The European Parliament Committee on Economic and Monetary Affairs published a draft on the proposal of Council on European Crowdfunding Service Providers (ECSP) for Business regulation on August 10.
The draft puts on the table the idea to include ICOs in the new regulations and bring them a certain legal recognition. It is clear that this is not a perfect solution but an improvement nevertheless in order to protect investors.
To define ICOs, the document proposes this text: “(Initial Coin Offering or ICO) means raising funds from the public in a dematerialized way using coins or tokens that are put for sale for a limited time by a business or an individual in exchange for fiat or virtual currencies.”
The draft considers this regulation as a potential solution to regulate ICOs. Currently, ICOs are not regulated and investors are exposed to the potential risks of frauds. If ICOs are interested in operating within the regulated space, this could be their chance. The proposed amendments are clear about this part.
“...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 EUR 8,000,000 or ICOs that do not use a counterparty do not fall within the scope of those requirements,"- says the document.
WHY IS IT IMPORTANT?
- There are many startups and ICOs in the European crypto sphere. If this proposal makes it to the regulations, ICOs might draw the attention of Investors who were waiting for a legal framework.
- An unregulated ICO space is full of dangers for the inexperienced investors, there are many frauds and exit scams are quite common. This regulation might protect investors until a more solid legal foundation has been laid.
- The EU states, unlike China or India, do not prohibit operations with the cryptocurrency and the conduct of the ICO. There, on the contrary, there is a rapid development of this sphere. But a common document for the EU countries that would regulate the initial coin offerings has not yet been adopted.