing of a registration statement with the SEC which must include audited financial statements. Alternatively, an offer can be made to “accredited investors” which has less extensive disclosure requirements.
If a sale of coins involves a “virtual currency”, the US Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) regulations may apply. FinCEN guidelines issued in March 2013 concern the regulatory treatment of persons using, or making a business of exchanging, accepting, and transmitting them. In contrast to “real currency”, “virtual currency” is defined as “a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction.” The guidance addresses “convertible” virtual currency – i.e. a virtual currency that either has an equivalent value in real currency, or acts as a substitute for real currency.
On 18 January 2018, the SEC issued a staff letter outlining investor protection issues they consider relevant in considering the suitability of exchange traded funds (ETFs) which invest in cryptocurrencies for retail offering. The key concerns outlined relate to valuation, the necessary liquidity to enable daily redemptions, custody arrangements, complying with the obligation to ensure an ETF’s market price does not deviate materially from its net asset value and risks of fraud and market manipulation. The staff letter comes in response to applications for SEC approval of ETFs investing in bitcoin, which have so far been denied. One alternative apparently under consideration in the US is exchange traded notes (ETNs) – a bank-issued debt security which would track the return on bitcoin and backed by the bank’s assets rather than physical ownership of bitcoin, which are reportedly available already in Europe.
- The Efforts of Slock.it, Slock.it’s Co-Founders, and The DAO’s Curators Were Essential to the Enterprise
3.2 People’s Republic of China (PRC)
By far the most stringent response to ICOs to date is that of the People’s Bank of China which together with six other financial regulators in the PRC issued a circular on 4 September 2017 banning ICOs in the PRC. The circular declared ICOs to be an unauthorized illegal fundraising activity. It also prohibits digital tokens from being circulated as a currency in the market. The circular states that ICOs are not issued by monetary authorities, do not have legal and monetary properties such as indemnity and coercion, and do not have legal status equivalent to that of money. From the date of the circular, all ICOs were required to cease immediately. Money already raised through ICOs had to be refunded to investors.
Digital token financing and trading platforms are prohibited from engaging in the exchange of fiat currency and virtual currency; buying and selling virtual currencies; and providing pricing, information and intermediary services in relation to virtual currencies. This prohibits the operations of cryptocurrency trading exchanges. China has also taken steps to block access to offshore ICOs and crypto exchanges.
Financial institutions and non-banking payment institutions are prohibited from, directly or indirectly, providing services or products relating to ICOs, such as setting up accounts, registration, trading, settlement, clearing and insurance.
There has been no official justification for China’s crackdown on cryptocurrencies, although the move is in line with the Central Government’s efforts to reduce financial market risks, as well as attempts to stem outflows of money from China. The effect of the clampdown has been to drive up costs as mining companies which originally moved to China to take advantage of cheap electricity and labour, are now relocating to the US and Canada.
On the other hand, China is reportedly studying issuing its own sovereign cryptocurrency, as is Russia.
3.3 South Korea
South Korea prohibited domestic companies and startups from participating in ICOs in September 2017. South Korea’s Financial Services Commission (FSC) banned all forms of ICOs however they are described. Margin trading of virtual currencies is also illegal.
After weeks of rumours that the Korean authorities were considering banning crypto currency trading exchanges, the FSC instead issued guidelines regulating cryptocurrency trading exchanges on 23 January 2018, designed to counter speculative trading activities. The government also introduced anti-money laundering guidelines for banks dealing with cryptocurrencies requiring them to monitor cryptocurrency exchanges they service for unusual transactions, and confirm the funding source and transaction purpose where money laundering is suspected. Red flags for money laundering activities include deposits or withdrawals of more than KRW10 million (US$9,400) per day or KRW20 million (US$18,800) per week, or a company or an organization depositing or withdrawing money from their bank accounts to trade cryptocurrencies.
Korea implemented a new “real-name account system” with effect from 30 January 2018, to replace a system in which banks opened virtual accounts for the customers of cryptocurrency exchanges for the deposit and withdrawal of money. Under the new system, customers must open an account with the bank providing virtual account services to the cryptocurrency exchange they use. Those who do not have an account at that bank can withdraw money from the virtual account, but cannot make further deposits into it.
South Korea apparently accounts for some 20% of global Bitcoin transactions and many Koreans have invested a large portion of their savings in cryptocurrencies because of the lack of available high-yield investment options. A recent survey found that three out of ten salaried workers in South Korea have cryptocurrency investments.
Japan is the world’s largest bitcoin market accounting for over 61% of global trades as of December 2017, twice the trading volume of the United States. Japan recognised cryptocurrencies as a legal payment method in April 2017 when the Payment Services Act (the PSA) was amended. Virtual currencies are treated as assets which can constitute means of payment rather than as legal currencies.
The PSA also gave the Japan Financial Services Authority (the FSA) the ability to license and regulate cryptocurrency exchanges in Japan. Tax reform was also introduced to remove a consumption tax that encouraged greater foreign investment.
The FSA issued a statement on ICOs on 27 October, 2017 warning of the risks of fraud and price volatility and outlining the possible regulatory treatment of ICOs. In summary, depending on how an ICO is structured, it may fall within the scope of the Payment Services Act and/or the Exchange Act. Thus:
- Where a coin issued in an ICO is a virtual currency under the PSA, any business which provides exchange services for virtual currencies on a regular basis must be registered with the Local Finance Bureau; and
- An ICO which has the characteristics of an investment and “the purchase of a token by a virtual currency is practically deemed equivalent to that of legal tender”, the ICO will be subject to the Financial Instruments and Exchange Act.
