With cryptocurrencies gaining progressively more weight in the global economy, the demanding call for legitimacy and accountability becomes impossible to ignore. In the face of institutionalization, the rules for ICOs that want to make it on the market have changed drastically — commanded by state regulations slowly taking definitive form and scams sabotaging reputation of the whole party.
Just before the 2018, the consensus of most analytics was that the year will be marked by the arrival of significant state regulations to the crypto market. As for now, this assumption proves itself correct, leading to many restrictions and obstacles to the growth of startups as they become more entangled in documentation and fees.
China continues its full-scale war on cryptocurrencies. After banning ICO and crypto exchanges in September 2017, this year it started targeting the overseas trading options as well, going down on Chinese bank and online-payment accounts suspected of facilitating trades on offshore cryptocurrency venues. ICO ban also remains active in South Korea.
In countries where ICOs are not straight-off banned, the regulations applied to them depend on how ICOs are defined within the existing legal framework. Two main binding definitions can be find within statements of governmental institutions regulating commerce in USA: one is that ICOs can represent offerings of securities; and the other defining all kinds of crypto as tax-subjected property.
Regulations tied to both are meant to protect investors from scam projects, yet often do as much harm as they do good. In USA, for instance, the existing security law prohibits offering securities to unaccredited investors – that’s why so many startups are putting USA on their restriction lists. Even in regions without such prohibition, unadjusted security regulations fall heavy on a project, slowing down the process of its development with paperwork and additional fees. On ICO market, where rapidness and accessibility are the main driving features, that can constitute a serious problem.
Figuring out whether or not tokens of a particular ICO should be defined as securities is quite tricky and allows for wide interpretation. The distinction between utility-tokens and security-tokens recognized in the ICO community often does not translate to legal framework of the state. Utility tokens, — ones that can be used to purchase goods and services or access the system, — may still be defined as securities by law.
In USA and Canada Howey Test often acts as a main criterion, stating that if you’re promoting your ICO as a way to make money, then you are promoting a security. However, the state reserves the right to make judgment calls about new ICOs case by case, so you would need plenty of time and resources to win yourself a special treatment. In New Zealand financial market authority states that all tokens and crypto-currencies are considered securities, granting exceptions only based on individual consideration.
Best environments for ICO (by the number of ICOs that reached the market cap over $10 million — Singapore, Caiman Islands, Switzerland) proved to be regions where tokens are less likely to be classified as securities, making them less subject to “harsh” regulatory oversight. It’s also where the development of crypto market receives support from the governmentally authorized bodies, promising more precise yet favorably adjusted regulations in future; and where the economy and political environment are stable enough to support the new economic niche.
Russia, Ukraine, and overall Eastern Europe, where the legal conditions are still flexible, and the marketing is fairly accessible, can also make favorable environments for ICO launching, especially with funding gathered offshore.
Earning a reputation. Latest tendencies of scam projects gaining larger scale and publicity, combined with more strict regulations, have caused ICOs to shift their attention towards persuading large investors – corporations and venture funds, which allows for a precise focusing of efforts.
The marketing strategies and campaign formats differ accordingly, becoming more targeted and relying more on building reputation and a strong community, and less on just loud presence. While for attracting small investors in 2017 the staple of successful ICO was social media advertising, mailouts, and viral content, nowadays you will need to concentrate on polishing your White Paper and creating a high-profile media presence with press-releases and interviews. Physical presence on events and conferences is also crucial, as well as extensive collaborations with projects that are widely recognized as reliable. Hiring a corporate lawyer also becomes a desirable feature.
As WeRaise CEO Olia Binkovska-Abraham said, “the Matthew effect gets more prominent than ever. If your ICO gets at least one large investor or partner with a good name, you are already two steps ahead of half of the market, and you are ten times more likely to get positive attention”.
WeRaise is up to challenge
Our full-cycle digital media advertising agency is well-informed and equipped by all the means necessary to:
- Guide you through the ICO market environment of various regions;
- Adequately and efficiently react to advertising restrictions;
- Develop a suitable media strategy for attracting just the type of investors you need;
- Help you building an active community around your project.