ICO Ban for US Citizens: Why Americans Cannot Participate in ICO and Invest in Cryptocurrencies
Cryptocurrency ICOs become popular both among digital entrepreneurs who now can obtain startup funds more quickly and efficiently as well as among investors of all scale. Yet it appears that this opportunity is currently not available for US citizens.
There are many reasons why the country is limiting access to launching and participating ICOs for US taxpayers. One of them is that the government wants to prevent money losses by regular people who may not have skills or knowledge to do a thorough check on the startup, especially if it’s located abroad. US regulators want to allow the right to make significant financial decisions to vetted, certified investors and not the general public.
Another reason is that in the USA cryptocurrencies belong to the securities type of equity, and only certified investors have the right to trade or invest in them.
The U.S. is not the only country that bans its citizens from joining a cryptocurrency ICOs – Singapore has a similar policy. A lot of countries may follow the lead.
Using a VPN to Invest in ICO
Here’s what happens when a person from the USA wants to join the ICO. During the signup, they must explicitly notify whether or not they are US taxpayers. If they choose the option “yes”, they land on a page that says they cannot proceed. If they try to fool the ICO founders and proceed using VPN to cover their location, then ICO has a problem.
It is evident that at this stage potential investors have to follow the law and take the necessary steps to abandon the sign-up process. However, they can purchase tokens without restrictions at a later stage when the ICO has ended and tokens are available at full price.
This decision doesn’t make cryptocurrencies out of law in the United States. The country’s legislation has the same strict attitude to other types of investing activities. If an ICO doesn’t take steps to prevent Americans from joining the token sale, they must notify US authorities and potentially face all kinds of repercussions.
All of these teams who plan to raise funds with ICOs and market them to the USA should keep in mind this restriction. Although most ICOs do not ask for any kind of proof whether a potential investor is based in the US or not, it’s worth keeping in mind that the possibility of Americans to skip the limitations and join whitelists and pre-sales could also be done via virtual private networks (VPN). While it’s certainly in the interest of ICO managers to attract more funds and does not exclude the massive American market, the consequences of doing that are still unclear. In worst case scenario, the whole ICO can be deemed illegal and this could lead even to criminal charges. While it’s not guaranteed that American legislators will start investigating all ICOs, this cannot be ruled out.
It’s important for any ICO to take steps to notify US investors that they cannot participate in any step of the ICO from a whitelist to the actual sale. Not a single project would want to break the law in such a powerful country as the USA. What’s even worse, these fiscal government limitations also apply to all kinds of foreign companies and can be effectively enforced in the future.
While the global ICO market remains largely unregulated, it’s only a matter of time till financial authorities will start to take notice and punish companies who failed to do their “homework”, that is, due diligence. Even with all the hype, a cryptocurrency ICO market is still in its infancy and it’s reasonable positive changes in the future to be expected.