What has happened?
Members of the European Parliament (MEPs) held a meeting on Tuesday to discuss potential new regulations on initial coin offerings (ICOs).
What does this mean?
The All-Party Innovation Group of the EU Parliament was examining potential new rules that would bring ICOs within the scope of an EU-wide crowdfunding regulation that is currently being drafted.
If approved by the Parliament, the rules would create common regulation and standards for token sales, allowing projects to raise funds and trade in the EU.
Among other things, Fox called for a cap of €8 million on token sale proceeds, anti-money laundering and know-your-customer requirements, as well as recommending that state authorities oversee the new system together with their own national rules.
He also recommended that "project owners" behind ICOs should provide a "key investment information sheet" to potential investors, containing a wide range of disclosures, from details of the identity, legal status and contact details of the project owner to detailed information on the platform, controls for risks management, how much money is being raised and what happens if the target is not reached.
The information provided to potential investors would have to be fair, clear and not misleading and project owners would be responsible for keeping it up to date and correct.
"Be assured, that as legislators we're trying to make ICOs more possible and more successful; that certainly is our objective," Fox said during the meeting.
Hogan Lovells Technology Partner John Salmon, who is helping draft the crowdfunding regulation and leads the firm's global blockchain group, said at the meeting that the proposal is a step in the right direction and should be helpful for the market as it offers certainty and legitimisation, even though it might not work for all ICOs.
"Having the certainty, but also having that legitimisation, I very much welcome having a European-wide proposal. I think it would be incredibly helpful to see that: it gives people the certainty to know… but we need to be clear whether this is a utility token or a transferable security, or how the regulatory regime comes within that. But I think it makes perfect sense because an ICO is another form of crowdfunding. It is different, but it is a form of crowdfunding."
At the meeting, calls were also made for stricter scrutiny of ICOs, given the high proportion of fraud perpetrated using the blockchain funding model.
What happens now?
MEPs have until 11 September to submit amendments to the proposal, which would trigger further debate.
If approved, the crowdfunding regulation is expected to come out in March 2019.
You can view and listen to entire debate here.
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