On March 28 2018, in an effort to stop online fraud being carried out through its social networking service, Twitter began blocking all advertisements promoting Initial Token Offerings (ITOs).
ITOs also referred to as an Initial Coin Offerings (ICOs), are similar to Initial Public Offerings (IPOs), in that they are used to raise capital from investors. However, there are some major differences. An ITO/ICO is typically open for a set period, during which investors can visit a website to purchase coins/tokens in exchange for fiat currency or a cryptocurrency such as Bitcoin or Ethereum. The structures of ITOs/ICOs will vary, and they may be used to raise capital for a variety of projects. Anyone with internet access can create or invest in an ITO/ICO; in many cases, they can do so anonymously.
The very nature of ITOs/ICOs has left potential investors open to the risk of online fraud. Twitter had previously identified the issue and had promised to crack down on users or bot accounts seeking cryptocurrencies from other users of the social networking site. The ban extends to all ads related to ITOs/ICOs, token sales, exchanges, and wallet services but excludes public companies listed on major stock markets.
Twitter’s move follows earlier similar announcements by Facebook to ban cryptocurrency advertising on its social networking site and by Google to restrict certain forms of cryptocurrency-related advertising.
This move has come in the wake of stepped-up efforts by regulators such as the Canadian Securities Administrators (CSA) to monitor and regulate cryptocurrencies and ITOs/ICOs.
For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.
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