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Regulators of Sweden and New Zealand published their Statements on ICO

Thursday, 09 November 2017

The financial regulators of Sweden and New Zealand have recently published documents on the primary placements of tokens (ICO). The Swedish financial regulator issued a statement, which notes a number of risks associated with the ICO. The ICO document is described as "a term used to designate the launch of a new token or another form of digital asset based on encryption technology." The Financial Services Agency (FSA) compares the primary placements of the tokens with the "basic" financial measures, and notes that "the goal of the ICO is to attract funding from the public to develop a business idea for the company that does not differ from the idea of basic financing."

The FSA document highlights five areas that are of particular concern to the regulator: "Lack of regulation" - FSA states that "most ICOs are not regulated" and "are not under the control of the authorities. As a consequence, as a result of the lack of "consumer protection", FSA warns that "there is no guarantee that a token or a crypto currency really gives the owner any rights or the right to claim its creator".

"The lack of market valuation" - FSA notes that "as a rule, there is no requirement that the price of a new digital asset correspond to a real market value" and that the issuer "is not required to involve any independent party in the valuation of a digital asset".
"Lack of guaranteed access to the secondary market" - FSA warns that "there is no requirement to redeem a digital asset" after it is distributed.
"Lack of information requirements" - FSA stressed the lack of a "requirement for everyone who launched the ICO in providing the necessary information," and that the information should "be provided to all investors at the same time."
"The risk of investment fraud" - FSA warns that "the recent rapid growth in both the number of ICOs and their value can attract developers who are not interested in completing a project, but simply want to earn money dishonestly."

New Zealand's Financial Markets Authority recently issued a statement that seeks to encourage entities within the ICO and cryptocurrency industries to consult with the regulatory body regarding their legal obligations.

The FMA "strongly encourages any businesses considering making an offer through an ICO to approach us early during their development phase." The regulator asserts that the "specific characteristics and economic substance of an ICO determine if it's a financial product – if it is regulated, and if so how."

The FMA also has released guides for individuals and businesses seeking to offer "services such as cryptocurrency exchanges, wallets and brokering." Such providers must "be a member of a dispute resolution scheme, be on the Financial Services Providers Register, must comply with fair dealing provisions in the Financial Markets Conduct Act.

The FMA states that it "wants to facilitate responsible innovation, and ensure that the regulatory regime remains relevant and agile."

27 January 2025