On 4 April 2018, Tama University’s ICO Business Research Group, which is backed by the Japanese government, published a report proposing to regulate ICOs in Japan (the “Tama Report” as a means to establish ICOs as a sustainable financing method. The report proposes regulation covering all stages of ICO issuance and financing, including both preliminary activities – that is private sales of tokens as well as the public sale. The report identifies three principal types of ICOs:
- Venture Company type – i.e. tokens are issued by small venture companies that find it difficult to access the main capital market or obtain venture capital. Buyers tend to be investors seeking a higher return than is available on conventional equities and are willing to take a higher degree of risk.
- Ecosystem type – i.e. tokens issued by multiple collaborating companies and/or local governments to form a new market through an ecosystem, which will give rights of participation in the ecosystem on advantageous terms.
- Large company type – i.e. tokens issued by companies to raise funds for higher-risk in-house projects (e.g. development of new products). Token purchasers tend to be those who seek special offers from the issuers or want to express support for their projects.
The trading of ICO tokens in the secondary market is already regulated under Japan’s Payment Services Act (discussed above). The Tama Report thus focusses on regulation of ICO issuance and is proposing the adoption of two key principles and guidelines for ICO issue and five trading principles aimed at protecting purchasers of tokens.
- Proposed Principles for ICO Issuance
- Issuance principle 1 – Issuers should define and disclose:
- conditions for the provision of conveniences such as services and
- rules on the distribution of procured funds, profits, and residual assets to token purchasers, shareholders, and debt holders;
- Issuance principle 2 – Issuers should define and disclose a means for tracking the progress of white papers. The rationale for the principle is that token purchasers need to be able to ascertain the progress of the plans described in the white paper. The Tama Report notes that the information disclosed need not necessarily be financial statements. The report further emphasizes the need for transparency around white papers including provision for their revision and making a revision history available to token holders.
- Issuance principle 1 – Issuers should define and disclose:
- Proposed Guidelines for ICO Issuance
- Guideline 1 – ICOs should be designed to be acceptable to existing shareholders and debt holders. The intention behind the proposed guidelines it that ICOs should not be used as a means to bring advantage or disadvantage to specific stakeholders.
- Guideline 2 – ICOs should not provide a loophole in existing financing methods. The report notes that ICO use should not be allowed to avoid financial laws.
- “an investment of money”
- Proposed Principles for Investor Protection around Token Purchase and Sale
5 principles are proposed to protect purchasers of ICO tokens.
- Trading Principle 1 – Token sellers would need to confirm the identity (KYC) and suitability of customers.
- Trading Principle 2 – Administrative companies supporting token issuance should confirm issuers’ KYC.
- Trading Principle 3 – Cryptocurrency exchanges should establish and adopt an industry-wide minimum standard for token listing.
- Trading Principle 4 – After listing, insider trading and other unfair trade practices should be restricted.
- Trading Principle 5 – All parties involved in the trading of tokens including issuers, trading exchanges and administrative companies should take measures to ensure cyber security.
Bloomberg reports that the Financial Services Agency of Japan will consider the guidelines outlined in the report in late April, but that implementation could take a few years.
In August 2017, the Monetary Authority of Singapore (MAS) issued a media release stating that the offer or issue of digital tokens in Singapore will be regulated if the tokens constitute products regulated under the Securities and Futures Act (Cap. 289) (the SFA).
MAS noted that the function of digital tokens has developed beyond being solely a virtual currency. For example, digital tokens may represent ownership or a security interest over an issuer’s assets or property, and thus may constitute an offer of shares or units in a collective investment scheme under the SFA. Where digital tokens represent a debt owed by the issuer, they may be regarded as debentures under the SFA.
Where digital tokens fall within the definition of securities under the SFA, issuers are subject to prospectus requirements (unless exempted), and issuers and intermediaries are also subject to the SFA and the Financial Advisers Act (Cap. 110) licensing requirements (unless exempted), as well as AML/CTF requirements.
The Singaporean authorities have been concerned that ICOs are susceptible to AML/CTF risks given their anonymous nature. The MAS is currently consulting on new regulation which will regulate both e-money (which is denominated in fiat currency) and virtual currencies. The proposed definitions are as follows:
- “E-money” will be defined as electronically stored monetary value that represents a claim on the e-money issuer that has been paid in advance for the purpose of making payment transactions through the use of a payment account and is accepted by another person other than the e-money issuer. A consumer purchases e-money from a business to allow him to transfer money to participating individuals or to purchase goods or services from merchants who accept such e-money;
- “Virtual currencies” will be defined as any digital representation of value that is:
- not denominated in fiat currency;
- is accepted by the public as a medium of exchange, to pay for goods or services, or discharge a debt; and
- can be transferred, stored or traded electronically.
The MAS is proposing to combine the existing Payment Systems (Oversight) Act (Cap. 222A) and the Money-Changing and Remittance Business Act (Cap. 187). The key proposals would:
- introduce a single payment services licence to regulate existing and new payment services;
- implement a regulatory structure for significant payment systems and retail payment services; and
address regulatory risks and concerns.
