일감법학┃제45호

Ilkam Law Review

2020년 2월 31-50쪽
건국대학교 법학연구소

Vol.45, Feb., 2020. pp.31-50
The Institute of Legal Studies, Konkuk Univ.

Prescriptive Jurisdiction in Securities Regulations:
Transformation from the ICO (Initial Coin Offering) to the STO(Security Token Offering) and the IEO (Initial Exchange Offering)*

43)

Koji Takahashi**

44)

목 차
Ⅰ. Introduction
Ⅱ. Principles underpinning prescriptive
jurisdiction
Ⅲ. Tests for operation of territoriality
principle
Ⅳ. Impact of the Internet
Ⅴ. Blockchain: From cross-border toborderless fundraising

Ⅵ. Creeping regulations
Ⅶ. Fragmentation of regulatory regimes
Ⅷ. Shrinking ICO
Ⅸ. The last straw?
Ⅹ. Shift to the STO
Ⅺ. Shift to the IEO
Ⅻ. Postscript이 글은 미국이 증권 규제에서 규범적 관할권을 주장함에 따라 ICO (가상화폐공개)가
어떤 영향을 받았는지를 살펴보고, ICO의 대안으로 STO (암호화폐공개)와 IEO(가상화페대행공개)를 분석한다. 이 분석은 기초원칙과 같이 규범적 관할권을 뒷받침하는 원칙을 검토하는 것으로 시작한다. 그런 다음 기초원칙의 운용을 지원하는 세 가지 테스트인 시행 테스트, 효과 테스트, 거래 테스트를 검토한다. 다음으로 인터넷이 국경을 넘나드는 투자유치를 용이하게 하는데 미치는 영향을 검토한다. 인터넷이 투자유치에 이용되는 경우 효과 테스트의 해석방법에 대하여 분석한다. 최근에는 블록체인 기술이 ICO를 탄생시켰다. 블록체인 기술은 ICO의 초기 인기에 기여한 특징인 국경 없는 투자유치를 가능하게 했다. ICO
는 기술적으로 국경이 없지만 법적으로는 그렇지 않다. 이 글은 요점을 설명하기 위해 앞서
DOI: 10.35148/ilsilr.2020..45.31
투고일: 2020. 1. 2. / 심사의뢰일: 2020. 1. 28. / 게재확정일: 2020. 2. 6.
* This article is based on my paper presented at the conference “Recent Issues on Virtual Currency in the Financial
Market” held at the Konkuk University on 13 December 2019. I am grateful to Profs. Kim, Byoung-Youn andKwon, Jong-Ho for their invitation. I also wish to record my gratitude to Mr. Sadakazu Osaki (Nomura ResearchInstitute) and Mr. Ken Kawai (Anderson Mori & Tomotsune) for their insights which assisted me in writing thisarticle.
** Professor, Doshisha University Law School, Japan32일감법학 제 45 호언급한 세 가지 테스트를 ICO에 적용하는 방법을 검토한다. 분열된 규제 체제에 의해 국경이 없는 ICO의 특징이 약화되면서 ICO는 최근 인기를 잃었다. 이 글은 STO와 IEO를 분석하여 ICO와 어떻게 다른지, 세분화된 규제 제도에 더 잘 맞는지 여부를 확인함으로써 결론을내린다.
[주제어] 규제조치결정, 증권시장, 개인적 원칙, 영역성 원칙, 행위 기준, 영향 기준, 거래조사,모리슨 v. 오스트리아 국립은행, 블록체인, SEC v. W.J. Howey, ICO(가상화폐공개),STO(암호화폐공개), IEO(가상화폐대행공개)Ⅰ. Introduction
The ICO (Initial Coin Offering) was in vogue in the years 2016-2018 but virtually dieddown in 2019. Instead, the STO (Security Token Offering) and the IEO (Initial Exchange
Offering) have begun to surge. Behind this shift is the States’ assertion of their prescriptive
jurisdiction in securities regulations.
Prescriptive jurisdiction refers to the geographical reach of the competence of a State toregulate issues involving international elements through its courts or regulators. In the caseof the S.S. “Lotus,”1) the Permanent Court of International Justice held:“Far from laying down a general prohibition to the effect that States may not extend theapplication of their laws and the jurisdiction of their courts to persons, property and acts
outside their territory, [international law] leaves them in this respect a wide measure of
discretion which is only limited in certain cases by prohibitive rules; as regards other cases,
every State remains free to adopt the principles which it regards as best and most suitable.”Given the broad discretion that international law grants each State, it would be worth
examining the actual practice of the States. The practice of the United States is, in viewof its global influence, the main focus of this article. It is reflected in the case law andthe statements made by the Securities and Exchange Commission (SEC).

