The Draft Report introduced the concept of initial coin offerings (ICOs) within the proposed framework for regulating crowdfunding service providers, or CSPs. ‘Initial coin offering or ICO’ is determined as «raising funds from the public in a dematerialised way using coins or tokens that are put for sale for a limited time by a business or an individual in exchange for fiat or virtual currencies»
While it may be viewed as a positive sign towards recognition of ICOs as mechanism for raising capital, the amendments proposed by the Draft Report will need to be further clarified to determine exactly what ICO structures will be covered by new regulation. On one hand, the Draft Report admitted that CSPs themselves may raise financing through ICO. On the other hand, it expressly provided that ICO which do not use a counterparty (aka intermediary) do not fall within the scope of new regulation.
We, therefore, can now determine at least two ways to conduct ICO: first way is to issue tokens itself and second way is where CSP is providing the platform for other companies to raise financing via ICO. For the latter, CSP is required to have authorisation under new regulation. For this reason, the Draft Report clarified and extended the list of services that require authorisation as CSP to include, inter alia, «the facilitation of offerings where the service provider acts as an intermediary between an entity issuing tokens via an ICO using a counterparty and investors». Importantly, the Draft Report provided for recognition of the CSPs established in third country to operate in the EU, provided certain criteria are met, allowing CSP to operate on cross-border basis.
The Committee suggested to exempt any crowdfunding offer raising amount below EUR 8mln (compared to initially proposed EUR 1 mln) from obligation to publish a prospectus under the Prospectus Regulation. The Draft Report made it clear that private placements, ICO in excess of 8 mln or ICOs that do not use a counterparty do not fall within the scope of new regulation. However, It is not clear whether this threshold should apply to ICO when CSP is issuing itself.
The link to the Draft Report can be found here