The European Securities and Markets Authority (ESMA), the European Union’s financial watchdog, has announced it is taking the same approach to initial coin offerings (ICOs) as its U.S. counterpart. The agency is examining all types of cryptocurrency fundraisers to determine how they fit EU’s regulatory framework.
ESMA to Assess What to Do with ICOs Outside Regulatory World
Governments across the globe have been attempting to fit digital tokens distributed on ICOs into their regulatory frameworks, as the cryptocurrency ecosystem shows no signs of slowing down its pursuit of disrupting economies and societies.
Japan and Singapore, among others, have already introduced a regulatory framework for digital currencies. Now, it’s the EU’s turn, according to Steven Maijoor, chair of ESMA. The agency is analyzing how the introduction of ICOs into the regulatory landscape will affect competition in the fundraising sector.
“Some of these ICOs are like a financial instrument. Once it is a financial instrument it comes under a whole regulatory framework […] The subsequent question is what do we do with those ICOs that are outside the regulatory world. We will assess that as a board. We expect to report by the end of the year.”
At European Parliament’s economic affairs committee, Maijoor told MPs that the regulator and its member-states counterparts are evaluating initial coin offerings on a case-by-case basis to determine which fall under EU’s regulation, reports Reuters.
ICO investors, so far, have been unprotected by government authorities. Maijoor added that the cryptocurrency fundraisers haven’t shown viability as of yet.
In March 2018, ESMA announced new rules on contracts for differences (CFDs) and binary options trading. The imposed measures, from 1 August 2018 onwards, limited leverage for cryptocurrency margin trading to 2:1. Other than that, EU regulators only warned retail investors about digital assets.
Consumer warnings, however, are unable to raise enough awareness in regard to the risk of ICOs, according to Andrea Enria, chairman of the European Banking Authority, who initially defended minimum regulatory interference on innovation such as ICOs.
“This is not working as expected […] Consumer warnings don’t seem to be sufficiently effective in raising awareness among consumers that there is a lack of safety net for these investments.”
In early September, a new report prepared for European Union finance ministers said the trading bloc should introduce common rules regarding crypto regulations, including how they are bought, sold, and traded.
Europe is one of the largest markets for initial coin offerings, with 30 percent of all projects funded being based in the continent.