1) PCIJ, Series A. No.10 (1927) p. 19.

Prescriptive Jurisdiction in Securities Regulations

Ⅱ. Principles underpinning prescriptive jurisdiction
Prescriptive jurisdiction is underpinned by various principles such as the universality
principle, the protective principle, the personality principle and the territoriality principle. The
relevance of each principle depends on the areas of law.
In the field of securities law, the personality principle used to be accepted in the UnitedStates. According to this principle, a State has prescriptive jurisdiction over its citizens or
nationals. In the Release 47082) published in 1964, the SEC stated the policy of protecting
the American nationals worldwide as follows:“… the Commission has not taken any action for failure to register securities of UnitedStates corporations distributed abroad to foreign nationals …. On the other hand, … a public
offering specifically directed toward American nationals abroad … would be regarded as
subject to registration.”

The SEC signaled the change of this policy in 1990 when it issued the Release 68633)
in conjunction with the Regulation S.4) In the Release, the SEC confirmed the departurefrom the personality principle in the following terms (Emphasis added):“The Regulation adopted today is based on a territorial approach to section 5 of the
Securities Act. The registration of securities is intended to protect the U.S. capital markets
and investors purchasing in the U.S. market, whether U.S. or foreign nationals.”

As stated there, the Regulation is based on the territoriality principle. It is reflected in
Section 901, which provides:“For the purposes only of section 5 of the [Securities Act], the terms offer, offer to sell,
sell, sale, and offer to buy shall be deemed to include offers and sales that occur within
2) Securities and Exchange Commission, “Registration of Foreign Offerings by Domestic Issuers” Securities Act Release
No. 4708 (1964).
3) Securities and Exchange Commission, “Offshore Offers and Sales” Release No. 33-6863 (1990).
4) “Rules Governing Offers and Sales Made Outside the United States Without Registration Under the Securities
Act of 1933” (17 CFR 230) (1990).

33

34

일감법학 제 45 호

the United States and shall be deemed not to include offers and sales that occur outside
the United States.”

As exemplified by this provision, the territoriality principle has long been serving as thecornerstone for the prescriptive jurisdiction in securities regulations. This principle, however,requires an elaboration on what needs to take place in the territory. For that purpose, various
tests have been developed such as the conduct test, the effects test and the transactional
tests.

Ⅲ. Tests for operation of territoriality principle
1. Conduct test
The conduct test allows a State to assert prescriptive jurisdiction on the basis that theplace of the relevant conduct is in the territory of that State. Under this test, a solicitationof investment would be subject to the regulations of the State where the conduct of solicitation
takes place. The conduct test is widely adopted as the most basic test for the operation of
the territoriality principle. Thus, in the United States, it is reflected in, for example, the Release
27017,5) in which the SEC stated:“… all broker-dealers physically operating within the United States that effect, induce,or attempt to induce any securities transactions would be required to register as broker-dealerswith the Commission, even if these activities were directed only to foreign investors outside
the United States.”

2. Effects test
The effects test allows a State to assert prescriptive jurisdiction on the basis that the place5) Securities and Exchange Commission, “Registration Requirements for Foreign Broker-Dealers,” Release No. 34-27017(1989).

