European Parliament’s Committee Drafts ICO Regulation Proposalby Jean-Armand Figeac August 20, 2018
The European Parliament Committee on EMA (Economic and Monetary Affairs) published last week a draft proposal mentioning the possibility to include Initial Coin Offerings in new crowdfunding regulation.
ICOs in the European Parliament’s MEP radar
After a legislative proposal drawn in March, it is now the turn for ICOs to be at the center of the EMA debate. Few days ago, a British Member of the European Parliament, Ashley Fox, drafted a report falling under the umbrella of the act entitled Legislative Proposal for an EU framework on crowd and peer to peer finance.
Although ICOs were warmly welcome by several jurisdictions such as Switzerland, Gibraltar and Malta, a clear lack of regulations and frameworks is still going on. Nevertheless, the proposal conducted under the supervision of the European Parliament member should further allow for “a competitive Union framework.” In fact, it may “enable crowdfunding service providers to raise capital through their own platforms via cryptocurrencies”.
In the draft published on the European Parliament website, we can read that:
“At present initial coin offerings are operating in an unregulated space and consumers are at risk from fraudulent activity taking place in this market. This Regulation gives the opportunity to ICOs that want to prove their legitimacy to comply with the requirements of this regulation.
Whilst this regulation may not provide the solution for regulating the ICO market, it takes a much-needed step towards imposing standards and protections in place for what is an excellent funding stream for tech start-ups”.
Need of token’s standards
These crowdfunding rules have been ongoing since 2017 and this amendment, including now ICOs alternatives, offer the opportunity to implement the first hint of tokens sales regulation at a European scale. Earlier this year in February, FINMA intended to apply financial market legislation in handling enquiries from ICO organisers. It seems now that regulation of this new financing mechanism reaches a higher sphere.
Obviously, the report does not forget to mention the potential risks of ICOs and cryptocurrencies as a whole. Even if the latter, “offer new and innovative ways of funding”, ICOs could also be used to “generate substantial market, fraud and cybersecurity risks to investors.”
In the Amendment 6 section, it can be noted that the regulation shall be applied to public sales raising an amount inferior than 8 million euros:
“…crowdfunding service providers that wish to offer an ICO through their platform, should comply with specific additional requirements under this Regulation. However, private placements, ICOs raising in excess of 8,000,000 [euros] or ICOs that do not use a counterparty do not fall within the scope of those requirements.”
These new signs of regulations should be warmly welcomed by the crypto community.
Indeed, few Swiss banks already closed the account of several crypto companies upon realizing that several key requirements were not applied. This improvement is vital in order to ensure that investments made by the general public and companies are not placed at risk.
Featured image via pixabay