In most parts of the world, both Bitcoin and Initial Coin Offering are going through a difficult time. Some have banned the trading of digital currencies in their country while few have not legalized it. Amidst all that, the Government of Abu Dhabi has gone one step ahead as they have released a set of guidelines for those who are willing to take part or begin token sales through Initial Coin Offerings (ICOs).
According to the Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA), anti-money laundering and know-your-customer (KYC) rules will be imposed on the token sales. It is pertinent to mention that the token sales will be classified on a case-per-case basis as either of the following:
The document which the Government of Abu Dhabi released read:
“Virtual currencies, unlike fiat currencies, are not legal tender. However, virtual currencies have “value” in that they can be exchanged for other things of value, with that value being dependent on considerations of supply and demand. In this respect, virtual currencies have much in common with physical commodities; such as precious metals, fuels and agricultural produce. Therefore from a regulatory perspective, virtual currencies are treated as commodities, which are not Specified Investments as defined under the FSMR. This means that a “mining” or spot transaction in virtual currencies will not constitute a Regulated Activity in itself”
Under the law of Abu Dhabi, the guiding document which was released states that a specific token sale may come outside or under the definition of a security. However, the token sale will primarily vary from case to case. Those tokens which won’t be treated as securities will automatically be considered as commodities.
About Initial Coin Offering
Initial Coin Offering is fundamentally used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. It essentially offers an unregulated means by which funds are raised for a new cryptocurrency venture.
When a cryptocurrency startup firm wants to raise money through an ICO, it usually creates a plan which states:
- What the project is about
- What need(s) the project will fulfill upon completion
- How much money is needed to undertake the venture
- How much of the virtual tokens the pioneers of the project will keep for themselves
- What type of money is accepted, and how long the ICO campaign will run for.