This paper compares Initial Public Offerings (IPOs) and equity crowdfunding with Initial Coin Offerings (ICOs) and explores the corresponding risks and limitations of these different fundraising practices, with a view to analysing the extent to which the latter should be subject to the same regulatory framework as the former. After assessing the underlying principles and current regulatory framework for IPOs and equity crowdfunding, with a focus on Europe and the US, we investigate the possibility of applying existing financial regulations to ICOs. Drawing from the notion of “functional equivalence”, we contend that many ICOs share a sufficient number of similarities with traditional IPOs and equity crowdfunding, to be regulated in a similar manner. However, given the various attempts by token issuers to escape from the scope of securities laws by assigning a different function to their ICOs tokens, we argue that principle-based regulation based on an in-depth risk-analysis could be an effective way of addressing the regulation of ICOs, thereby moving from “functional equivalence” to “risk equivalence”. Finally, we explore the use of blockchain technology as a regulatory technology, incorporating specific rules and constraints into the technological fabric of an ICO, in order to ensure compliance with the fundamental principles of financial regulation.

/pdf/blockchain-technology-and-financial-regulation-a-risk-based-k3j14ewv2j.pdf

Blockchain Technology and Financial Regulation: A Risk-Based Approach to the Regulation of ICOs

Legal issues of ICOs are significant in the contemporary financial world because this method of capital formation is becoming widespread. In spite of the significance of ICOs, there are no financial regulations in this field in the most important legal systems. Therefore, research concerning future legal provisions in the area of ICOs is needed. This paper concerns issues related to the scope and structure of future financial regulations applicable to ICOs. The author focuses on principles on which legal provisions in the field of ICOs should be based. National, European and international matters are discussed separately in this work. Matters regarding a future international organisation competent in issues of crypto-assets are elaborated. Furthermore, the author proposes to create a model convention on cryptocurrencies and bilateral agreements on the exchange of information in crypto-asset matters. Disclosure obligations, anti-manipulation provisions and anti-money laundering principles are also set out. Moreover, the author discusses issues regarding audit requirements, special methods of registration and innovative payment rules for crypto-asset purposes. Finally, recommendations concerning ICOs are made separately for national, European and international purposes. The author believes that the conclusions in this paper can be useful not only for legislators but also for international actors, European institutions and legal researchers.

/pdf/considerations-on-the-construction-of-future-financial-296oy1q9wi.pdf

Considerations on the Construction of Future Financial Regulations in the Field of Initial Coin Offering

The present article aims to provide a comprehensive overview of the state of the art of legal science on crowdfunding and to lay the foundation for the understanding of some of its key concepts, facilitating the development of future legal research. This paper demonstrates that legal scholarship seems to not take full comparative advantage of the fact that many concerns are common across jurisdictions, such as encouraging SME development through access to risk capital or ensuring the protection of the unsophisticated investor. It also shows that scholarship and legislative efforts, predominantly in the US and the EU, are most often focused on investment crowdfunding and that these efforts usually attempt to define the obligations of the crowdfunding service provider, striking a balance between stimulating access to risk capital for start-ups and scaling up the crowdfunding business while, at the same time, protecting investors - in particular the unsophisticated ones. Even though it is challenging to legally define specific crowdfunding services, the commonly used typology of crowdfunding is found to be meaningful in a legal context, as it denotes the applicable legal framework. Considering that there is a correlation between the clarity of regulation in a country and the volume of crowdfunding, and given that crowdfunding is growing as both a method of finance and as a business, the time is ripe for legal scholars to direct their attention to the field. In doing so, they assist the actors in the market, the legislators, and the judiciary.

Status Artis: Research in the Law and Practice of Crowdfunding

/pdf/the-evolution-of-crowdfunding-reconciling-regulation-1dmaszezpj.pdf

The Evolution of Crowdfunding: Reconciling Regulation Crowdfunding with Initial Coin Offerings

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The Evolution of Crowdfunding: Reconciling Regulation Crowdfunding with Initial Coin Offerings