Rival countries to test Swiss ICO dominance?

IOTA Foundation

Has Germany emerged as a rival to the booming Swiss model of ICO foundations? The creation of the IOTA hybrid foundation in Berlin - the first such structure in Germany - appears just as things are looking shaky in Switzerland with the Tezos foundation governance row in full swing.

“It may seem counter-intuitive to go through the painful process of becoming a regulated non-profit entity in Germany, especially when considering ‘easier’ alternative options in other jurisdictions,” IOTA stated. “But subjecting ourselves to the onerous oversight of one of the world’s most respected governments, within the heart of the EU, will give IOTA an unparalleled legitimacy.”

“Standing on solid legal pillars” is considered by some to be crucial for persuading big hitters, in such fields as mobility, health, industry and energy, to incorporate IOTA technology into their future strategy – particularly with the EU’s financial regulator (ESMA) paying critical attention to the ICO scene.

“ESMA has observed a rapid growth in ICOs globally and in Europe and is concerned that investors may be unaware of the high risks that they are taking when investing in ICOs. Additionally, ESMA is concerned that firms involved in ICOs may conduct their activities without complying with relevant applicable EU legislation,” the regulator stated this month.

The IOTA Foundation fund will spend the “tens of millions of dollars” at its disposal developing the system further. The foundation will also award grants from a $10 million Ecosystem Fund to promising projects that use its technology.

IOTA’s open source technology is designed for secure communications and payments on the internet of things. The unique ‘Tangle’ distributed ledger system is already being used by some companies, including Bosch. 

Singapore ICO interest

Since the creation of the Ethereum Foundation in 2014, Switzerland (in particular canton Zug) has cornered the market in the ICO foundation ‘industry’ – thanks in large part to its low taxes and light touch regulations. Such entities – usually reserved for charities and NGOs – have absorbed around a quarter of the $3 billion+ raised globally by ICOs so far this year. Their popularity may even have been boosted by restrictive measures taken against ICOs in the US, China and South Korea.

But the success of Swiss ICO foundations has also raised eyebrows – and concerns in some quarters that using such structures to house stockpiles of crypto-tokens from start-ups may be circumventing their original intention. 

Such concerns have only been stoked by the Swiss regulator recently launching a probe into ICOs and a public bitter spat at the Tezos Foundation.

So could Germany offer a more legally robust foundation model than “other jurisdictions” – as suggested by IOTA? Singapore is also casting a somewhat cautious eye at encouraging “the right kind” of ICO to set up in its jurisdiction.

The Monetary Authority of Singapore financial regulator told the Financial Times this week that it will set up a regulatory sandbox to test out the viability of the new form of crowdfunding. Indeed, Singapore is “very keen” to attract such enterprise – providing such ventures play by the rules.