Prescriptive Jurisdiction in Securities Regulationsof the effects of the relevant conduct is in the territory of that State. Under this test, a solicitationof investment would be subject to the regulations of the State where the investors receive
the solicitation. Where the conduct of solicitation takes place in another State, the applicationof regulations in such circumstances is sometimes described as extra-territorial applicationfrom the viewpoint which assimilates the territoriality principle with the conduct test. In thisarticle, we take the viewpoint which sees the territoriality principle as a broader principle
having its basis in the occurrence of various events such as the conduct, the effects of the
conduct and the transaction. The effects test could then be treated as one of the tests – alongwith the conduct test and transactional test - for the operation of the territoriality principle.
Like the conduct test, the effects test is widely adopted since it has a good rationale behind
it: it allows the regulators to safeguard the interests sought to be protected by the regulations.
In the United States, the acceptance of the two tests is reflected in, for example, section
27 of the Securities Exchange Act 1934.6) It provides:(b) EXTRATERRITORIAL JURISDICTION.—The district courts of the United States …
shall have jurisdiction of an action or proceeding brought or instituted by the Commission
or the United States alleging a violation of the antifraud provisions of this title involving—(1) conduct within the United States that constitutes significant steps in furtherance ofthe violation, even if the securities transaction occurs outside the United States and involves
only foreign investors; or(2) conduct occurring outside the United States that has a foreseeable substantial effectwithin the United States.

The effects test is reflected in sub-paragraph (2) while the conduct test in sub-paragraph(1). As indicated by this provision, the two tests are not mutually exclusive and may bothbe simultaneously adopted.

6) Similar provisions are to be found in section 22(c) of the Securities Act 1933 and section 214(b) of the Investment
Advisers Act 1940.

35

36

일감법학 제 45 호

3. Transactional test
The transactional test allows a State to assert prescriptive jurisdiction on the basis thatthe place of transaction is in the territory of that State. Under this test, a solicitation of
investment would be subject to the regulations of the State where the transaction inducedby the solicitation takes place.
This test was established in the United States by the Supreme Court’s judgment in the
Morrison case7) in 2010. The Court denied the conduct test and the effects test by relying
on a literal reading of the relevant provision (Section 10(b)) of the Securities Exchange Act
1934 and held that the provision was only applicable to “transactions in securities listed on
domestic exchanges and domestic transactions in other securities.” This test is, however, notimmune from criticisms. Thus, it has been said:8)“By ignoring the fraud’s genesis or effect and focusing instead on the technical transaction,
Morrison creates not just an easy escape for foreign fraudsters, but an open invitation: Cometo the United States to commit securities fraud and feel free to negatively impact the UnitedStates with that fraud – so long as you don’t list your securities on an American exchange,
you may never have to repay any of the investors you victimized.”

Today, the transactional test only retains validity with respect to the private right of action.
With respect to public enforcement, the conduct test and the effects test have been re-introducedby the insertion of section 27, examined above, into the Securities Exchange Act 1934. Outside
the United States, the transactional test does not appear to have been widely adopted.

Ⅳ. Impact of the Internet
The emergence of the Internet has greatly facilitated the cross-border solicitation of7) Morrison v. National Australia Bank, 130 S.Ct. 2869 (2010).
8) Staff of the Securities and Exchange Commission, “Study on the Cross-Border Scope of the Private Right of Action
Under Section 10(b) of the Securities Exchange Act of 1934” (2012) pp. iv, 48, 51.

Prescriptive Jurisdiction in Securities Regulations

investment. To be sure, it is not impossible to make a cross-border solicitation with thetraditional media such as telephone and fax but the targeted States would have to bepre-determined. Where, on the other hand, the Internet is used, a web page may be viewed
from anywhere in the world. It has, however, necessitated elaboration on where the effects
of solicitation are deemed to take place under the effects test. In this regard, the SEC statedin its Release9) in 1998:

When offerors implement adequate measures to prevent U.S. persons from participating
in an offshore Internet offer, we would not view the offer as targeted at the United States
and thus would not treat it as occurring in the United States for registration purposes.
What constitutes adequate measures will depend on all the facts and circumstances ofany particular situation. We generally would not consider an offshore Internet offer madeby a non-U.S. offeror as targeted at the United States, however, if:
The Web site includes a prominent disclaimer making it clear that the offer is directed
only to countries other than the United States. … andThe Web site offeror implements procedures that are reasonably designed to guard against
sales to U.S. persons in the offshore offering.

According to this statement, the SEC treats an offshore internet offer targeted at the UnitedStates as occurring in the United States. And unless the web site offeror implements procedures“reasonably designed to guard against sales to U.S. persons,” an offshore Internet offer may
be considered to be targeted at the United States.

