During the public discussion, ESMA referred to its recent joint survey (now closed) with the EBA of the relevant national regulators in each EU member state, in which ESMA requested that the regulators review 60 sample token offerings and provide views as to whether, and how, such tokens might be regulated in their member state under national laws implementing MiFID II.4 Interestingly, while ESMA could not reveal substantive details, its representative did indicate that there was a reasonable amount of consistency among the responses ESMA received. ESMA and the EBA will publish their findings later in 2018. It is hoped that they will provide detail on the views reached by each of the national regulators, as this information could prove to be very valuable to issuers and advisors working in this space.
The EBA also commented that while in the past it has been generally negative in its outlook on cryptocurrencies, the Commission has asked it to revisit this policy area. It is also seeing interest from banks that wish to gain exposure to cryptocurrencies, both as a means to better understand cryptocurrency markets and to seek investment opportunities, which may also lead the EBA to reconsider its previous positions.
The public discussion also addressed the relative merits of including ICOs within the proposed regime for crowdfunding. While there were generally supportive statements from the Commission, ESMA, the EBA and the FCA, the subtext to many of their comments appeared to be that work is already underway in this area to clarify the treatment of ICOs and cryptoassets and that this work should be allowed to be completed. In addition, there was some scepticism, particularly from the Commission, that appending an ICO regime onto the Commission’s proposal for crowdfunding would not necessarily provide a substantial improvement to the current proposal. Further, the European Commission indicated that Fox’s proposals did not address potential secondary market concerns, which are closely linked to issues in primary markets and would therefore need to be dealt with in any ICO regulatory regime.5
The EU’s direction of travel in respect of cryptoassets and ICOs was highlighted again by Valdis Dombrovskis (Commission Vice-President for the Euro and Social Dialogue, and lead on Financial Stability, Financial Services and the Capital Markets Union), on September 7, when he spoke to an informal press conference of the EU Council’s Economics and Financial Affairs Council (Ecofin). Echoing the statements made by ESMA and the EBA, Mr. Dombrovskis confirmed that the Commission is set to conclude its regulatory mapping of cryptoassets by the end of this year, which will allow the Commission to determine “whether and how to apply existing EU financial rules to these assets or if we need new EU rules.”6 The Ecofin Council is responsible for EU policy in three main areas: economic policy, taxation issues and the regulation of financial services and is made up of the economics and finance ministers from all member states. It is therefore significant that Mr. Dombrovskis also noted that “[m]any Member States today supported the need for such mapping,” and commented that the Commission sees that “crypto-assets are here to stay.”
These developments suggest that we will soon be given a formal set of parameters from regulators on the application of financial services regulation to cryptoassets, and particularly ICOs. Firms interested in cryptoassets should watch for EU regulatory guidance later this year.
1 A copy of Fox’s draft report is available at http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&reference=PE-626.662&format=PDF&language=EN&secondRef=02
2 The meeting was recorded for the public record and is available to view online at http://web-events.streamovations.be/index.php/event/stream/regulating-ico-s-is-the-crowdfunding-proposal-what-we-were-looking-for
3 Available at http://opac.oireachtas.ie/AWData/Library3/FINdoclaid050418_135736.pdf
4 The Markets in Financial Instruments Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation (EU) No 600/2014).
5 Further information on the European Parliament’s legislative program relating to crowdfunding is available at http://www.europarl.europa.eu/legislative-train/theme-deeper-and-fairer-internal-market-with-a-strengthened-industrial-base-financial-services/file-crowdfunding-service-providers-for-business
6 The full text of the press release is available at http://europa.eu/rapid/press-release_SPEECH-18-5716_en.htm