Hong Kong Regulator Shuts Down ‘Black Cell’ ICO

Hong Kong’s Securities and Futures Commission, the country’s securities regulator, has moved to shut down  an initial coin offering (ICO) citing “potential unauthorized promotional activities and unlicensed regulated activities.”

Black Cell Technology was forced to halt its initial coin offering by the regulatory body. The project has complied with the official verdict by ceasing the token sale, and investors have been told their cryptocurrency will be returned.

The project was proposing to use investor funds for development of their app, with token holders promised equity shares in return. It was this feature that alerted the regulatory authority, who have classed the token as a security. The body’s official statement described the ICO has an “unlicensed regulatory activity”, with collective investment schemes required to register and comply with official regulations. Whilst the SFC has in the past issued warnings to companies, today’s news marks the first intervention to shut down an ICO in Hong Kong.

Black Cell Technology are developing a mobile-based food marketplace named Krops, which they believe will simplify business both for farmers and shoppers. It’s unclear how the project will proceed, however, with regulatory bodies clamping down on ICO’s. Previously projects launching via initial coin offerings have had to restrict access to investors from countries hostile to the business model. The US SEC (Securities and Exchange Commission) has in particular been clamping down on ICO’s with detailed investigations underway. Some projects have received subpoenas, and those just entering ICO stage are keen to stay out of potential investigation. China has been even stronger, however, issuing a blanket ban on all ICOs within the country.

Whilst the development in Hong Kong has taken some by surprise, the action by Hong Kong’s SFC has not come out of the blue. Last month the regulatory body issued a warning to cryptocurrency trading platforms to not involve themselves with tokens that could be perceived as securities. The body has been steadily developing its approach, indicating potential action as far back as September of last year when a statement was issued that some cryptocurrency platforms held features that could class them as securities.

Black Cell was likely particularly targeted because their token specifically referenced a return for token holders. It was a move that clearly marked the token as a potential security. Other projects have been more ambiguous in their approach however, and avoided direct regulatory intervention. But with authorities clarifying their approach towards ICOs, it remains to be seen for how long that freedom will continue.

Featured image of Hong Kong from Shutterstock.

20.03.2018 / 02:50 101
Hong Kong Securities Regulator Shuts Down ICO, Makes Company Issue Refunds Hong Kong Securities Regulator Shuts
The Hong Kong securities regulator has ended a companys ICO for selling unregistered securities. The Hong Kong Securities and Futures Commission
Second Securities Regulator Halts 'Black Cell' Token Sale Second Securities Regulator Halts
Hong Kong's Securities and Futures Commission (SFC) has halted an initial coin offering (ICO) on the grounds that the issuer was selling securities
US: Cryptocurrency Trading Platforms Must Be Registered With SEC US: Cryptocurrency Trading Platforms
In the US, the SEC has issued a public statement reaffirming registration and regulatory requirements for online platforms trading cryptocurrencies.
SEC Chair Says 'We Are Watching' As Companies Launch ICOs SEC Chair Says 'We Are Watching' As
Jay Clayton, the chairman of the U.S. Securities and Exchange Commission, has issued new remarks about the regulatory risks of launching an initial
Brazil Regulators Move to Block Bitcoin Mining Investments Brazil Regulators Move to Block Bitcoin
Brazil's Securities and Exchange Commission (CVM) has moved to suspend the offer of securities related to a local bitcoin mining operation. In a
Comments (0)
Add a comment
Comment on