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Hong Kong regulator closes the OIC of the "black cell"

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The Securities and Futures Commission of Hong Kong, the country's securities regulator, decided close an initial offer of parts (ICO) citing "potential unauthorized promotional activities and unauthorized regulated activities".

Black Cell Technology was forced to stop its initial offer of coins by the regulatory body. The project complied with the official verdict by ending the symbolic sale, and investors were informed that their cryptocurrency would be returned.

The project proposed to use investors' funds for the development of their application, the token holders promising actions in return. It's this feature that has alerted the regulator, who has classified the token as security. The official statement from the agency indicated that the ICO has a "unlicensed regulatory activity", with collective investment schemes required to register and comply with official regulations. While the SFC has already issued warnings to companies, today's news is the first response to close an ICO in Hong Kong.

Black Cell Technology is developing a mobile food market called Krops, which they believe will simplify the activities of farmers and buyers. However, it is unclear how the project will unfold, with the regulatory bodies that crack down on ICOs. Previously, projects launched through initial offers of coins had to restrict access to investors from hostile countries to the economic model. In particular, the US Securities and Exchange Commission (SEC) has cracked down on ICO's activities by conducting detailed investigations. Some projects have received subpoenas, and those who have just entered the ICO stage are eager to stay away from potential investigations. China has been even stronger by imposing a blanket ban on all country offices in the country.

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While the development in Hong Kong took a surprise, the action of Hong Kong's SFC did not come out of nowhere. Last month, the regulator issued a warning to cryptocurrency trading platforms for not getting involved with chips that could be perceived as securities. The body has consistently expanded its approach, pointing to a potential action as early as September of last year when a statement was released that some cryptocurrency platforms held features that could classify them as headlines.

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Black Cell was probably particularly targeted because their token specifically referred to a return for token holders. It was a move that clearly marked the token as a potential security. However, other projects were more ambiguous in their approach and avoided direct regulatory intervention. But with the authorities clarifying their approach to ICOs, it remains to be seen how long this freedom will continue.

Hong Kong image of Shutterstock.

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