A draft proposal by the European Parliament’s Committee on Economic and Monetary Affairs suggests creating new regulations for public initial coin offerings (ICOs), according to a document published on August 10.
Ashley Fox, a Member of the European Parliament (MEP) representing the United Kingdom, wrote a draft report on proposed regulations for Europe’s crowdfunding platform operators and companies. Work on crowdfunding regulations has been ongoing since last year, with a formal proposal from the European Commission coming in March with the mandate of developing a framework on “crowd and peer-to-peer finance.”
“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,” – Fox wrote.
According to the report, crowdfunding service providers “should be permitted to raise capital through their platforms using certain cryptocurrencies.” However, while ICOs “offer new and innovative ways of funding,” they can also be used to “generate substantial market, fraud and cybersecurity risks to investors.”
The proposed regulation appears only to apply to public sales that raise less than 8 million euros:
“…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 8,000,000 [euros] or ICOs that do not use a counterparty do not fall within the scope of those requirements.”
According to the document, new rules would require platforms to create a cap for crowdfunding efforts and follow certain securities laws.
Ashley Fox emphasized the importance of providing some regulatory guidelines for the space, noting that “at present initial coin offerings are operating in an unregulated space and consumers are at risk from fraudulent activity taking place in this market.”