How Governments Are Reacting to ICOs

There are certain seismic disruptions to the natural order that force governments around the word to pay attention and react quicker than the tools of governance ordinarily allow.

Epidemics, terrorism, nuclear energy, world war and now…blockchain technology. Specifically, initial coin offerings (ICOs) are making governments itchy.

If you are trying to keep up, you will be very busy and very confused. Each week seems to bring another pronouncement from yet another country. Big or small, everyone has something to say. We’ve heard from behind the veiled curtain of mega-states like Russia and China, and we’ve heard from the neighborly nations like Canada and the Isle of Man.

The message is far from clear. While many nations can stand united on challenges like melting ice caps, they’re a bit more baffled with crypto.

So, how does a government react when faced with this new class of disruption? We have identified at least five approaches by global governments to ICOs.

The ‘forbidden city’ approach

On one extreme, we have the “forbidden city” approach currently championed by the People’s Bank of China: a blanket ban on ICOs and exchanges.

As many observers have noted, this approach is likely a stopgap measure that allows a government to be unequivocal (all token sales are illegal) until it can properly assess the situation and decide what to do.

The ‘in the works’ approach

Some governments, in the face of change, choose to be progressive and open to innovation. They come out and say: we recognize that this is different, so we need to have special legislation, and we are working on it.

In some cases, this may be optics alone. Russia flip-flopped in the past few months on its stance on ICOs, but the latest comes right from the top: President Vladimir Putin has ordered that legislation be implemented on ICOs to bring them in line with traditional securities financings (e.g., initial public offerings of stock).

In other cases, it may be an earnest attempt to put forth clear legislation. The governments of Isle of Man and Gibraltar seem to have a repurposing or revised framework of existing legislation in development.

It’s not clear how workable any such legislation will be, but it’s in the works, so that’s progress…

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