The proposed Payment Services Bill would adopt an activity-based approach and govern activities that: (i) face either customers or merchants; or (ii) process funds or acquire transactions. The proposed regulated activities include: (a) account issuance services which would cover issuing or operating an e-wallet or a non-bank credit card; (b) e-money issuance allowing the user to pay merchants or transfer e-money to another individual; and (c) virtual currency services including buying or selling virtual currency or providing a platform to allow persons to exchange virtual currency.
AML/CTF obligations would be imposed on virtual currency intermediaries which:
- deal in virtual currencies – i.e. buy and sell virtual currencies which involves exchanging virtual currency for fiat currency or another virtual currency; and/or
- facilitate the exchange of virtual currency. This would include establishing or operating a virtual currency exchange allowing participants to use the platform to exchange or trade virtual currencies.
The new requirements would apply to virtual currency service providers that process funds or virtual currency. The AML/CTF requirements would include identifying and verifying customer and beneficial owner identity, screening for AML and CTF concerns, suspicious transaction reporting, ongoing monitoring and record keeping.
The new ordinance would not however apply to regulated financial service providers, in-game assets and loyalty-points that are not denominated in fiat currency.
Gibraltar is one of the jurisdictions at the forefront of ICO regulation which has been introduced with the aim of promoting Gibraltar as an ICO hub. Regulations governing businesses operating in or from Gibraltar which use distributed ledger technology for storing or transmitting value belonging to others (DLT Activities) took effect on 1 January 2018. Firms carrying on a business in DLT Activities, including crypto trading exchanges, need to be authorised as DLT Providers by Gibraltar’s Financial Services Commission (the FSC). ICOs are not however specifically regulated in Gibraltar, although they may fall within the scope of existing regulation of securities. However, Gibraltar’s Government (HMGoG) issued proposals for the regulation of ICOs in March 2018. The proposals would introduce a requirement for an “authorised sponsor” of all publicly offered ICOs and would regulate the conduct of authorised sponsors, secondary token market operators and token investment and ancillary service providers.
Gibraltar’s DLT principles-based regulation 
Gibraltar’s regulatory approach to DLT is outcome-focused, not prescriptive. The FSC requires DLT Providers to comply with nine principles designed to ensure achievement of desired regulatory outcomes, including investor protection.
The nine principles require a DLT firm to:
- conduct its business with honesty and integrity;
- pay due regard to the interests and needs of each and all its customers and must communicate with its customers in a way which is fair, clear and not misleading;
- maintain adequate financial and non-financial resources;
- manage and control its business effectively, and conduct its business with due skill, care and diligence; including having proper regard to risks to its business and customers;
- have effective arrangements in place for the protection of client assets and money when it is responsible for them;
- have effective corporate governance arrangements;
- ensure that all systems and security access protocols are maintained to appropriate high standards;
- have systems in place to prevent, detect and disclose financial crime risks such as anti-money laundering and countering terrorist financing (AML/CFT); and
be resilient and develop contingency plans for the orderly and solvent wind down of its business.
ICO “sponsor regime”
On 15 March 2018, HMGoG and the Gibraltar Financial Services Commission (GFSC) issued “Proposals for the regulation of token sales, secondary market platforms and investment services relating to tokens” proposing new legislation to regulate the following activities conducted in or from Gibraltar:
the promotion, sale and distribution of tokens;
operating secondary market platforms trading in tokens; and
providing investment and ancillary services relating to tokens.
The new regime proposes that GFSC will regulate:
authorized sponsors of public ICOs;
secondary token market operators; and
token investment and ancillary service providers.
It will not however regulate technology, tokens, smart contracts or their functioning, individual public ICOs or persons involved in the promotion, sale and distribution of tokens.
The aim of the proposed regulatory regime would be to mitigate the risks associated with token-based crowd financing by requiring full and accurate disclosure of information, imposing rules for the orderly and proper conduct of secondary market platforms and requiring competent professional investment services. GFSC will be the relevant supervisory authority for AML/CFT regulation, and the provisions of DLT regulations will apply to firms covered by the new token regulations.
Public offering of tokens
The first limb of the regulations will regulate the primary market promotion, sale and distribution of tokens that are not securities, outright gifts or donations which are conducted in or from Gibraltar. Tokens that function solely as decentralised virtual currency (e.g. Bitcoin) or as central bank-issued digital currency will be excluded from this limb of the regulations. However, hybrid tokens (which have an underlying economic function that is both virtual currency and something else) will be caught.
The activities to be regulated under the first limb are proposed to include activities:
which purport to be or imply that they are made from Gibraltar;
are intended to come to the attention of or be accessed by any person in Gibraltar;
are conducted by overseas subsidiaries of Gibraltar-registered legal persons (in such cases, the Gibraltar person will be liable); or
are conducted by overseas agents and proxies acting on behalf of Gibraltar-registered legal persons, or on behalf of natural persons ordinarily resident in Gibraltar (in such cases, the Gibraltar person will be liable).
The proposed regulations on the promotion, sale and distribution of tokens will require adequate, accurate and balanced disclosure of information to enable anyone considering purchasing tokens in the primary market to make an informed decision. The regulations may prescribe what, as a minimum, constitutes adequate disclosure, and in what form disclosures are made (e.g. in a key facts document not exceeding 2 pages). The GFSC would publish guidance on the disclosure rules from time to time.
