Toward the end of 2017 Twitter was flooded with statements like: “Down with the banks!”; “Crypto vs government!”; “We don’t need regulation!”
All that quickly changed in 2018 after the market crash. Afterwards, the battle cries turned into:
We need regulation!
Who allowed this to happen?
ICO market is full of scams!
They changed the terms on their investors, why is nobody doing anything!
Lots of investors can resonate with the latter claims. ICOs have frequently changed their vesting schedule without any warning to investors. Indeed, up until last year, it wasn’t even clear to whom ICO’s had to report their metrics.
Another problem for many ICOs are banks, or more so the lack of banks.
Finding crypto-friendly banks is hard, and most projects you see out there do not have a bank account. Not because banks are worried about going out of business from the pending blockchain revolution or any of that, but simply because the level of KYC & AML done by most ICOs and exchanges does not satisfy required regulatory guidelines. Or at least this is what the banks say.
So, in order to build a global lasting infrastructure, we first wanted to make sure that we establish a solid foundation in a country with clear legal crypto guidelines.
Switzerland: trial and error
We started our journey back in 2017 in Switzerland. Many projects were heading in that direction and it looked like a good idea, especially after FINMA (the Swiss Financial Authority) announced its detailed ICO guidelines in February 2018.
It made sense to attempt to build in an environment with an established set of rules, but things were not as established as they seemed.
Since FINMA was just publishing some guidelines, and there was no bill to explain and enforce the regulations, nothing was actually clear. The market was booming, and Swiss banks were ready to profit of the boom. They told us that our KYC & AML had to be done by a certified KYC provider in Switzerland. Needless to say that the price for this services were 10x the average market price.
After months of trying to get a clear view of what we are supposed to do, what our token will be legally considered, countless discussions with our lawyers, banks, and KYC/AML providers, we decided to give up on this slow and expensive option. It was time to go back to the drawing board and look for a different jurisdiction. One in which blockchain, crypto, and ICOs were regulated, but also one where we could move a lot faster.
Malta: faster and cheaper
It turned out Malta was the answer for us. It still requires a lot of work, and countless discussions, but at least in Malta we found solutions for most of our problems.
The Maltese gov. passed 3 bills in June 2018 regarding cryptocurrencies, blockchain and distributed ledger technology (DLT) marking it one of the first jurisdictions in the world to pass specific legislation around the tech.
Consequently, we have incorporated Elrond Ltd. in Malta. We are in the process of obtaining a license, that will enable the company to issue the Elrond token, list on exchanges, and publicly raise funds through an ICO.
Currently we are in the private seed funding stage and NOT at the final public sale round. Given that we are in the process of getting license from Malta’s financial authority, legal reasons prohibit us from publicly disclosing various financial information at this point.
As soon as the license is cleared however, we’ll be able to be as transparent as possible and share all relevant financial information. To be sure, the Maltese law ensures a higher transparency level by requiring ICOs to make a series of documents public, such as shareholders, whitepaper certification, board of directors, appoint an auditor, a VFA agent, a MLRO agent, and a custodian, establish a cyber-security framework, ensure that there are appropriate systems in place to satisfy AML/CFT requirements, etc.
Regulation is evolving fast, and we’ve learned a lot from trying to go through all legal hurdles in Switzerland first. Perhaps the most important lesson being that lawyers can kill your startup if you let them decide business matters on your behalf. Still, some regulation might be useful for most ICOs. Even licenses like the one required in Malta might help protect some investors by adding higher accountability standards.
In the end, it is up to the community to take time for serious due diligence and reward good behavior with trust and support. As long as there is balance between consumer protection and permissionless innovation, it is up to blockchain projects to raise the standard and adopt self governing principles.
For more information, please visit us:
Official website: www.elrond.com
Elrond Github: https://github.com/ElrondNetwork
Community platform: community.elrond.com