A group of European Union politicians have begun looking into new rules on how initial coin offerings (ICOs) are regulated on the continent.
The EU Parliament’s All-Party Innovation Group discussed a proposal from British MEP Ashley Fox (Conservative, South West England and Gibraltar) earlier this week.
A major plank of the new regulation proposal focuses on mitigating any potential fraud which may occur. It suggests, for example, rules to combat the risk of money-laundering. It also looks at introducing “know-your-customer” rules, which are designed to place an obligation on all market participants to take steps to confirm that any potential transaction partner is who they say they are.
It is believed that defending ICOs against fraud will be incorporated into an overarching crowdfunding regulation system.
Fox’s proposal contains a number of ground-breaking elements. As well as the money laundering rules, it also proposes a limit of eight million euros on the revenues from any token sales.
The group heard from a wide variety of stakeholders in the cryptocurrency investment scene during its hearings, which took place on the 4thof September.
One such stakeholder was Nicolas Brien, who is the Managing Director of French start-up industry body France Digitale. Brien told the group that there was demand in the market for legitimisation tools designed to help each participant know that they are not exposing themselves to crypto fraud each time they complete a transaction.
“Having the certainty, but also having that legitimization, I actually welcome having a European-wide proposal because it gives people the certainty to know,” he said.
Brien also touched on the somewhat controversial issue of whether or not ICOs can be classed as crowdfunding.
“I think we need to be clear whether this is a utility token or a transferable security, or how the regulator regime looks at that, but I think this can be done because an ICO is another form of crowdfunding. It’s different, but it is a form of crowdfunding.”
For the regulators who spoke during the discussion, the issue of potential fraud arose time and again.
A representative of the British Financial Conduct Authority, or FCA, highlighted the “lack of transparency” which currently exists in the ICO sector.
“We certainly do see a huge potential benefit in this space for firms to raise capital from a broad array of investors and without the cost of an intermediary,” said Laura Royle.
“But there are risks associated [such as] the potential for fraud, with a lack of transparency and the volatility,” she added.
The outcome of the meeting was not binding, and it will now be up to the other members of the EU Parliament to present any changes they would like to make to the proposed legislation.
They have until September 11th to do this.
This is not the first time that the European Parliament, which is often quite active in taking steps to regulate technology, has discussed cryptocurrency.
In July, for example, a report by the body’s Committee on Economic and Monetary Affairs said that there were some benefits to central banks issuing their own cryptocurrencies.