Ⅴ. Blockchain: From cross-border to borderless fundraising
The blockchain technology was invented to create the Bitcoin cryptocurrency around 2009.
It also gave birth to a new fundraising method in the style of ICO. In the ICO, the enterprisereceives contributions from the investors in fiat or crypto currencies. In consideration, the9) Securities and Exchange Commission, “Re: Use of Internet Web Sites To Offer Securities, Solicit Securities
Transactions, or Advertise Investment Services Offshore,” International Series Release No. 1125 (1998).

37

38

일감법학 제 45 호enterprise issues tokens on a blockchain with a contractual undertaking to provide dividends
or certain services to the holder of the tokens. The investors may trade the tokens on theblockchain on a peer-to-peer basis or on an exchange such as a crypto-currency exchange.
While the Internet has facilitated cross-border fundraising, the blockchain technology has
enabled borderless fundraising: the contributions to the enterprise may be made in statelesscrypto-currencies through a borderless network; and in return, the ICO tokens, which arealso stateless, are issued on a borderless network. With its ability to seamlessly raise funds
from around the world, the ICO has seen an explosive growth in number and size in theyears 2016-2017.

Borderless fundraising (ICO)
Bord erless n etw ork
Fiatcurrency

stateless
Cryptocurrency

stateless
Cryptocurrency

Fiatcurrency(1) Contribution(2) Issuancestateless(3) Tradingstateless(Exchange)

Investors
w orld w id eEnterprise

Traders
w orld w id e

TokensTokensⅥ. Creeping regulations
The growth of the ICO brought with it rampant fraudulent activities, which attracted theattention of regulators around the world. In order to protect investors, some States banned
the ICO altogether,10) while others began to consider that securities regulations were applicableto certain types of ICO tokens.
The first step in this direction was taken by the SEC in its 2017 report on The DAO,11)10) e.g. South Korea (2017) and China (2017).

Prescriptive Jurisdiction in Securities Regulations

a high profile ICO case. In the report, the SEC stated, “[b]ecause DAO Tokens were securities,
The DAO was required to register the offer and sale of DAO Tokens, unless a valid exemption
from such registration applied.” The SEC found that the DAO Tokens were securities because
they fell into the category of “investment contract” as defined by the Supreme Court in SEC
v. W.J. Howey.12) This report was followed by a statement of the SEC Chairman in thesame year,13) in which he stated, “[b]y and large, the structures of initial coin offerings that
I have seen promoted involve the offer and sale of securities and directly implicate the securities
registration requirements and other investor protection provisions of our federal securities
laws.”
Other States also came to regard certain types of ICO tokens as securities. The Swiss
regulator, for example, classified the tokens into three types: payment tokens, utility tokens,and asset tokens and opined that the latter two could be treated as securities under certain
conditions.14)

Ⅶ. Fragmentation of regulatory regimes
Between different States, there is no uniformity in the securities regulations or the way
they are to be applied to the ICO. It follows that while the blockchain has technologicallyenabled borderless fundraising, the ICO cannot legally be borderless. We will consider below
the impact of the States’ assertion of prescriptive jurisdiction in securities regulations byexamining how the three tests – the conduct test, the effects test and the transactional test
- may be applied in the ICO.

11) Securities and Exchange Commission, “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange
Act of 1934: The DAO” Release No. 81207 (July, 2017).
12) 328 U.S. 293 (1946).
13) Jay Clayton, “Statement on Cryptocurrencies and Initial Coin Offerings” (December, 2017).
14) FINMA (Swiss Financial Market Supervisory Authority), “Guidelines for enquiries regarding the regulatory framework
for initial coin offerings (ICOs)” 16 February 2018.

