Switzerland Remarks Certain Tokens May Be Securities VS Korea Bans to Raise Virtual Currencies

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Morrison Forester Blockchain Lawyer Comments on South Korea, Switzerland ICO Announcements
Friday, October 20th, 2017

[Switzerland] South Korea and Switzerland both made announcements regarding initial coin offerings on September 29, though their approaches diverged: Switzerland acknowledged that some ICOs may fall under existing regulation, but recognized their “innovative potential”; South Korea banned raising money through virtual currencies.

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Morrison & Foerster lawyer, Joshua Ashley Klayman

Morrison & Foerster lawyer, Joshua Ashley Klayman, co-chair of the firm’s Blockchain + Smart Contracts group, discussed these developments and the accelerating pace of regulatory guidance announcements on ICOs.

“The announcement from Switzerland’s Financial Market Supervisory Authority potentially is significant, not because it is different from what other jurisdictions have been saying, but because its message is relatively consistent with other jurisdictions’ guidance,” says Ms. Klayman. “It is significant, among other things, because Switzerland now has stated that certain tokens may be securities. Prior to this guidance, many in the space previously had assumed that Switzerland’s view was that tokens were not securities, in reliance on a court decision that focused specifically on Ethereum.”

Ms. Klayman adds, “Some in this space, including Emma Channing from The Argon Group and my team at Morrison & Foerster LLP, had long been cautioning about the risks of relying on that decision, particularly in the case of tokens that bore very little resemblance to Ether. It will be interesting to see whether this guidance will affect Switzerland’s relatively overwhelming popularity to date as a token sale launch jurisdiction, now that it has been clarified that certain tokens may be securities.”

The U.S. SEC was the first financial regulator to take a stance on token offerings, in July; other countries to make announcements since include Canada, Singapore, Gibralter, and China. In banning ICOs, South Korea's Financial Services Commission took an approach to virtual currencies similar to China's.

The announcements from around the globe are a net positive to those working with token sales, Ms. Klayman says: “On the whole, though, I see the greater clarity and relative consistency of messages from various jurisdictions, such as the U.S., Canada, Singapore, Hong Kong, Switzerland and others, as a net benefit to those navigating the token sale space. Of course, China and South Korea appear to have taken different approaches by announcing bans, but even they noted similar concerns in their guidance.”

Ms. Klayman has been closely following blockchain tech-related developments. She heads the Wall Street Blockchain Alliance’s Legal Working Committee, and Morrison & Foerster is a member of the Enterprise Ethereum Alliance (EEA) Legal Industry Working Group.

Ms Klayman add "The announcement from Switzerland’s Financial Market Supervisory Authority potentially is significant, not because it is different from what other jurisdictions have been saying, but because its message is relatively consistent with other jurisdictions’ guidance, " says Ms. Klayman. “It is significant, among other things, because Switzerland now has stated that certain tokens may be securities.

Prior to this guidance, many in the space previously had assumed that Switzerland’s view was that tokens were not securities, in reliance on a court decision that focused specifically on Ethereum. Some in this space, including Emma Channing from The Argon Group and my team at Morrison & Foerster LLP, had long been cautioning about the risks of relying on that decision, particularly in the case of tokens that bore very little resemblance to Ether.

It will be interesting to see whether this guidance will affect Switzerland’s relatively overwhelming popularity to date as a token sale launch jurisdiction, now that it has been clarified that certain tokens may be securities. On the whole, though, I see the greater clarity and relative consistency of messages from various jurisdictions, such as the U.S., Canada, Singapore, Hong Kong, Switzerland and others, as a net benefit to those navigating the token sale space.

Of course, China and South Korea appear to have taken different approaches by announcing bans, but even they noted similar concerns in their guidance.”

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