Financial crime provisions
Undertakings that receive proceeds in any form from the sale of tokens (on their own account or on behalf of another person) will be brought within the scope of the Proceeds of Crimes Act 2015 (“POCA”) and will need to comply with its AML and CFT provisions.
The proposed regulations will establish a regime for the authorisation and supervision of token sale sponsors (“authorised sponsors”) who will be responsible for compliance with this limb of the regulations. An authorised sponsor will need to be appointed in respect of every public token offering promoted, sold or distributed in or from Gibraltar. Authorised sponsors may be appointed by the Gibraltar promoter or by organisers of the offering, wherever located.
Authorised sponsors will be required to have knowledge and experience of ICOs and mind and management in Gibraltar. Authorised sponsors will be directly accountable to GFSC for the actions of their delegates.
Codes of practice
Authorised sponsors will be required to have in place one or more codes of practice relating to offerings they sponsor. Authorised sponsors are considered to be in the best position to determine best practice for the offerings they sponsor and will be free to apply different codes to different categories of tokens and offerings. Codes of practice may cover matters such as methods for applying and distributing sale proceeds.
A code of practice will have to be incorporated in authorised sponsors’ agreements with their ICO clients. Submission of codes of practice will form part of the application process for an authorised sponsor licence. Prior reporting of amendments to codes of practice will be required and will be treated in the same way as other major business changes.
It is proposed that regulations would specify principles governing the content of codes of practice. Authorised sponsors will be free, subject to approval, to set their own methodologies for implementing the principles.
Registers of authorised sponsors, codes of practice, sponsors’ clients and tokens
GFSC will establish and maintain a public register of authorised sponsors and their codes of practice (past and present).
GFSC will add to the public register the following details of public offerings provided by authorised sponsors of public offerings they are engaged in:
the client(s) for whom they act;
the token(s) included in the offering;
the code of practice applicable to the offering; and
any interest they, and connected persons, have in the tokens offered.
A new offence will be created of promoting, selling or distributing tokens in or from Gibraltar without compliance with:
the requirement for an authorized sponsor;
the requirement for a current entry on the public register;
specified disclosure obligations; and
relevant provisions of POCA, where applicable.
The promotion, sale and distribution of a public token offering may only be conducted once, and while, the offering appears on the register.
Secondary market activities
The proposals include regulation of secondary market platforms operated in or from Gibraltar that are used for trading tokens and, to the extent not covered by other regulations, their derivatives. The regulations aim to ensure that the activities of such markets are fair, transparent and efficient.
The proposed regulations will set out requirements for:
disclosure to the public of data on trading activity;
disclosure of transaction data to GFSC; and
specific supervisory actions concerning tokens and positions on token derivatives.
The regulations will cover secondary market trading of all tokenised digital assets including virtual currencies and will be modelled, to the extent appropriate, on market platform provisions under MiFID 2 and MiFIR. GFSC would issue guidance as appropriate.
Authorised secondary token markets
The proposals include adding a new controlled activity of providing investment and ancillary services relating to tokens in or from Gibraltar. This would also cover services relating to derivative products of tokens that are not covered by other existing regulation. GFSC would authorise and supervise secondary token market operators and establish and maintain a public register of such operators.
Investment and ancillary services relating to tokens
This limb of the regulations is intended to cover advice on investments in tokens, virtual currencies and central bank-issued digital currencies, including:
generic advice (setting out fairly and in a neutral manner the facts relating to token investments and services);
product-related advice (setting out in a selective and judgemental manner the advantages and disadvantages of a particular token investment and service);
and personal recommendation (based on the particular needs and circumstances of the individual investor).
This limb of the regulations will be modelled on similar provisions under MiFID.
On 25 January 2018, Russia’s Ministry of Finance published a draft federal law to regulate “digital financial assets” which will include cryptocurrencies, digital tokens and initial coin offers (ICOs). If implemented, the new law will legalise cryptocurrencies and allow them to be traded on licensed exchanges in Russia. Unlike Japan, however, Russia will not recognise cryptocurrencies as a legal means of payment. Only the ruble is recognised as legal tender in Russia.
The draft law defines cryptocurrencies as digital assets which can be traded and will allow trading on licensed crypto exchanges – “exchange operators of digital financial assets”. These exchanges will have to comply with existing legislation, including know your client obligations (KYC). Under the new law, smart contracts will be recognised as being legally binding.
Restrictions will be imposed on ICOs. Only registered businesses and officially registered entrepreneurs will be allowed to conduct an ICO. A limit of RUR 50,000 (US$900) will be imposed on the amount unqualified investors are permitted to invest in digital coins/tokens. The draft law does not however implement a previously proposed ceiling of 1 billion rubles on the amount a company can raise through an ICO.
Those conducting an ICO will need to disclose information about the beneficiaries of the project and the rights of holders of coin/token holders. Coin issuers will need to be transparent about the token price and how it is determined and will be required to provide information as to the process for issuing and storing tokens. The name of the token issuer, the location of its permanently operating executive body and its website address will also need to be made public.
Russia is also reported to be considering the introduction its own national cryptocurrency – dubbed the CryptoRuble – which would be legal tender in Russia. Russia has reportedly been looking at taxing cryptocurrency mining as a business activity, although this is not covered in the draft law on cryptocurrencies.
