Gibraltar moves ahead with world’s first initial coin offering rules

A picture taken on February 6, 2018 shows a person holding a visual representation of the digital crypto-currency Bitcoin. (AFP)
Updated 09 February 2018
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Gibraltar moves ahead with world’s first initial coin offering rules

LONDON: Gibraltar will introduce the world’s first regulations for initial coin offerings with dedicated rules for the cryptocurrency sector whose fast growth has triggered concern among central bankers.
They are worried about financial stability and protecting consumers but regulators have so far adopted a patchwork approach to ICOs, ranging from bans in China to applying existing securities rules in the United States.
This has created legal uncertainty for transactions that sometimes straddle many countries.
An ICO involves a company raising funds by offering investors tokens in return for their cash or cryptocurrency such as bitcoin, as opposed to obtaining shares in the company from a traditional offering.
Over $3.7 billion was raised through ICOs last year, up from less than 82 million euros in 2016, a leap that has rung alarm bells among central bankers as some firms rush to issue tokens before new rules are introduced.
Gibraltar’s government and Gibraltar Financial Services Commission (GFSC) said lawmakers will discuss a draft law in coming weeks to regulate the promotion, sale and distribution of tokens connected with the British overseas territory.
The GFSC said it would represent the first set of bespoke rules for tokens in the world.
“One of the key aspects of the token regulations is that we will be introducing the concept of regulating authorized sponsors who will be responsible for assuring compliance with disclosure and financial crime rules,” said Sian Jones, a senior adviser to the GFSC.
The regulation will establish disclosure rules that require adequate, accurate and balanced information to anyone buying tokens, the government and Financial Services Commission said in a joint statement.
Central bankers have lined up in recent weeks to call for cryptocurrencies and ICOs to be regulated, saying that while innovation in finance can bring benefits, consumers must be protected.
“Tokens could post substantial risks for investors and can be vulnerable to financial crime without appropriate measures,” the finance ministers and central bank governors of France and Germany said in a letter on Friday.
“In the longer run, potential risks in the field of financial stability may emerge as well,” said the letter calling on the Group of 20 economies (G20) to discuss cryptocurrencies at their next meeting.
Gibraltar’s move is being closely watched by regulators from across the world, including Britain and Singapore, who may come forward with their own rules.
Jay Clayton, head of the US Securities and Exchange Commission, said on Tuesday that tokens are securities and subject to the same investor protection rules as share offerings.
French markets watchdog AMF published a discussion paper last October on ICOs, but it has not yet said if it will push ahead with rules.
Gibraltar is looking to boost its thriving financial services industry beyond gaming after Britain, along with Gibraltar, leave the European Union in 2019.
It blazed a trail in January by introducing the world’s first bespoke license for “fintech” firms using the blockchain distributed ledger technology that underpins ICOs.
“We remain fully committed to ensuring that we protect consumers and the reputation of our jurisdiction,” said Albert Isola, Gibraltar’s commerce minister.
Gibraltar is also reviewing its rules for investment funds that involve cryptocurrencies and tokens.


Tesla seeks to dismiss securities fraud lawsuit

Updated 26 May 2018
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Tesla seeks to dismiss securities fraud lawsuit

  • Tesla insists it did not mislead shareholders about Model 3 dean.
  • Landmark electric vehicle has suffered several delays, worrying investors

Tesla on Friday asked a court to dismiss a securities fraud lawsuit by shareholders who said the electric vehicle maker gave false public statements about the progress of producing its new Model 3 sedan.
In a filing in federal court in San Francisco, Tesla said that its statements about the challenges the company faced with Model 3 were “frank and in plain language,” including repeated disclosures by Chief Executive Elon Musk of “production hell.”
Tesla did not seek to hide the truth, its motion to dismiss said.
The company says its Model 3 has experienced numerous “bottlenecks” from problems with Tesla’s battery module process at its Nevada Gigafactory to general assembly at its Fremont plant.
Tesla is under pressure to deliver the Model 3 to reap revenue and stem massive spending that has put Tesla’s finances in the red. The ramp of the Model 3, Tesla said in the court filing, was “the first of its kind,” with difficulties likely to crop up after it got underway.
The lawsuit filed last October seeks class action status for shareholders who bought Tesla stock between May 4, 2016 through October 6, 2017, inclusive. It said shareholders bought “artificially inflated” shares because Musk and other executives misled them with their statements.
Tesla made such statements during the lead-up to, and early production of, its Model 3 sedan and failed to disclose that the company was “woefully unprepared” for the vehicle’s production, the lawsuit said.
A hearing is scheduled for August.
The Tesla response chronicled disclosures of production bottlenecks the company faced in its third quarter of 2017 when it fell short of its targets.
Tesla’s statements that its Model 3 production was “on track” in May and August of 2017 — which plaintiffs argue were false — were made before production problems began to surface, Tesla argued.
Tesla said its “good faith belief” in the Model 3 program is reflected in everything it has done: a $4 billion investment, the build-out of its Gigafactory battery factory in Nevada and the high-volume equipment it commissioned. (Reporting By Alexandria Sage; Editing by Peter Henderson and Grant McCool)