Initial Coin Offerings

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An ECON draft report on digital finance recommends legislative action in relation to cryptoassets and cyber resilience and a framework for digital onboarding.

By Stuart Davis, Sam Maxson, and Anna Lewis-Martinez

On 4 June 2020, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published a draft report setting out its recommendations to the European Commission on digital finance, including emerging risks in cryptoassets and regulatory and supervisory challenges in the area of financial services, institutions, and markets.

The aim of the draft report is to address the main areas that demand a pan-European regulatory response to digital finance. Three priority areas are highlighted for consideration for legislative action: cryptoassets, cyber resilience, and data. These areas are noted as key to the future development of digital finance in the EU.

By Andrew Moyle, Wenchi Hu, Simon Hawkins and Stuart Davis

Initial Coin Offerings (ICOs) involve issuers offering virtual coins or tokens that are created and disseminated using distributed ledger or blockchain technology. The capital raised from the offer will fund the development of a digital platform, software, or any other project. Holders of virtual coins or tokens may have additional rights over and above those of a cryptocurrency, such as rights to access the platform, use the software, or otherwise participate in the project. In some cases, holders may also have rights to a return on their investment, or rights to participate in a share of the returns provided by the project or by the company backing the project. Post-issuance, holders may resell virtual coins or tokens in a secondary market on virtual currency exchanges or other platforms. ICOs are typically announced on cryptocurrency forums and websites through a white paper describing the project and key terms of the ICO, subscription details, timeline, etc.