On 21 December 2017, a decree “On Development of Digital Economy” (Decree 8) designed to establish regulation regime for cryptocurrencies, ICOs and smart-contracts was issued by the government of Belarus. Its provisions came into force on 28 March 2018.
Decree 8 legalised ICOs in Belarus, as well as cryptocurrency mining and other transactions.
Residents of Belarus’ High Technology Park (HTP) can now legally launch ICOs, deal in tokens and hold them in virtual wallets. No tax will apply to cryptocurrencies, tokens and profit from cryptocurrency operations in the subsequent five years. Decree 8 also introduces regulations to simplify the visa regime for HTP residents, freeing them of the obligation to apply for work permits by way of waiver and granting them temporary residency status in Belarus.
The Ministry of Finance of Belarus has also adopted accounting standards for cryptocurrencies. Tokens are required to be entered in accounting records at their initial cost and are classified according to their intended use.
Tokens purchased through ICOs are classified as investments, and therefore need to be debited as “long-term financial investments” if their circulation period is greater than 12 months, or otherwise as “short-term financial investments”, and credited under “settlements with different debtors and creditors” and “other income and expenses”.
Tokens purchased by a trader or an exchange for subsequent trading should be debited under the “goods” account and credited under “settlements with suppliers and contractors” and “income and expenses for current activities”.
Tokens acquired from mining should be debited under the “finished goods” account and credited under the “main activities” account.
The measures are said to be intended to improve anti-money laundering measures and cybersecurity procedures.
On 5 April 2018, a Statement on Developmental and Regulatory Policies was released by the Reserve Bank of India (the Reserve Bank).The statement prohibited entities regulated by the Reserve Bank from dealing with or providing services to any individual or business involved in virtual currencies. The statement went on to say that the risks associated with virtual currencies were deemed to raise concerns about money protection, market integrity and money laundering risks. The Reserve Bank however stated that it is considering introducing a central bank digital currency and has already set up an inter-departmental group to conduct a feasibility study.
A separate circular issued on 5 April 2018 orders regulated entities to cease operations with entities dealing in cryptocurrencies within three months. The circular comes after three public warnings issued by the Reserve Bank on cryptocurrency risks.
An India-based company, Kali Digital Ecosystems Pvt Ltd, has since filed a plea challenging the circular and the Delhi High Court is now seeking a response from the Reserve Bank, the Goods and Services Tax Council and the Indian government the by 24 May 2018.
3.10 United Kingdom
The UK’s Financial Conduct Authority (the FCA) released a consumer warning statement about the risks of ICOs in September 2017. Warning consumers that ICOs are very high-risk, speculative investments, the FCA cautioned investors that they should only buy ICO tokens if they are experienced investors, confident in the quality of the ICO project and are prepared to lose their entire stake.
The FCA warned of risks associated with ICOs, including that most ICOs are not regulated by the FCA, the lack of investor protection, price volatility, the potential for fraud, and that most are in a very early stage of development. Further, ICOs are not subject to regulated prospectus requirements, but rather typically issue a ‘white paper’, which may be unbalanced, incomplete or misleading.
Whether ICOs are regulated by the FCA is determined on a case-by-case basis, and depends on how the ICO is structured. The FCA warned businesses that they should carefully consider if their activities could constitute arranging, dealing or advising on regulated financial investments.
A further warning statement was issued in November 2017 on the risks of investing in cryptocurrency contracts for differences. On 6 April, 2018, a further statement on the need for firms offering cryptocurrency derivatives to be authorised was issued.
The UK has however set up a cryptocurrency task force as part of a wider fintech strategy aimed at creating industry-wide standards which will make it easier for fintech firms to partner with banks.
4.1 Are cryptocurrencies securities?
The key issue under Hong Kong law is whether any particular cryptocurrency is a security for the purposes of Hong Kong’s regulatory framework.
On 5 September 2017, Hong Kong’s Securities and Futures Commission (the SFC) issued a statement on ICOs (the SFC Statement) which provides that while digital tokens offered in typical ICOs are usually characterised as a “virtual commodity”, depending on the facts and circumstances of an ICO, digital tokens that are offered or sold may be “securities” as defined in the Securities and Futures Ordinance (Cap. 571) (the SFO), and subject to the securities laws of Hong Kong.
“Securities” are broadly defined under the SFO. The SFC also has a right to prescribe a class of interests, rights or property as a security by notice. It would thus be open to the SFC to issue a notice specifying that it regards digital coins issued in an ICO to be securities subject to Hong Kong securities laws and regulations.
Whether digital tokens of an ICO are securities under the SFO is a complex legal issue and is fact specific. An analysis is required of matters including, among others, the terms of issue of the coins, the coin’s characteristics, the underlying platform and business model, and the purpose or “use” of the coins – e.g. whether coin purchase monies will be used to fund a project(s), to facilitate a payment system, or as a platform for trading cryptocurrency.
The SFC Statement outlines three scenarios in which digital coins might constitute “securities”, namely where the coins could be regarded as shares, debentures or interests in a collective investment scheme (CIS).
- Interests in a CIS
According to the SFC Statement, digital tokens or coins offered in an ICO may be regarded as “shares” where they represent equity or ownership interests in a corporation, for example where coin holders are given shareholders’ rights, such as the right to receive dividends and the right to participate in the distribution of the corporation’s surplus assets upon winding up.
