A report by the EU agency that manages finance across the 28 member states has called for cryptocurrencies to be regulated as a new asset class – this means that ICOs would continue to flourish with offers of utility tokens.
On January 9, 2019, the European Securities and Markets Authority (ESMA) published advice addressed to the European Commission, the European Parliament and the Council of the EU on Initial Coin Offerings (ICOs) and cryptoassets – a term which includes all types of tokens and similar instruments.
ESMA breaks cryptoassets up into two types: Those that qualify as instruments under the Markets in Financial Instruments Directive (
The big news is about those that do not qualify (essentially, what the industry calls ‘utility tokens’). ESMA is calling for a “bespoke regime” for these tokens, meaning that they would be treated as an entirely new asset class, and thus not subject to controls by the national authorities that regulate securities.
ESMA has asked for action at the “Directive Level” to regulate these tokens, and, in fact, action by the Commission at that level is expected early this year. The ‘new asset approach’ is one taken by the French government which is in the process of enacting legislation that would embody this approach exactly.
Samuel Robinson, a securities lawyer with the CMS firm in London, comments: “The ESMA advice confirms, from an EU-wide perspective, the need for a coordinated international approach. This was also the point of view expressed in the UK Cryptoassets Taskforce report published at the end of October 2018.
“This applies in particular with regards to proposals to clarify the regulatory perimeter of existing rules and regulations, the need to bring certain instruments and activities (e.g. services provided by crypto-asset exchanges) within
Those instruments that do qualify under MIFID need more legal clarity, the report says.
ESMA had asked the National Competent Authorities – the chief finance and security regulators in each member state – to provide input for this report.