The Financial Supervisory Commission (FSC) is drawing up national standards for initial coin offerings (ICOs) to make virtual tokens as easy to invest in as stocks and just as liquid, FSC Chairman Wellington Koo said yesterday.
The draft is to be completed by June next year, he told a meeting of the Legislative Yuan’s Finance Committee. Koo made the remarks after Chinese Nationalist Party (KMT) Legislator William Tseng said at a question-and-answer session on whether the government would regulate ICOs.
To conduct an ICO, businesses typically post a white paper on the Internet that outlines their ideas on token use, issue requirements and expected growth before offering virtual tokens for sale.
However, 127 white papers worldwide were found last year to have been faked and as of April, 80 papers were found to be inaccurate, Tseng said. Citing data from ICO advisory firm Satis Group, Tseng said that 81 percent of ICOs have been identified as scams.
The commission would regulate ICOs, Koo said, but added that tokens exchanged for goods, such as those used in accruing points at convenience stores or mileage points accepted by airlines, would not be covered by the standards.
“The more we regulate, the more this new economic behavior wanes,” Koo said.
The commission has no intention of curbing the creativity and productivity associated with cryptocurrencies if they are not used as securities, he said.
“People often confuse an ICO with the trading of cryptocurrencies,” Securities and Futures Bureau Deputy Director-General Tsai Li-ling said by telephone.
An ICO is a type of public fundraising activity, whereas cryptocurrency trading is similar to trading in gold, for which the commission only implements money laundering controls, Tsai said.
If the token in an ICO functioned similar to a security, the commission would define it as a “securities token” and subject it to the Securities and Exchange Act, Tsai said. The issuer would also need to disclose information similar to what companies that are publicly traded need to do now, she said. However, without referencing the standards of other countries, it would be difficult to draft standards for ICOs, Tsai said.
The government tends to regard cryptocurrencies as virtue commodities or assets rather than currencies, because they have no intrinsic value, central bank Governor Yang Chin-long told the committee, explaining why the commission should be responsible for regulating ICOs. The commission said it has helped prosecutors investigate three cases of suspected ICO fraud.
One of the cases involved a private company advertising that coins could be exchanged for equities, which might have violated the Securities and Exchange Act and the Banking Act, the commission said.