39

40

일감법학 제 45 호

1. Conduct test
As noted earlier in this article, under the conduct test, a solicitation of investment would
be subject to the regulations of the State where the conduct of solicitation takes place. In
the ICO, investment is often solicited online using, for example, social media, chat rooms,
and bulletin boards. But applying the conduct test to the ICO would not give rise to difficulty
because the conduct of posting messages takes place in the real, physical world and hence
can be localized in a specific State.
The possibility that States may assert prescriptive jurisdiction under the conduct test led
the enterprises wishing to raise funds through the ICO to locate themselves in the States
whose regulations were perceived to be hospitable.15) One of such States is Malta whose
legislation, the Virtual Financial Assets Act 2018, is applicable under the conduct test, as
so indicated by the following provision (Emphasis added):

3. (1) No issuer shall offer a virtual financial asset to the public in or from within Malta… unless such issuer draws up a whitepaper which …

2. Effects test
As noted earlier in this article, under the effects test, a solicitation of investment would
be subject to the regulations of the State where the investors receive the solicitation. Wherethe Internet is used to make a cross-border solicitation, the effects of the solicitation may
be considered to occur in the United States unless procedures “reasonably designed to guard
against sales to U.S. persons”16) are implemented.
In those respects, the ICO would be no different from the traditional type of securities.
Thus, in the seminal DAO report,17) the SEC noted, “[d]uring the Offering Period, The DAO
offered and sold DAO Tokens in exchange for ETH through The DAO Website, which was15) For example, a group company of the Korean company Hyundai organized an ICO in 2017 in cooperation with
Hdac, a Swiss based company.
16) International Series Release No. 1125 (1998), supra note 9.
17) Release No. 81207, supra note 11.

Prescriptive Jurisdiction in Securities Regulations

publicly-accessible, including to individuals in the United States.” This statement has led
some ICO token issuers to block U.S.-based IP addresses18) from accessing their web page19)
in order to avoid being captured by the U.S. regulations.

Not legally borderlessFiatcurrency

Cryptocurrency(1) Contribution(2) Issuance

Investors
w orldw ide(sa veexclu d ed
Sta tes)(3) Trading

Fiatcurrency(Exchange)

Enterprisesu b ject toth e loca lreg u la tion s

Cryptocurrency

Traders

TokensTokens

3. Transactional test
As noted earlier in this article, under the transactional test, a solicitation of investment
would be subject to the regulations of the State where the transaction induced by the solicitation
takes place. The application of this test to the ICO would give rise to difficulty because
the ICO tokens are issued and traded on a borderless network, which makes it difficult to
localize the place of transaction in a specific State.

Pla ce of tra n sa ction
Fiatcurrency

Cryptocurrency

Cryptocurrency

Fiatcurrency(1) Contribution
Investors(3) Trading(2) Issuance(Exchange)

Enterprise

Traders

TokensTokens18) These are the numbers allocated to the devices connected to the Internet.
19) e.g. the ICO by block.one, as noted in the Securities and Exchange Commission, “Order Instituting Cease-And-Desist
Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-And-Desist
Order” Administrative Release No. 10714 (September 30, 2019).

41

42

일감법학 제 45 호This difficulty surfaced in the case of Re Tezos.20) In this case, the plaintiff, a residentof Illinois, who had contributed the cryptocurrency Ether in an ICO scheme brought a classaction lawsuit against the defendants who had orchestrated the ICO, alleging the violationof the Securities Exchange Act 1934.
It was stated in the contribution terms that the creation and allocation of the ICO tokens
in this case was considered to be executed in the Channel Islands. The Federal District Courtof California, however, denied the significance of the contribution terms. This portion of
the judgement seems well founded since the applicability of regulations ought not to be
determined by the regulated actors by way of fixing the terms.
Seeking to identify the actual place of transaction, the court asked itself, “where does
an unregistered security, purchased … and recorded ‘on the blockchain,’ actually take place?”.
It took into consideration various factors and found that the transaction took place in the
United States. These included the use of a website hosted on a server in Arizona and run
in California, the fact that marketing was mainly targeted at the U.S. residents and the factthat the nodes validating the contribution of Ethers were clustered densely in the UnitedStates. Whether all these factors are truly relevant to determining the place of transaction
is doubtful but they underscore the difficulty of applying the transactional test to the ICO.
This judgement also demonstrated the breadth of the U.S. prescriptive jurisdiction. The
ICO in this case was overseen by a Swiss foundation which also had control of the proceeds.
Though this factor could have disturbed the conclusion that the place of transaction wasin the United States, the court paid no regard to them. Among the factors taken into
consideration was the presence in the United States of a large cluster of the nodes of Ethereum,
the most popular blockchain network for issuing ICO tokens. If this factor is given weight,
the place of transaction of many other ICOs would also be found to be in the United States.

