Regulation

Following increased frauds associated with ICOs, including cyber thefts using

Multi-Level Marketing Systems and trading halts due to exit scams and possible

market manipulation, different countries have setup various regulations which are

continually changing. Cryptocurrencies are based on distributed ledger technologies

enabling people to acquire or transfer their cryptocurrencies directly to another

person without the need of an intermediary. Therefore, they are exposed to fraud. It

is difficult to regulate ICOs and cryptocurrencies using a central authority since

they can easily be moved across national and jurisdictional boundaries. However,

countries have developed varied approaches to regulate ICOs and cryptocurrencies,

depending on the nature of the cryptocurrency.

Controlling cryptocurrencies can be broken down into two forms: utility tokens and

asset-backed tokens. Utility tokens hold more value than asset-backed tokens since

they are essential for the holder to exchange a token for a good or service in the

future, for example, Bitcoin. Asset- backed tokens may have value because there is

an underlying asset which the holder of the token can attribute a value to. In most

countries, asset-backed tokens are regulated, rather than utility tokens, which are

not prone to fraud. ICO regulation is still under development in most countries

including Australia, Canada, and France. Countries that have already developed

and implemented ICO regulations are the United States, United Arab Emirates,

Switzerland, Gibraltar, and New Zealand. In China and South Korea, all ICOs have

been banned completely. Owing to the difference in regulations per country, ICO

investors must analyze which countries to sell their coins or tokens in based on set

regulations, therefore increasing the complexity in trading cryptocurrencies.

Prospective purchasers of cryptocurrencies also need to understand regulations in

The Gibraltar British Overseas Territory Financial Service Commission is in the

processes of developing a framework to implement a worldwide regulation

governing cryptocurrency

transaction to eliminate the complexity of transactions due to different regulations in each country. Investing in cryptocurrencies and Initial Coin Offerings (ICOs) is

highly risky and speculative. Investors should be careful not to get scammed by

identifying exit scams early enough using the key points we have mentioned above.

Additionally, Multi-Level Marketing Systems should totally be avoided as they are

fraudulent ways to benefit initial investors. Whether the development and

implementation of regulations will help curb scammers in the ICO world, time will

tell.

Chapter Five: Wrapping It Up

If you had purchased $100 of BTC on Jan 1, 2011, it would have cost you $0.30 per

BTC, amounting to 333.33BTC. Seven years on and BTC has hit an all-time high of

$11k, exchanging at $9,315.28at the time of writing. Assuming you had kept your

333.33 BTC, they would be worth an incredible $3 million today. That is not a bad return for a $100 initial investment. Just like BTC, Initial Coin Offerings (ICOs)

may have similar profits, butonly if carefully traded. In this chapter, we are going to

discuss stages and tips in investing in ICOs.