EU Parliament aims to standardize ICO rules. In case the regulations are adopted within the EU bloc, it could form a standard for token sales. This would allow projects to raise funds and conduct business in any of the EU member states.
5 September, AtoZ Markets – European Parliament members held a meeting this Tuesday. During the meeting, they discussed a proposal that intends to create new regulations on initial coin offerings (ICOs) that are carried out within the economic zone.
EU Parliament Aims to Standardize ICO Rules
The All-Party Innovation Group within the EU Parliament got a chance to analyze the potential benefits and issues that may arise with the new ICO rules. The ICOs rules, according to the EU officials, are standing for a part of a wider crowdfunding framework.
The proposals have been suggested by a Member of the European Parliament (MEP), Ashley Fox. Fox has urged to set out an 8 million euro cap on token sale proceeds earlier. Reportedly, officials have been working on these regulations already starting from last year, while a formal proposal from the EU Commission has emerged in March with the mandate to develop guidelines on “crowd and peer-to-peer finance.”
As per Fox’s report, the regulatory framework offers an opportunity to regulate token sales across the EU bloc:
“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.”
Following on this, the report also noted that crowdfunding service providers “should be permitted to raise capital through their platforms using certain cryptocurrencies.” Yet, while ICOs “offer new and innovative ways of funding,” they can also be utilized to “generate substantial market, fraud and cybersecurity risks to investors.”
ICO Token Sales Standard?
In case the regulations are established within the EU bloc, it could form a standard for token sales. This, in turn, would allow projects to raise funds and conduct business in any of the EU member states. Fox has added:
“Be assured, that as legislators we’re trying to make ICOs more possible and more successful, that certainly is our objective.”
France Digitale managing director Nicolas Brien has also attended the Tuesday meeting. He has stated that “there is an emergency to act” to form such a standard. He further explained that “the market wants legitimization … from every jurisdiction. In the UK it’s particularly bad, none of the banks will bank you if you have crypto.”
Brien has also stated:
“Having the certainty, but also having that legitimization, I actually welcome having a European-wide proposal because it gives people the certainty to know. I think we need to be clear whether this is a utility token or a transferable security, or how the regulator regime looks at that, but I think this can be done because an ICO is another form of crowdfunding. It’s different, but it is a form of crowdfunding.”
ICO Evaluation Procedure
During the meeting, many of the regulators and representatives have highlighted the need for stricter assessment of ICOs, considering the abundance of scams that are utilizing the Blockchain based funding model
Laura Royle with the Financial Conduct Authority (FCA) stated that “we certainly do see a huge potential benefit in this space for firms to raise capital from a broad array of investors and without the cost of an intermediary, but there are risks associated [such as] the potential for fraud, with a lack of transparency and the volatility.”
The FCA has noted that it has seen a “high proportion” of fraud. The regulator estimated that anywhere from 25 to 81 percent of ICOs might result in fraud.
Following the meeting, EU Parliament members can now submit their changes to the proposal by September 11.
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