Ⅷ. Shrinking ICO
The fragmentation of regulatory regimes21) has deprived the ICO of its capability to20) In Re Tezos (2018 WL 4293341), the U.S. District Court for the Northern District of California.

Prescriptive Jurisdiction in Securities Regulations

seamlessly raise funds from around the world, which was initially a major appeal of the
ICO. In addition, the uncertainty as to, and apparent breadth of, the U.S. jurisdiction to prescribe
its regulations under the transactional test would have had a chilling effect. All this musthave contributed to the massive decline in the number of ICOs witnessed in the years
2018-2019.

Ⅸ. The last straw?
In the circumstances, the SEC’s Release issued in September 201922) may become thelast straw on the ICO’s back. Finding that Block.one, a Cayman Islands-registered company,
had violated the U.S. Securities Act 1933, the SEC stated:“10. Block.one launched the EOS.IO Website …. Block.one subsequently sold anddistributed the ERC-20 Tokens directly through the EOS.IO Website in exchange for Ether.
The EOS.IO Website included certain measures intended to block U.S.-based purchasers from21) For a proposal to overhaul the global regulatory regime, see Matthias Lehmann, “Global Rules for a Global Market
Place? – The Regulation and Supervision of FinTech Providers” (forthcoming in (2019) 37 Boston University
International Law Journal).
22) Administrative Release No. 10714, supra note 19.

43

44

일감법학 제 45 호

buying ERC-20 Tokens, including by blocking U.S.-based IP addresses from accessing the
EOS.IO Website token sale page. In addition, Block.one required all ERC-20 Token purchasers
to agree to the Token Purchase Agreement, which included provisions that U.S. persons wereprohibited from purchasing ERC-20 Tokens, and that any purchase by a U.S. person was
unlawful and rendered the purchase agreement null and void. Block.one did not, however,ascertain from purchasers whether they were in fact U.S.-based persons, and a number of
U.S.-based persons purchased ERC-20 Tokens directly through the EOS.IO Website.”On that finding, the SEC concluded that neither blocking the U.S.-based IP addresses23)
nor excluding the U.S.-based investors in the contribution terms was sufficient to insulate
the ICO from the U.S. regulations. In this way, the SEC has set a high hurdle to carveout the U.S.-based investors: it would now be necessary to check individually where each
investor is based. Consequently, the approach of maintaining the worldwide scope offundraising while only excluding the U.S.-based investors has become much less viable.

Ⅹ. Shift to the STO
A way forward in these circumstances would be the STO (security token offering), an
approach which targets the investors of a specific State with a conscious effort to comply
with the regulations of that State. This is opposite to the approach of the ICO, which is
to target the investors worldwide save specific States. Since the STO is not a borderlessfundraising, it is in that sense no different from the fundraising with traditional securities.
The STO, however, has its distinct appeal. Owing to the use of blockchain, the enterprises
would enjoy the saving of time and costs for issuing and managing securities and the investors
would benefit from the ease of access to a liquid market around the clock.
In the Release of September 2019,24) the SEC made another remark which may accelerate
the shift to the STO. To fortify the justification for applying the U.S. regulations to the23) An IP address can be faked with the use of the VPN (Virtual Private Network), a method of constructing a private
network on the Internet by means of encryption.
24) Administrative Release No. 10714, supra note 19.

Prescriptive Jurisdiction in Securities Regulations

Block.one’s ICO, the SEC stated:“12. … Block.one did not take any steps to prevent the ERC-20 Tokens from being
immediately resellable to U.S.-based purchasers in secondary market trades.”STO
Con trol of secon d a ry m a rk etFiatcurrency

Cryptocurrency(1) Contribution

Investorsof ata rg eted
Sta te(3) Trading(2) IssuanceFiatcurrency(Exchange)

Enterprise

Cryptocurrency

Tradersof ata rg eted
Sta teTokensTokensThis remark may be taken to require an effective control of distribution on the secondary
market. Curbing the possible flowback to the U.S. market in the secondary trading has long
been a regulatory concern with the traditional securities.25) The blockchain technology, which
has made it possible to issue programable tokens, has opened the door to an effective control
of distribution on the secondary market. It is interesting in this respect that some STO standards
are being developed,26) which may make such control possible.

