The SEC just dealt a big blow to the hottest trend in cryptocurrencies - but Asia is cheering
As reported by Business Insider's Rob Price, the SEC said on Tuesday that initial coin offerings (ICOs), in some cases, can be considered securities; and as such will be required to subscribe to the necessary regulations.
ICO participants invest money and receive digital "tokens" in return. Thus far, ICOs have been largely unregulated, with some crowdfunding events raising hundreds of millions of dollars.
But many Asia-based ICO investors and companies are excited because they think the SEC's warning will drive business to the continent where countries are more open to blockchain experimentation.
"Asia-based advisers, investors, and funds are cheering," Sebastian Quinn-Watson, a consultant for Blockchain Global Limited, a bitcoin mining firm, told Business Insider. "We have Chinese and Singaporean LPs that are eager to pour more money into the market to attract talented founders and blockchain companies to Asia."
EximChain, an Ethereum tech company, is one such firm that will soon commence a multi-million dollar ICO overseas.
"On China side, we see that there has been a number of domestic ICOs that are still able to push ahead," Hope Lui, EximChain CEO, told Business Insider in an email. "This will increase."
According to Quinn-Watson, countries such as China and Singapore are more open to blockchain innovations.
Singapore's central bank, for instance, recently outlined a plan to connect the world's central banks via blockchain technology.
"The two-phase effort called "Project Ubin" would see global central banks settling cross-border transactions in real time via a blockchain," according to reporting by CoinDesk.
"The immediate impact will be an increasing number of US blockchain startups seeking to run their ICOS in the region," Quinn-Watson said. "We expect this occur and we expect to see other countries that have implemented a 'fintech sandbox approach' similar to Singapore to also reap immediate dividends."
In January of last year, China's central bank said it would "soon" have its own cryptocurrency, according to Bloomberg.
To be sure, not everyone is bullish on Asia's ICO future. Itai Damti, CEO of Leverate, a forex technology company, told Business Insider regulators in other countries will catch up.
"Other regulators will follow suit within 6-12 months, so the geographic arbitrage will not last," he said.
In order to fly under the raider of the SEC, firms running ICOs tend to avoid using industry language, according to bitcoin evangelist Paul McNeal. As such, phrases such as "participating in a protocol" are used instead of "owning a share."
But the SEC message clarifies that such games with semantics won't fly, according to Joseph Gaugliardo, a securities lawyer at Pepper Hamilton.
"Basically the SEC is sending a message to folks involved in running ICOs - 'you do the math," Gaugliardo said. "If what you're doing looks like a security, then it's subject to securities law."
In total, ICOs have raised $1.37 billion, according to Lex Sokolin, a partner at Autonomous NEXT, a fintech analytics firm.
Rob Price contributed reporting.