EU Regulators To Study Cryptos On A Case By Case Basis
The financial watchdogs from the European Union have affirmed today that they will take a new stance on Initial Coin Offerings (ICOs), they will examine every ICO on a case by case basis to decide whether they should be regulated or not. This decision mirror the moves from the United States, which has taken a similar stance on the issue.
ICOs, in case you do not know, is a sort of way to raise capital for blockchain startups which issue cryptos like Bitcoin in exchange for investment. The main issues stem from whether these tokens can be considered utility tokens like Bitcoin to be used on the platforms or whether they are securities like equity shares.
Also, it is important to notice that many ICOs from last year were total failures and a lot of people lost money in the market, which has called the attention of many financial watchdogs.
Steven Maijoor, the chair of the European Securities and Market Authority (ESMA), has been analyzing ICOs recently and his discovery was that the best approach is to use a case by case basis instead of trying to regulate the whole ICO market with the same rules so far.
According to him, ICOs are like a financial instrument, so they need a regulatory framework. However, the market is still too new and there is the question of whether the ICOs that are outside the regulatory world should be regulated.
The main issue, Maijoor affirms, is that most of the ICOs have had some difficulty in showing their viability as a financial instrument and to actually bring any extra benefits to the table that the traditional ways of raising money do not have already.
The problem is that, for instance, the U. S. Securities and Exchange Commission (SEC) chair Jay Clayton has affirmed that most new tokens were securities but he did not classify which ones were, so a huge grey area of uncertainty is being created around the issue.
Warning Investors Is Not Enough
At the moment, the main problem faced by the regulators of the European Union is that they have limited themselves to issue warnings to retail investors against investing in cryptos without having any sort of guarantee, but it looks like this is far from enough.
The chair of the European Banking Authority, Andrea Enria, has told lawmakers that letting ICOs develop without specific rules “is not working as expected”.
There are many national initiatives to regulate ICOs, but a single EU decision is lacking at the moment and Enria believes that the awareness must be raised in order for the customers really understand that they are investing in a market without any kind of safety net.
A recent report from the EU finance ministers has suggested that the EU should adopt common rules to define the market and it looks like this is what is going to happen.