Initial Coin Offering—General
Oxford Dictionaries defines a cryptocurrency as “a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.” However, such a definition though widely regarded as accurate by the public, is misleading. This is because the definition overemphasises the function of cryptocurrencies as being a currency or money when nothing could not be further from the truth. The reason may be due to the fact that bitcoin (BTC) was the first and is the most dominant cryptocurrency with its main purpose to be a “peer-to-peer version of electronic cash”.
Cryptocurrencies are essentially digital programmable assets that can represent almost anything from shares in a company, vouchers, or even loyalty points. An example where a cryptocurrency is not created to be currency or money is ether (ETH), the second largest cryptocurrency at present. The main purpose of ether is to be fuel used to run smart contracts on the Ethereum blockchain.
Cryptocurrencies is an umbrella term that refers to both Tokens and Coins. Tokens are smart contracts (small pieces of code) that are running on top of a blockchain. Today, Ethereum is the most popular blockchain to build tokens on with most abiding by the ERC-20 Token Standard. Coins, on the other hand, are the cryptocurrencies of layer one blockchains. For example, ether is the native cryptocurrency of the layer one blockchain, Ethereum. Tokens are then built on top of the Ethereum blockchain.
An initial coin offering (ICO) is a sale of digital tokens created by the project to raise funds from the public. In most cases, the funds raised will be used for the development of the project. The digital tokens will give token holders certain uses and rights and they vary widely from project to project. The tokens could be used as a medium of exchange to settle transactions or be used to incentivise the public to adopt the project’s technological solution. Some rights given to token holders could be voting rights on important decisions of the project or right to future profits made by the project, albeit such tokens may be construed to be securities in most jurisdictions. There are also instances where tokens will give holders no rights at all.
Initial Coin Offering (ICO) is also known as Initial Token Offering (ITO) and Token Generation Event (TGE) and these different naming conventions have the same meaning. Among the three terms, Initial Coin Offering (ICO) is the most commonly used.
An Initial Public Offering (IPO) is the very first sale of a private company’s stock to the public to raise investment capital with part of the stock being traded on a stock exchange. The digital tokens sold during an Initial Coin Offering (ICO) can represent many different things, including stock of the company.
When it comes to virtual currencies/digital tokens and raising funds through an ICO, different countries abide by different set of regulation. The following are the main points gathered from several MAS media releases regarding their stance on ICOs in Singapore. If you are unsure about the laws governing the Republic of Singapore you should seek legal advice.
"Singapore, like most jurisdictions, does not regulate virtual currencies per se, as these are not considered as securities or legal tender. The Monetary Authority of Singapore’s (MAS) regulation of virtual currency intermediaries pertains specifically to the money laundering and terrorist financing risks they pose. It does not extend to the safety and soundness of virtual currency intermediaries nor the proper functioning of virtual currency transactions.
The types of digital tokens offered in Singapore and elsewhere vary widely. Some offers may be subject to the Securities and Futures Act (SFA) while others may not be. MAS will examine the structure and characteristics of, including the rights attached to, a digital token in determining if the digital token is a type of capital markets products under the SFA.
All issuers of digital tokens, intermediaries facilitating or advising on an offer of digital tokens, and platforms facilitating trading in digital tokens should therefore seek independent legal advice to ensure they comply with all applicable laws, and consult MAS where appropriate.”
Most of the digital tokens present today are Utility Tokens with functions varying from a means of exchange, fuel to run smart contracts, to loyalty points. Given that security laws around the world have yet to provide a robust legal framework, most projects are refraining from offering Security Tokens and are sticking to Utility Tokens instead.
Just like investing in the stock market, there are risks when backing ICO projects. As much as we attempt to weed out bad projects, backers are strongly encouraged to do a full due diligence on the projects that they are interested in backing. Though non-exhaustive, some risks are listed below.
- a. Most ICOs are launched by startups and the chances of failure are high.
- b. There may not exist an active or liquid market for the tokens to be bought or sold after the ICO.
- c. There is no guarantee or assurance of any success of the projects.
- d. The price of tokens may be very volatile.
- e. The projects may turn out to be scams or fraudulent.
- f. Given the lack of regulatory clarity, projects may deemed to be illegal and be shut down by regulators.
Initial Coin Offering—backing and distribution
There are four steps. First, create an account with us using your e-mail account. Second, complete the compliance screening process and “My Profile”. Third, choose the project that you are interested in. Last, transfer your funds to project using the Ethereum and/or Bitcoin addresses provided. If you decide to back the project in ethers (ETH), transfer your ethers to the Ethereum address provided. Likewise, if you decide to back the project in bitcoins (BTC), transfer your bitcoins to the Bitcoin address provided.
We support contributions in ether (ETH) and bitcoin (BTC). We do not accept contributions in fiat currencies.
You can buy bitcoins and ethers at cryptocurrency exchanges. Some of the largest and most popular exchanges are Coinbase, Binance, and Huobi. This is not an endorsement of these or any cryptocurrency exchanges by Ceito. We are not responsible or liable for any loss or damage of any sort incurred as the result of any such dealings with these cryptocurrency exchanges.
A cryptocurrency wallet is a software program that stores the public and private keys that are used to receive or send cryptocurrencies. We like to think of a cryptocurrency wallet as a keychain. Generally, there are four kinds of cryptocurrency wallets. They are exchange wallets, local software wallets, hardware wallet, and paper wallet. The tradeoff among the types of cryptocurrency wallets will be between convenience and security. Exchange wallets are the most convenient but least secure while paper wallets are the least convenient but most secure.
