New Crowdfunding Rules for ICOs
The EU All-Party Innovation Group is looking for the potential benefits and problems with rules relating to ICOs. This was the reason to set up the meeting to discuss and find solutions that will help the crowdfunding framework.
Most importantly, if the European Parliament initiates to adopt it, this will create a standard for token sales. This move will also allow projects to raise their funds and carry on business in 28 nations.
Laura Royle at the Financial Conduct Authority (FCA) says that they certainly realize the huge potential benefit within the space for companies to raise capital from a broad array of investors. However, this was also without any cost of the intermediary. Still, there are some risks like the potential for fraud, with lacking transparency volatility.
The All-Party Innovation Group of the EU Parliament is looking to examine the new rules that might raise ICOs. They must exhibit the scope incorporating EU-wide crowdfunding regulation which is currently under the draft.
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.
This proposal to drive in the ICOs within the crowdfunding rules was first initiated by Ashley Fox, the UK MEP. Additionally, Ashley Fox also prompts for
- A €8 million cap on token sale proceeding,
- Anti-money laundering requirements
- Know-your-customer requirements
Also, recommends that the state authorities oversee the new build system in context with their national rules.
Ashley Fox suggests that “project owners” backing ICOs should offer a “key investment detail sheet” for potential investors, including a massive range of disclosures, from the identity information, contact details and legal status about the project owner to the information details about the platform, risks management control, how much money will get raised and what will happen if the target does not hit.
The information given to potential investors is fair, crystal clear without any misleading hints. It is the project owner’s liability to keep it up to date, informative and correct.
Ashley Fox also states during the meeting,
With assurity, that as legislators we’re trying to make ICOs more possible and more successful; that certainly is our objective.
John Salmon, the Technology Partner of Hogan Lovells, who is supporting to draft the crowdfunding regulation and leading the global blockchain group of company, also says at the meeting.
According to John Salmon, the proposal is a move in right direction and will be helpful especially for the market offering certainty and legitimization. However, it might not be the same working for all ICOs.
John Salmon also adds,
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.
During the meeting session, calls were also held to strict the ICOs scrutiny, as there is the high proportion of fraud relating to the blockchain funding model.
MEPs have one week until September 11 to submit their amendments to propose, which can follow the further debate. If they attain approval, the crowdfunding rules are hoping to come out by March 2019.