A draft report proposing new regulations
The Committee has a draft proposal which suggests creating some new regulators for public Initial Coin Offerings or ICOs, according to one document which was published on Friday. One Member of the European Parliament (MEP), Ashley Fox, who is actually a representative of the United Kingdom, wrote a draft report on proposed regulations for the crowdfunding platform operators and companies in Europe. The work on crowdfunding regulations begin last year, and it had a formal proposal from the European Commission coming in March, with the mandate of developing a framework on “crowd and peer-to-peer finance.”
According to the note of Fox, accompanying the legislative language for the proposal, the framework provides a chance of regulating token sales. He wrote that that regulation will give the opportunity to ICOs that want to prove their legitimacy to comply with the requirements of the regulation. Even though this regulation may actually not provide the needed solution for regulating the ICO market, it is going to take a much-needed step towards imposing some standards, as well as protections in place for what is an exceptional funding stream for tech start-ups.
The proposed regulation only applies to public sales
According to the statements of the report, the crowdfunding service providers should actually be allowed to raise capital through their platforms, with the use of specific cryptocurrencies. But, while ICOs offer new, as well as innovative ways of funding, they can also be utilized to generate a substantial market, fraud, as well as cybersecurity risks to investors.
The regulation which was proposed seems to apply only to some public sales which raise less than 8 million euros, stating that crowdfunding service providers that wish to offer an ICO through their platform need to comply with some specific additional requirements under this regulation. However, some of the private placements like ICOs raising more than 8,000,000 euros or ICOs which do not use counterparty, do not fall within the group of those requirements.
Introducing many changes
The new rules which were proposed are also going to require platforms to create a cap for crowdfunding efforts and follow specific securities law, as the document announced.
Fox also puts an accent on the significance of creating some regulatory guidelines for space, noting that now ICOs are operating in an unregulated space and consumers are at risk from fraudulent activity taking place in this market.
While Fox published the draft proposal on Friday last week, he also wrote that he thinks that many changes should be introduced to improve the plan, adding that this regulation is a chance to provide regulation for ICOs too.