Why the US Needs to Follow France’s New ICO Framework
In October, the French finance minister announced that parliament approved a framework for initial coin offerings (ICOs) that would ease how fintech companies do business in the country. The progressive regulatory provision requires companies that want to launch ICOs submit white papers to French authorities for review.
If successful, the companies receive an ICO visa that gives them access to banking and accounting services with ease. The framework, proposed by the French Financial Market Regulators earlier in the year, aims at protecting investors by ensuring that companies disclose economic reasons and how they spend funds after an ICO. Stakeholders will be elated as it is expected that the ICO visa will boost growth in the country's cryptocurrency industry.
ONe Network CEO and founder, John Hoelzer says, "I believe this is a step in the right direction. It seems fairly straightforward and should help foster some companies to want to do business there. I believe ask long as the process is not extremely lengthy and burdensome it should prove helpful. Protecting investor/contributors is key to market success and proper regulation is important in allowing the market to thrive in the future."
But, what will be the impact of such a framework?
The Ripple Effect
By implementing the the ICO visa, investors in France will be confident of the legality and authenticity of the companies that launch ICOs in the country. This will translate to increased investment in the industry and subsequent growth as companies that will be found defrauding investors will be removed from the pool of potential projects.
It will also result in international companies rushing to set up businesses in the country because ICO visa will only be given to companies that are incorporated in France. Companies that want to benefit from financial and accounting services will have to become registered entities.
Globally, regulatory authorities will take notice of frameworks such as these. Countries that want to be market leaders in the cryptocurrency space will be encouraged to consider such a framework or develop better ones in order to attract reputable companies to launch ICOs. For those countries that continue to struggle with the concept of blockchain and cryptocurrencies, the ICO visa system will increase the industry’s standing as they might now have a different view of the numerous opportunities available in the crypto space.
The ICO visa system that is now in place in France is a reflection of how countries are competing to ensure they have a competitive edge in this nascent industry. The ‘State of the Token Market’ report developed by Fabric Ventures pointed out that $4.1 billion has been raised in ICOs this year in Europe, significantly more than in other regions.
In the US, the Securities and Exchange Commission (SEC) is currently considering ICOs which fall within the Securities Act of 1933 and the subsequent Howey test of 1946. This provides a challenge for the US to have clear and progressive regulations that will propagate the industry to global crypto leadership status.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.