Ⅺ. Shift to the IEO
The IEO (Initial Exchange Offering) differs from the typical ICO in that the tokens areissued on an exchange rather than to the investors directly. Like the traditional securities
25) As reflected in the conditions set out in Section 903(b) of the Regulation S, supra note 4.
26) e.g. ERC 1400 (an umbrella standard) and ERC 884 (for compliance with the Delaware regulations).

45

46

일감법학 제 45 호in the IPO (Initial Public Offering), the tokens in the IEO would be vetted by the exchange.
The secondary trading could be either on an exchange or on a peer-to-peer basis. The IEO
is not a mutually exclusive concept to the STO and may be combined with the latter.
The merit of the IEO from the viewpoint of prescriptive jurisdiction is that it would introduce
clarity on how the transactional test would be applied. As seen above, identifying the placeof transaction is difficult in the ICO where the tokens are issued directly to the investors.
Where, on the other hand, the tokens are issued on an exchange, it would be easy to identify
the place of transaction. According to the SEC,27) an online platform trading tokens must
be registered as a national securities exchange or an ATS (Alternative Trading System). It
follows that the IEO tokens issued on a U.S. registered exchange would be subject to the
U.S. regulations under the transactional test.

IEO and transactional test
Pla ce of tran saction

Fiatcurrency

Cryptocurrency

Cryptocurrency

Fiatcurrency(1) Contribution
Investors(3) Trading(2) Issuance(Exch an g e)

Exch an g eEnterprise

Traders

TokensTokensⅫ. Postscript
In this article, we have focused on the regulatory aspects of the ICO, the STO and the
IEO. For these new forms of fundraising to blossom, it is also necessary to clarify their27) Securities and Exchange Commission (Divisions of Enforcement and Trading and Markets), “Statement on Potentially
Unlawful Online Platforms for Trading Digital Assets” (2018).

Prescriptive Jurisdiction in Securities Regulationsprivate-law aspects. In particular, the question of who is the rightful holder of theblockchain-based tokens would need to be addressed28) where, for example, the tokens havebeen stolen by hacking.

28) See e.g. Koji Takahashi, “Implications of Blockchain Technology for the UNCITRAL Works” in the United Nations
Commission on International Trade Law (ed.) Modernizing International Trade Law to Support Innovation andSustainable Development (2017) 81, 87.

47

48

일감법학 제 45 호

References
1. 단행본
大崎貞和, ネット証券取引, 日本経済新聞社、2000.
2. 학술지
青木浩子, “証券取引の国際化にともなう各国証券開示規制の展開（二）”, 法学協会雑誌 115巻8号, 有斐閣, 1998, 1084-1115頁.
大崎貞和, “インターネットの利用に関する米国SEC の解釈通達”, 資本市場クォータリー, 野村総合研究所資本市場研究室, 1998年春号, 100-109頁.
高橋宏司, “証券関係法規の規律管轄権とICO (Initial Coin Offering)”, 国際法外交雑誌
117巻 4号, 国際法学会, 2019, 693-717頁.
龍田節, “証券取引法の域外適用”, 日本国際経済法学会年報 2号, 日本国際経済法学会,
1993, 335-346頁.
藤澤尚江, “証券取引における民事責任と法の適用関係”, 筑波ロー・ジャーナル 20号,
筑波ロー・ジャーナル編集委員会, 2016, 173-204頁.
不破茂, “証券取引規制における民事責任規定の国際的適用”, 国際商取引学会年報 13号,
国際商取引学会, 2011, 187-204頁.
松尾直彦, “金融商品取引法の国際的適用範囲”, 東京大学法科大学院ローレビュー 6号,
東京大学法科大学院ローレビュー編集委員会, 2011, 276-286頁.
森下国彦, “金融関連法令の国際的適用範囲”, ジュリスト 1232号, 有斐閣, 2002, 119-125頁.
八木俊則, “金融規制法のクロスボーダー適用に関する試論”, 資本市場 303号, 資本市場研究会, 2010, 16-35頁.
John Birkenheier & George Vasios, “The Application of Morrison in an Era of Electronic
Trading and Increasingly Global Markets”, Journal of Business & Securities Law,
Vol. 15, Michigan State University College of Law, 2015, pp. 53-107.