Where digital coins are used to create or acknowledge a debt or liability owed by the coin issuer, the SFC may regard them as “debentures”, for example where an issuer may repay coin holders the principal of their investment on a fixed date or upon redemption, with interest paid to holders.
The SFC Statement provides that if token proceeds are managed collectively by the ICO scheme operator to invest in projects with the aim of enabling coin holders to participate in a share of the returns provided by the projects, the digital coins may be regarded as interests in a CIS.
The SFC’s guidance indicates that the essential features of a CIS are:
it must involve an arrangement in respect of property (property is broadly defined);
participants do not have day-to-day control over the management of the property (even if they have the right to be consulted or to give directions about the management of the property);
the property is managed as a whole by or on behalf of the person operating the arrangements, and/or the participants’ contributions and the profits or income are pooled; and
the purpose of the arrangement is to provide participants with profits, income or other returns from the acquisition or management of the property.
There have been no court decisions on the meaning of “collective investment scheme” in Hong Kong and whether or not any particular ICO falls within the definition will depend on the facts and circumstances of the ICO and ultimately, the courts’ interpretation of the statutory definition.
In Hong Kong, as in the US and other jurisdictions, ICOs are typically being structured so that the digital coins will represent a right of access to the technology whose development the ICO proceeds will fund. The intention behind this is to characterise the tokens or coins as pre-payment vouchers rather than as securities. White papers thus typically present the digital coins as providing purchasers with the right to use the technology and they sometimes additionally act as the means of payment for use of the services offered by the technology. These are sometimes referred to as “utility tokens”.
On 9 February, 2018, the SFC published a statement warning investors of the potential risks of investing in ICOs and dealing with cryptocurrency exchanges. The SFC stated that it has sent letters to seven cryptocurrency exchanges in Hong Kong or connected to Hong Kong notifying them that they should not trade cryptocurrencies which are “securities” as defined under the SFO unless they are licensed by the SFC. Most of the cryptocurrency exchanges contacted by the SFC apparently either: (i) confirmed that they do not trade cryptocurrencies which are “securities” under the SFO; or (ii) immediately rectified the position and ceased trading in cryptocurrencies that are securities.
The statement also confirmed that the SFC wrote to seven ICO issuers, most of whom confirmed SFO compliance or ceased offering tokens in Hong Kong. The statement describes ICOs as “essentially crowdfunding by blockchain start-ups” and notes that ICO issuers are typically “assisted by market professionals such as lawyers, accountants and consultants” to structure the ICO as an offering of “utility tokens to fall outside the purview of the SFO and to circumvent the scrutiny of the SFC”. The statement thus appears to acknowledge that digital tokens which are “utility tokens” are not “securities” under the SFO.
There is however no legal definition of “utility token”. An old-fashioned example would be fairground tokens used to purchase rides. The difficulty with ICO tokens is that it is uncertain whether to be a utility token, tokens must have an actual use on issue (i.e. at the ICO stage). This is a feature of regulations in Switzerland and state legislation in some US states (e.g. Wyoming) which would classify the many ICOs whose proceeds will be used to fund the development of a platform as securities subject to existing securities laws. The other area of difficulty is that some tokens do not fall neatly into specific categories of tokens: for example a utility token which will be listed on a crypto trading exchange may allow the holder to realise a profit if the value of the token increases. There are difficult questions as to whether hybrid tokens of this type would fall into Hong Kong’s existing definition of a CIS. It can be argued that crowdfunding tokens of this type are no different to reward-based crowdfunding sites such as Kickstarter whose activities are not regulated. As with Kickstarter, the purchase price paid for ICO tokens can be regarded as a pre-payment for goods/services to be provided in the future. While ICO tokens may be traded in the secondary market if accepted by a trading exchange, goods funded through Kickstarter are also potentially tradable. It is therefore far from clear how the CIS definition would apply to ICOs, given that it requires token purchasers to receive or expect to receive a share of the profits or income of the ICO issuer (which is unusual for ICOs) or “a payment or other returns” from the acquisition, holding, management, or disposal of all or any part of the property the subject of the “arrangements” (under the ICO) or of “any right, interest, title or benefit” in that property or any part of it.
Although not specifically mentioned in the SFC’s Statement, in certain circumstances, digital coins issued in an ICO might constitute structured products or regulated investment agreements, both of which are “securities” for the purposes of the SFO.
A structured product is broadly defined and includes any product where all or part of the return or amount due (or both) or the settlement method is determined by reference to any one or more of:
- Changes to the price, value or level (or within a range) of securities, commodities, indices, property, interest rates, currency exchange rates or futures contracts, or any combination or basket of any of these;
- The occurrence or non-occurrence of any specified event(s) other than an event relating only to the issuer and/or the guarantor of the product; or
- A regulated investment agreement is an agreement whose profit, income or return is calculated by reference to changes in the value of any property (e.g. equity linked deposits).
This classification is therefore likely to apply where the return on a coin is linked to changes in the price or value of any property, which would include the price of cryptocurrencies such as Bitcoin etc. or of any securities index etc.
