The Israel Securities Authority (ISA) recently ruled that utility tokens issued by companies are securities and therefore cannot be classified as assets. The ISA’s decision comes after Israeli tech startup Kirobo tried to convince regulators that the planned token issuance did not amount to a security offering.
Growth of token value
In response to Kirobo’s claims, the ISA published a position paper explaining why the planned token offering should “be subject to Israeli securities regulation”. By putting Kirobo’s averages aside, the ISA insists that “the tokens should be considered securities, either because of the risk of holding them or because of buyers’ expectations of a short or long-term return. term to receive. “
The regulator also highlights an important aspect of Kirobo’s proposal, which appears to undermine utility token claims. In the position paper, the ISA reveals that “Kirobo’s plans to hold 0.8% of the tokens indicate it plans to increase the value of the tokens.” The regulator adds:
Chances are, there are investors who will buy the token for financial purposes and expect its value to rise, which is characteristic of securities investment.
Regulators moving to regulate cryptos
Meanwhile, the rest of the report, which does not reveal how the tech startup responded to the ruling, implies that the ISA’s stance is similar to that of the US against Ripple’s token. By the end of 2020, regulators in the United States said the issuance of the XRP token violated the US Securities Act. The SEC has now launched $ 1.3 billion lawsuit against Ripple and its executives for these alleged violations.
In the meantime, the report explains that the decisions of the two countries came at a time when “financial regulators are still assessing how to regulate cryptocurrencies such as bitcoin and its rivals.” The report ends by suggesting that “future legal battles could determine whether cryptocurrencies make the leap from a niche to a general asset.”
What exactly should be referred to as a utility or security token? You can give us your thoughts in the comments section.
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