Financial regulators in Israel have become the latest to consider introducing measures that would target ICOs, announcing the formation of a new committee to consider the issue.
The panel, established by the Israeli Securities Authority, will look at whether ICOs can be brought within the current scope of domestic securities regulation, and will publish its recommendations in due course, expected to be before the end of December.
The panel will reflect on positions being adopted by regulators elsewhere in the world, as it looks to draw conclusions about the most effective way to regulate initial coin offerings.
In doing so, it joins growing numbers of similar authorities worldwide turning an increasing focus on the issue of the thus far unregulated pseudo-securities of token issues.
Initial coin offerings, or ICOs, have become an increasingly fashionable way for startups to raise capital from investors at scale, often used as an alternative to traditional securities. To date, just shy of $2 billion has been raised through the ICO mechanism, a figure which has recently started to draw more attention to token issues from regulators worldwide.
Investors are drawn to tokens in the hope of future resale value, much like with initial share offerings. However, tokens are crucially not regarded as securities in the traditional sense, and for the time being, remain outside the scope of financial regulation worldwide.
The Israeli approach could be the next step towards bringing ICOs into the fold, following similar approaches by governments and regulators elsewhere.
The Securities and Exchange Commission in the United States has already declared ICOs to be a form of security, while the Russian Finance Ministry this week proposed that all forms of cryptocurrency be regulated as traditional assets, rather than currency instruments.
Similarly, authorities in Canada last week highlighted that some ICOs do indeed fall within the scope of securities, and offered to help any companies proposing an ICO to deliver compliance with existing laws and regulations.
The key dividing line for regulators appears to be the utility value of tokens beyond merely an investment in the underlying company, with those tokens perceived as having applications beyond mere investment less likely to fall within the remit of regulators.
With the Israeli panel convening ahead of the December report, it remains to be seen which type of approach to regulating the issue is adopted by the regulators there.