Widespread usage of cryptocurrencies and crypto exchanges in Asia on the one hand, and severe restrictions for ICO investors in the US and mainland China on the other hand - both factors made Hong Kong, South Korea and Japan new world centres of investments, roadshows, meet-ups and crowdsales for the projects based on blockchain.
In May 2016 the team of little-known blockchain platform called DAO raised record amount of money - over $117 million in one month - using initial coin offering (ICO) instead of venture capital or other traditional fundraising models. Since then the ICO boom rocked the financial world, the global attention was shifted from classical financial centers to the different spots on the map.
According to the recent research on initial coin offerings by E&Y advisory agency, in 2017 the majority of ICOs were held by projects based in the US ($1.031 billion raised in ICOs), China ($452 million, Hong Kong included), and Russia ($310 million).
So far, there has been no research analyzing the sources of investments by countries. Although, more and more projects from US, Western Europe and Russia are arranging business trips to Asia in order to find anchor investors for their blockchain-based projects. South Korea, Hong Kong and Japan have become the loadstones for those who seek investments in cryptos.
Today the number of roadshows and meet-ups for the blockchain startups is relatively equal in the US and in Asia, says Julia Plavnik, CBDO of BoatPilot, a developer of free navigator and interactive pilot app. “Although US has huge investment potential, Asia remains the major investor to ICOs. Due to SEC restrictions, startups are afraid to attract money from individual American investors.”
Having attracted big amount of scammers and fraudsters, the ICO rage was followed by severe restrictions and even complete bans of ICO in the number of countries. Due to SEC restrictions, in the US only accredited investors (who worth over 1 million dollars and are U.S. citizens or residents) are officially allowed take part in ICOs. As a result, numerous European and Asian ICO projects restrict US citizens from participating in their token sales.
In search of the best developed crypto jurisdiction in Asia, ICO and blockchain businesses choose South Korea, Hong Kong and Japan over Singapore and South East Asia. According to Julia Plavnik, Singapore is less popular among ICO organisers, due to uncertain regulation policy of government that delays the implementation of rules of ICO campaigns and cryptocurrency circulation.
"Singapore banks are blocking accounts, that received money transfers from the cryptocurrency conversion," Julia Plavnik told Insider.Pro.
Making business Chinese way
Despite the total ban of ICOs in China in autumn 2017, the country is ratcheting up its adoption of blockchain. As reported by South China Morning Post on April 24, a new fund that aims to invest in blockchain-related projects was launched in the Xiongan New Area economic zone outside Beijing.
The ICO projects have turned their steps to Hong Kong, where blockchain-based fundraising is still legal. Hong Kong remains one of the main crypto hubs on the planet, thanks to its own legal system, distinct from the law of the People's Republic of China. Nevertheless, Hong Kong’s Securities and Futures Commission (SFC) is watching new ICOs closely and intends to regulate cryptocurrency exchanges in the nearest future.
Hong Kong hosts world’s biggest crypto exchanges, including Binance with approximately 8 million users. “As a result of one of our trips to Hong Kong we signed a partnership agreement with Gatecoin, one of the biggest crypto exchanges in Asia, it’s regulated by the Hong Kong legislation and, in case of any unforeseen situations, the exchange is promising to return investors the money,” Diana Sorina from Arcona comments.
Bypassing the ICO ban in South Korea
According to the ICO organisers, the existing ban on helding ICOs in the country doesn’t actually prevent Koreans from investing to foreign projects, that are not registered in South Korea. “Investors from South Korea provide 80% of our funds, that’s more money then we received from 5,000 small investors all over the globe,” Art Pirozhkov, COO of Moscow-based project Jury.online, which has been working with Korean investors for more then 8 years, reported to Insider.Pro.
In May Art Pirozhkov is going to organize the presentation of 50 projects from Russia and Europe to South Korean investors. "Basically, a foreign startup needs a conductor to Korean market, because national culture is based on trust in group leaders".
Recently the country’s government announced its intentions to legalise ICOs in the country and applying specific regulations to this kind of fundraising, as reported by Korea Times in mid-March 2018.
The crypto exchanges are not banned in South Korea, that makes it possible for Koreans to trade tokens (cryptocurrencies) of various foreign projects. “In South Korea there are 15 crypto exchanges, that are obliged to identify their clients. The deanonymization trend restores the growth of trust among the investors and other market players”, says Julia Plavnik.
Japan and is the largest crypto market, accounting for almost 56% of all global transactions in Bitcoins. “A few months ago, when we participated in the large exhibition in Tokyo, many private investors wanted to buy tokens on the spot”, said Diana Sorina.
ICOs are still not banned in Japan, though the count’s officials announced new rules for legalizing in early April. Proposed guidelines include identifying investors to prevent money laundering, protecting existing shareholders and debt holders, restricting unfair trade practices like insider trading and ramping up cybersecurity efforts.
However, according to Diana Sorina, new ICO regulations are about to come out in Japan so currently most Japanese investors are waiting holding back, but there are other countries in the region ready to pick up this priceless opportunity.
By Kira Egorova