The EU Parliament’s The All-Party Innovation Group of has drafted a proposal to examine potential new rules that would bring ICOs within the scope of an EU-wide crowdfunding regulation that is currently being drafted. If the European Parliament green lights the proposal, this would mean a common EU-wide regulation and standards for ICOs, which would allow startups to raise funds using tokens and trade in the EU.
The meeting was live streamed and is also available here.
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“Among other things, Fox called for a cap of €8 million on token sale proceeds, anti-money laundering and know-your-customer requirements, as well as recommending that state authorities oversee the new system together with their own national rules.
He also recommended that “project owners” behind ICOs should provide a “key investment information sheet” to potential investors, containing a wide range of disclosures, from details of the identity, legal status and contact details of the project owner to detailed information on the platform, controls for risks management, how much money is being raised and what happens if the target is not reached.
The information provided to potential investors would have to be fair, clear and not misleading and project owners would be responsible for keeping it up to date and correct.”
Hogan Lovells Technology Partner John Salmon, who is helping draft the crowdfunding regulation and leads the firm’s global blockchain group, said at the meeting that the proposal is a step in the right direction and should be helpful for the market as it offers certainty and legitimisation, even though it might not work for all ICOs.
“Having the certainty, but also having that legitimisation, I very much welcome having a European-wide proposal. I think it would be incredibly helpful to see that: it gives people the certainty to know… but we need to be clear whether this is a utility token or a transferable security, or how the regulatory regime comes within that. But I think it makes perfect sense because an ICO is another form of crowdfunding. It is different, but it is a form of crowdfunding.”
From the report:
“This regulation is an opportunity to provide regulation for initial coin offerings. 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.”
MEPs have until 11 September to submit amendments to the proposal, which would trigger further debate. If approved, the crowdfunding regulation is expected to come out in March 2019.