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ISA Chairman Promotes ICO Easements

Traders Magazine Online News, March 21, 2018

John D'Antona Jr.

The overseas Initial Coin Offering (ICO) market just got support from a top regulator.

The Chairman of the Israeli Securities Authority, Anat Guetta, has come out to promote easements on the issuing of cryptocurrencies. He has put forth a framework that will help companies that raise funds through ICOs and a new model. The model - for each issue, it will be decided whether it is a security, and if so, the companies will be required to the same standards as share issues, including a prospectus.

Guetta’s framework and model, referred to as “a sandbox,”  is designed to provide companies a controlled work environment with reduced regulation for a limited period—a hub of sorts, for supervised experimentation with customers.

Anat Guetta, ISA

The ISA has also established a committee to examine the regulation of distributed cryptographic coins. After meetings with lawyers and consultants, they formulated three possible models for implementation. The first follows the American model and the laws to which share-issuing companies are subject. Each ICO will be examined and in accordance with the interpretation of the law, it will be determined if it should be treated as a security issue. When issuing a security, the issue will be subject to all of the same requirements as companies that issue shares on the stock exchange, including the submission of a detailed prospectus.

The second model, the Swiss, defines specific legislation for companies issuing digital currencies, whether the issued currency is defined as a security or not. As a rule, if the currency only allows the purchase of a service or product, it is not considered a security; if it confers rights (for example, voting rights), then it is. Crowdfunding, which is the third model, allows a company to raise capital from the public.

ISA’s Guetta supports the first model, which maintains the status quo but grants easements for a limited time. These eased restrictions might include the granting of a permit to market the issue on the Internet, which is currently forbidden common issues, or a submission of a shortened prospectus. Today, ICO-promoting companies publish a document called a white paper on their sites, which typically includes their business model, the purpose of their fundraising, milestones, product explanations, and how they will use the issued currency.

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