We highly discourage backers from using their cryptocurrency exchange wallets to receive tokens from ICO projects that use our platform. There are several types of Ethereum wallets that we suggest that backers use when backing projects. They are Ledger, MyEtherWallet, Metamask, Mist, Trezor, imToken, and Jaxx. This is not an endorsement of these or any cryptocurrency wallets by Ceito. We are not responsible or liable for any loss or damage of any sort incurred as the result of any such dealings with these cryptocurrency wallets.
Most projects price their tokens in the public sale in US Dollars (example: 10 ABC Token/USD) and collect funds from backers in ethers (ETH) and/or bitcoins (BTC). To know the number of project tokens each backer purchased and hence be allocated, we need to know the exchange rate of BTC/USD and/or ETH/USD at the point in time when the contribution was made.
Unlike company stocks, cryptocurrencies like ether and bitcoin are not traded on one central exchange. They are traded on multiple cryptocurrency exchanges scattered all over the world and each of them quotes a different exchange rate.
To determine the exchange rates of BTC/USD and ETH/USD at the point in time when backers make their contributions, we will calculate and use their average rates. At the time of update, both averages use 4 contributing constituent cryptocurrency exchanges. They are: Bitstamp, GDAX, Kraken, and Bitfinex. Both averages are calculated by equally weighting the last transaction price made on these exchanges. Ceito reserves all rights to add or remove the exchange rates provided by certain cryptocurrency exchanges from the calculation when appropriate.
Though we are able to generate digital tokens on Ethereum, NEO, and Stellar, we expect that most projects will be issuing their tokens on Ethereum and be abiding by the ERC-20 Token Standards.
ICOs will end either when the pre-set hard cap of the project is hit or when the time period for the public sale of tokens is over.
After the ICO ends, Ceito will distribute the tokens to all relevant parties into their personal Ethereum addresses provided to Ceito. The tokens will be distributed at a timing chosen at random but will be done within 14 days after the ICO ends.
The main purpose of collecting your personal data is for us to run a background check on you as required by the Monetary Authority of Singapore (MAS). This will be done by two of our compliance partners, namely Jumio and Thomson Reuters. There are also other purposes for us to collect your personal data. To learn more, we strongly encourage you to refer to Ceito Data Protection Notice, specifically Clauses 4, 5, and 6 under “Collection, use and disclosure of personal data” where we describe the different purposes for collecting your personal data.
The types of data we collect are name, NRIC number, address, email address, telephone number, nationality, cryptocurrency addresses, and others. We strongly encourage you to refer to Ceito Data Protection Notice, specifically Clause 2 under “Personal data” to learn more about our policy on the types of personal data we collect.
The purpose of collecting your Personal Ethereum Address is for us to know which address to transfer the project tokens you bought to. Currently, we only collect one Personal Ethereum Address per person. If you wish to change your Personal Ethereum Address, you can do so under “My Profile”. The distribution of tokens to your Personal Ethereum Address will occur within 14 days after the ICO completes.
Your personal data is stored in S3 bucket hosted on Amazon Web Services (AWS).
We may retain your personal data for as long as it is necessary to fulfil the purpose for which it was collected, or as required or permitted by applicable laws. We strongly encourage you to refer to Ceito Data Protection Notice, specifically Clauses 19 and 20 under “Retention of personal data” to learn more about our policy on retaining personal data.
We may disclose your personal data but under specific conditions. We strongly encourage you to refer to Ceito Data Protection Notice, specifically Clauses 7 and 8 under “Collection, use and disclosure of personal data” to learn more about these conditions.
Virtual currency transactions, given their anonymous nature, are particularly vulnerable to Money Laundering and Terrorism Financing risks. Currently, Singapore does not regulate virtual currencies per se, as these are not considered as securities or legal tender. However, the MAS’ regulation of virtual currency intermediaries like Ceito pertains specifically to the money laundering (ML) and terrorist financing (TF) risks they pose. The Monetary Authority of Singapore (MAS) therefore requires virtual currency intermediaries like Ceito to verify the identities of their customers and report suspicious transactions to the Suspicious Transaction Reporting Office (STRO). STRO is a unit in the Commercial Affairs Department of the Singapore Police Force.
Ceito’s compliance policies are in alignment with Singapore’s Anti-Money Laundering and Countering the Financing of Terrorism policy objectives as articulated in the “National Policy Statement”. These objectives are: To a) detect, deter, and prevent Money Laundering, associated predicate offences and Terrorism Financing; and b) protect the integrity of its financial system from illegal activities and illicit fund flows.
ICOs used to take several weeks to complete their compliance checks. The compliance checks on Ceito Dashboard are automated and will take on average 5 minutes to complete all the required checks.
Whenever a new backer uses our dashboard, they will need to undergo the compliance checks.
We have partnered up with Jumio which will be providing us with ID and identity verification service. They have to date done over 100 million identity checks and the clients that they provide this service to include Airbnb, easyJet, Coinbase, and HSBC, and others.
Assisting us with our Money Laundering and Financing of Terrorism (ML/FT) background checks is Thomson Reuters through their World-Check database. The screening service provided by World-Check is currently used by most banks and financial institutions around the world.
No. After completing the compliance checks when setting up their account on Ceito Dashboard, backers can back any and multiple projects that is available. They do not need to redo their checks.
Ceito will not take on any Prohibited Projects. Additionally, Ceito will do a full due diligence on all projects thoroughly and abide by our internal Project Screening Policy. We are committed to only accepting quality projects on our platform and will thoroughly screen through every project that we receive. By not accepting bad and/or fraudulent projects, we protect both the backers that use our platform as well as ourselves. The list of Prohibited Projects can be found at https://ceito.io/prohibited-projects.
In addition, projects that plan to launch their ICO on Ceito Dashboard will need an independent legal opinion. This will ensure that projects are compliant with existing laws and will act as a natural filter against potentially fraudulent projects.
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