U.S and Singapore Citizens have ICO participation restrictions. Know your legal rights when participating in ICOs of blockchain projects .
I am an avid cryptocurrency enthusiast. I have been investing in crypto for at least 18 months. The rise of Initial Coin Offering s(ICOs) via the Ethereum protocol has been compared to Tulip mania, surging! The amount of ICO’s that have launched this year is staggering with, for the first time outpacing the traditional Venture Capital Market. Obviously, this new innovation comes with risk, as this method and medium of funding an organisation is not regulated with no legal or financial recourse in the event of a dispute.
Given the lack of regulation and the question of whether, these tokens constitute a security, this can, in future, have wide sweeping tax and regulatory impacts.
One of the most recurring questions is why all of these ICOs try to prevent US citizens from participating. The ongoing EOS ICO has been one of the notable ICO’s that restricts U.S Citizens from participating.
Some projects even go as far as trying to dissuade residents from Singapore to participate as well. It is evident these two regions do not take kindly to cryptocurrency ICOs, mainly due to regulatory reasons.
This is where Lawyers, Business moguls and Blockchain technology collide.
Due to this legal grey area, ICO’s have put this clause to avoid future backlash from Regulators as well as fines. We can see the recent Bitcoin Money transmission debacle continue, where the US Government has convicted John D. Powell of Normal, Illinois on two counts of “operating an illegal money transfer business” and was sentenced to four years in federal prison. So to avoid this regulatory uncertainty where a ICOs can be labelled as traditional sales of equity, ICO raisers have opted out of US and Singapore Citizen participation.
There are many different reasons as to why this is the case, even though the countermeasures can be bypassed quite easily.US Participation can be bypassed, as ICOs tend to ask if you are a US citizen, but there is no verification of whether or not one speaks the truth. Some projects use geolocation to block US citizens, but those can be bypassed with a proxy or VPN. It is impossible to prevent US citizens from participating, but these measures have to be taken regardless according to The Merkel (2017).
There is a heavy burden for ICO’s to perform , Anti Money Laundering (AML) and Know your Client (KYC) checks but It is evident this unregulated space will be of keen interest to financial watchdogs all over the world in the coming years and doing your due diligence to avoid penalty is of prime importance to ICO start-ups.
As a global citizen, I am fortunate that I can invest in these ICO’s, but regulation can stifle innovation through these measures and raise less funds towards a global Blockchain revolution.
For further reading please see:
https://www.cryptocoinsnews.com/illinois-man-convicted-operating-illegal-money-transfer-business-selling-bitcoins/
https://themerkle.com/why-cant-us-citizens-participate-in-cryptocurrency-icos/