4.2 Hong Kong Regulation of Securities
Dealing in or advising on digital coins regarded as “securities” under the SFO, or managing or marketing a fund investing in such digital coins may constitute a “regulated activity”. Parties engaging in a “regulated activity” must obtain a licence from the SFC where their activities target the Hong Kong public, regardless of whether the parties are located in Hong Kong. There is a limited exemption from the requirement to be licensed to deal in securities where a person, as principal, deals with institutional professional investors who include licensed investment intermediaries, authorised financial institutions, regulated insurance companies, regulated collective investment schemes, governments and multilateral agencies.
ICOs involving the offer of shares or debentures to the public are subject to the detailed prospectus requirements under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (CWUMPO), unless an exemption applies. The main exemptions which may be available are for:
- offers to not more than 50 persons;
- offers only to professional investors:
- institutional investors including authorised banks, licensed investment intermediaries; authorised funds; authorised insurers; authorised pension schemes etc.; and
- “high net worth investors” who include:
- individuals who have a securities portfolio of HK$8 million or more;
- corporations or partnerships with:
- a securities portfolio of HK$8 million or more; or
- HK$40 million in total assets; and
- investment companies owned by an individual, corporation or partnership who qualify as professional investors where the investment company’s sole business is to hold investments;
- Small offers where the total consideration payable does not exceed HK$5 million; and
- Offers where the minimum consideration payable (for shares) or the minimum principal amount to be subscribed (for debentures) does not exceed HK$500,000
ICOs involving an offer to the public to participate in a CIS require SFC authorisation, unless an exemption is available, e.g. for offers made only to Hong Kong professional investors and offshore investors.
4.3 Are cryptocurrencies money or currency?
In March 2015, the Secretary for Financial Services and the Treasury of the Hong Kong Government (the FSTB) stated in the Hong Kong Legislative Council that Bitcoin and other kinds of virtual commodities do not qualify as e-currencies, having regard to their nature and circulation in Hong Kong at that time. The Secretary further stated that the Hong Kong Government did not then consider it necessary to introduce new legislation to regulate trading in such virtual commodities or to prohibit people from participating in such activities.
The Hong Kong Monetary Authority (the HKMA) has also stated that it regards Bitcoin not as legal tender but as a “virtual commodity”. According to its February 2015 press release, “As Bitcoin does not have any backing – either in physical form or from the issuer – and its pricing is highly volatile, it does not qualify as a means of payment or electronic money. Bitcoin and other similar virtual commodities are not regulated by the HKMA”. In its statement, the HKMA also reminded the public of the risks involved in Bitcoin trading, and that cases have been reported to the police which may involve fraud or pyramid schemes.
Under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584) (PSSVFO), the HKMA may, by notice published in the Gazette, declare a thing to be a medium of exchange for the purposes of the Ordinance. This could potentially be applied to include Bitcoin or another cryptocurrency. There may be implications where a cryptocurrency platform is used as a medium for payments. If a cryptocurrency is declared a medium of exchange, there may be implications as to whether the relevant platform is a stored value facility (SVF) or designated by the HKMA as a retail payment system or a clearing and settlement system under the PSSVFO.
4.4 Anti-Money Laundering (AML) and Counter-terrorist Financing (CTF)
A significant issue is the application to cryptocurrencies of the comprehensive requirements under AML/CTF laws, such as know your client and suspicious transaction reporting obligations. Hong Kong’s financial regulators, including the SFC, the HKMA and the Customs and Excise Department (C&ED), require financial institutions to assess stringently money laundering and terrorist financing risks associated with virtual commodities in accordance with the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap. 615) (AMLO). Financial institutions (which include banks and SFC licensed corporations) are required to comply continuously with customer due diligence and record keeping requirements when establishing or maintaining business relationships with customers or clients who are operators of any schemes or businesses relating to virtual commodities.
In January 2014, the SFC issued a circular reminding licensed corporations (LCs) and associated entities (AEs) to take all reasonable measures to ensure that proper safeguards exist to mitigate the AML/CTF risks that they may face. The circular notes that virtual commodities that are transacted or held on an anonymous basis inherently present significantly higher AML/CTF risks.
The SFC in its September 2017 statement, cautioned investors that they may be exposed to increased risks of fraud, given that these arrangements and the parties involved operate online and may not be regulated.
There are a number of other laws which companies and other entities must comply with even if they are not a bank or SFC-licensed corporation. Under the applicable ordinances, any persons (including financial institutions, virtual commodity dealers or operators) are required to report any suspicious activities in relation to money laundering or terrorist financing to the Joint Financial Intelligence Unit (“JFIU”) set up by the Police and the C&ED in Hong Kong. A failure to disclose such suspicious transactions to the JFIU may amount to an offence. The applicable ordinances include:
- the Organized and Serious Crimes Ordinance (Cap. 455);
- the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405);
- the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575);
- the United Nations Sanctions Ordinance (Cap. 537); and
- the Weapons of Mass Destruction (Control of Provision of Services) Ordinance (Cap 526).
4.5 Regulation of Crypto Trading Exchanges
Operators in Hong Kong whose transactions involve money changing or remittance services are required to apply to the Commissioner of Customs and Excise in Hong Kong for a “money service operator” (MSO) licence under the AMLO. In an April 2014 statement, the Money Service Supervision Bureau of the C&ED said that Bitcoin or other similar virtual currencies are not “money” for the purposes of the AMLO, and do not fall within the regulatory regime administered by the C&ED.