Prescriptive Jurisdiction in Securities Regulations

Stephen Choi & Linda Silberman, “Transnational Litigation and Global Securities Class-Action
Lawsuits”, Wisconsin Law Review, University of Wisconsin Law School, 2009, pp.
465-490.
Sôichirô Kozuka, “Trading Securities over the Internet: Recent Developments in Japanese
Securities Regulation”, Die Zeitschrift fûr Japanisches Recht, Vol. 7, No. 14,
Deutsch-Japanische uristenvereinigung e.V, 2002, pp. 79-87.
Matthias Lehmann, “Prospectus liability and private international law”, Journal of Private
International Law, Vol. 12, No. 2, Inderscience Publishers, 2016, pp. 318-335.
Wolf-Georg Ringe & Alexander Hellgardt, “The International Dimension of Issuer Liability—
Liability and Choice of Law from a Transatlantic Perspective”, Oxford Journal of
Legal Studies Vol. 31 No. 1, Oxford University Press, 2011, pp. 23-38.
Samuel Wolff, “Offshore Distributions under the Securities Act of 1933: An Analysis ofRegulation S”, Law and Policy in International Business Vol. 23, Georgetown University Law
Center, 1992, pp. 101-113.
3. 기타
大崎貞和, ｢米国SECの仮想通貨規制への実務家の対応｣, 2018, <http://fis.nri.co.jp/ja-JP/
knowledge/commentary/2018/20180730_2.html>, 검색일: 2019.12.30.
金融法委員会, ｢金融関連法令のクロスボーダー適用に関する中間論点整理｣, (2002年),<http://www.flb.gr.jp/jdoc/publication11-j.pdf>, 검색일: 2019.12.30.
龍田節, “国際的な証券取引の法的規制”, 龍田節・森本滋編, 商法・経済法の諸問題, 商事法務研究会、1994.
Linda Quinn (Director of the Division of Corporation Finance), “Redefining ‘Public Offeringor Distribution’ for Today”, Address to Federal Regulation of Securities Committee
Annual Fall Meeting (November 22, 1986) SEC News Release, U. S. securities andExchange Commission, 1986, pp. 1-11.

49

50

일감법학 제 45 호

[ Abstract ]Prescriptive Jurisdiction in Securities Regulations:
Transformation from the ICO (Initial Coin Offering) to the STO(Security Token Offering) and the IEO (Initial Exchange Offering)
Koji Takahashi*

29)This article examines how the ICO (Initial Coin Offering) has been impacted by the States’
assertion of prescriptive jurisdiction in securities regulations and analyze the STO (Security
Token Offering) and the IEO (Initial Exchange Offering) as alternatives to the ICO. The
analysis begins with examining the principles underpinning prescriptive jurisdiction such as,
in particular, the territoriality principle. It then proceeds to examine the three tests – theconduct test, the effects test and the transactional test - which support the operation of theterritoriality principle. Attention is then turned to the impact of the Internet which has facilitatedcross-border fundraising. An analysis is given to the way the effects test is interpreted where
the Internet is used for the solicitation of investment. More recently, the blockchain technology
has given birth to the ICO. It has enabled borderless fundraising, a feature which contributed
to the initial popularity of the ICO. While the ICO is technologically borderless, it is legally
not so. To illustrate the point, the article examines the way the aforementioned three tests
are to be applied in the ICO. With its borderless feature undermined by the fragmented
regulatory regimes, the ICO has lately lost popularity. The article concludes by examining
the STO and the IEO to see how they differ from the ICO and fit better with the fragmented
regulatory regimes.
[Key Words] prescriptive jurisdiction, securities regulation, personality principle, territoriality
principle, conduct test, effects test, transactional test, Morrison v. National Australia
Bank, blockchain, SEC v. W.J. Howey, ICO (Initial Coin Offering), STO (Security
Token Offering), IEO (Initial Exchange Offering)** Professor, Doshisha University Law School, Japan