EU wants to include ICOs in new public finance rules

The European Parliament's Economic and Monetary Affairs Committee has prepared draft proposals to create new rules for initial coin offerings (ICOs)

Ashley Fox, a member of the European Parliament representing the United Kingdom, has written a preliminary report on proposed rules for European crowdfunding platforms and companies. Work on regulating public finance (crowdfunding) has been ongoing since last year in response to the European Commission's order to develop general principles for the implementation of “crowdfunding and peer-to-peer finance”. According to the Fox report, these general principles are an opportunity to provide regulation for initial coin offerings, which currently operate in an unregulated space and consumers are exposed to the risk of fraud that exists in this market.

“The new regulation of the European Parliament will provide the opportunity to legally conduct ICOs, adhering to the new rules. While this will not solve the issue of regulation of the ICO market, it is still an important step towards setting standards and ensuring funding protection for technology startups,” Fox said.

The report also states that crowdfunding service providers “should be allowed to raise capital through their platforms using certain cryptocurrencies.” However, Fox also notes that along with “offering new and innovative methods of financing,” ICOs can “present significant risk of adverse price fluctuations, fraud risk, and cybersecurity risk to investors.” In this regard, the new rules will help platforms operate legally, and consumers will be able to protect themselves to some extent when using the services of such platforms.

Crowdfunding service providers who want to legally conduct ICOs through their platform will need to meet specific requirements. They are provided for in new rules that will apply to public sales where the profit is less than 8 million euros. Private placements of ICOs that generate profits of more than €8 million, or ICOs without a counterparty, will not be subject to these rules. Thus, platforms will have to create restrictions on fundraising through ICOs and comply with securities laws.

According to https://www.coindesk.com