(Bloomberg) -- It’s truly the Wild West when it comes to initial coin offerings for cryptocurrencies.
No country has drafted specific legislation governing the popular method startups are using to raise funds, according to a survey of law firms across 18 global jurisdictions posted on Lex Mundi’s website. The tool to compare regulations on ICOs shows countries from the U.S. to South Korea to Switzerland instead rely on a hodgepodge of laws meant for securities, commodities and currencies.
The regulatory void means issuers and investors lack clarity on how tokens will be classified, and the different approaches to the fundraising mechanism across jurisdictions have concentrated issuance wherever legislators have been less restrictive. It’s clear that existing statutes apply when tokens are classified as securities, but there are no laws that apply for where they aren’t.
“Since blockchain tokens are not a homogeneous asset class -- they may feature characteristics of securities, commodities, currency units, or a combination thereof -- and affect markets that span national borders, there is a significant amount of uncertainty and a critical need for legal experts to offer unequivocal advice,” said Dario de Martino, co-chair of the blockchain practice at Morrison & Foerster LLP, who contributed to the guide.
Lex Mundi, a network of 160 law firms, created the Global Token Sales Guide as a resource for its members, their clients, which include ICO issuers and investors, and other market participants.
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While no country has given clear support for ICOs, some jurisdictions are considered to be friendlier, like Switzerland, where token sales are unregulated when the funds are raised without intermediaries or secondary markets, and when no repayment to investors is required, according to law firm Pestalozzi. In Singapore, also considered to be among friendlier nations, the Monetary Authority of Singapore said digital tokens that are virtual currencies are not regulated under current law, according to Rajah & Tann Singapore LLP.
At the same time, it’s not clear how South Korea, the only country to directly prohibit ICOs, will be able to act on its ban since "the legal basis for banning ICOs that do not involve the sale of securities tokens remains unclear under current Korean law," according to the law firm of Lee & Ko.
The lack of ICO-specific regulation makes it hard to both issue and ban token sales, but this may change. Law firms in most of the jurisdictions surveyed for the Lex Mundi guide said regulators have set up committees and hearings to study the issue.