A “remittance service” is defined as arranging for the sending of money to a place outside Hong Kong, or arranging for the receipt of money from a place outside Hong Kong. A trading platform operated in Hong Kong which sends or receives fiat currency to or from another jurisdiction could be conducting a remittance service. Further, if cryptocurrencies can be traded on an exchange using fiat currency, the exchange may be regarded as “changing” money which would require it to be licensed as an MSO under the AMLO. Licensed MSOs are required to comply with the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (For Money Service Operators).
The difficulty in classifying digital tokens or coins is the fact that even if coins’ primary purpose is to provide access to new technology, they are undoubtedly being traded by speculators for the purpose of profit taking. Whether that alone should bring a coin within the definition of “securities” is arguable. Legally, coin offers are very much like so-called pre-sale or reward-based crowd-funding, e.g. the type of projects that appear on Kickstarter and Indiego. Members of the public can fund the development of a particular project – e.g. the manufacture of a watch or the building of a gym in return for the right to receive the watch or use the gym once the watch is produced or the gym is built. Funders of the project have the right to sell the watch or gym membership at a profit: but neither would be regarded as constituting “securities”. Arguably therefore a coin which creates a right to use technology once it is developed, which may or may not be sold at a profit, should be treated in the same way.
There are clearly risks associated with ICOs – the project may never be completed and coin holders stand to lose their investment. Coins would not in most cases give holders any contractual rights against the coin issuer or any rights on its insolvency. Offers are not generally restricted to professionals deemed sufficiently sophisticated to assess the risks of investment. The disclosure made in white papers is not subject to any particular standards or scrutiny. Whether regulators choose to clamp down on coin offers will probably depend on the perceived risk to retail investors in particular jurisdictions. There are clearly arguments both for and against regulation of ICOs. While greater legal certainty would be welcome, there have been calls to ensure that any regulation imposed should not be overly onerous. Many, although not all, ICOs are involved in the development of blockchain-based technology and applications which will offer substantial improvements in efficiency. The danger of over-regulation is that technological innovation may be stifled and there have already been criticisms of China’s clampdown on cryptocurrencies as stifling their development and diminishing China’s once dominant position in the cryptocurrency revolution.
Gibraltar is just one jurisdiction offering an interesting approach to regulating the ICO space, one which is principles based which is thus well-suited to an evolving area.
Although ICOs are currently unregulated in Hong Kong, many issuers are adopting best practices which are both in the best interests of potential coin purchasers and also serve to distinguish legitimate ICOs from the Ponzi schemes which have dogged the industry in some jurisdictions.
The Hong Kong Fintech Association has published “Best Practices for Token Sales”  with suggested practices for the conduct of Hong Kong ICOs which provides a very useful starting point for anyone considering conducting an ICO in Hong Kong.
Note: The above represents Charltons’ current understanding of the regulation of ICOs in different jurisdictions. Charltons advises only on Hong Kong law and while the above represents our understanding of the legal position in certain other jurisdictions, legal advice from qualified lawyers in the relevant jurisdictions should be sought in relation to any particular transaction or situation. Further, this note is intended for educational purposes and it does not constitute Hong Kong legal advice. Specific advice must be sought in relation to any particular situation.
 Forbes. “Despite Bitcoin’s ‘Sell –Off’, the Cryptocurrency Space Continues to Attract Investors”. 1 April 2018.
 CoinMarketCap at 16 April, 2018.
 Harvard Business Review, “The Truth About Blockchain”,
 Bloomberg. “Bitcoin Fall Extends to 25% as Fears of Crypto Crackdown Linger”. 16 January 2018. https://www.bloomberg.com/news/articles/2018-01-16/cryptocurrencies-resume-slide-as-bitcoin-tumbles-to-december-low?cmpid=BBD011618_BIZ&utm_medium=email&utm_source=newsletter&utm_term=180116&utm_campaign=bloombergdaily
 Others include Bolivia and Ecuador.
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 HM Government of Gibraltar. “Token Regulation Proposals for the regulation of token sales, secondary token market platforms, and investment services relating to tokens”. 15 March 2018
 CCN. “Putin’s Orders: Russia Will Have its National Cryptocurrency, the ‘CryptoRuble’”. 16 October 2017. https://www.ccn.com/putins-orders-russia-will-national-cryptocurrency-cryptoruble/.
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 Bitcoin.com. “Belarus Adopts Crypto Accounting Standard”. 26 March 2018. https://news.bitcoin.com/belarus-adopts-crypto-accounting-standard/
 Bloomberg Quint. “RBI Bans Regulated Entities from Dealing in Virtual Currencies”. 5 April 2018.
 Bloomberg Quint. “RBI Circular Barring Banking Services for Virtual Currencies Challenged in Court”. 22 April 2018.
 FCA. “Consumer warning about the risks of Initial Coin Offerings”. 12 September 2017.
 FCA. “Consumer warning about the risks of investing in cryptocurrency CFDs”. 14 November 2017
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 Section 1A of Schedule 1 to the Securities and Futures Ordinance.
 Fintech Association of Hong Kong. “Best Practices for Token Sales”. December 2017. http://hkfintech.org/wp-content/uploads/2017/12/FTAHK-Best-Practices-for-Token-Sales-December-2017-final.pdf