Part I: ICOs and Existing EU Financial Law
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5/15/18 1 Crypto-Securities Regulation: ICOs under EU Financial Law Dr. Philipp Hacker, LL.M. (Yale) WZB Berlin Social Sciences Center/Humboldt University of Berlin/UCL Part I: ICOs and Existing EU Financial Law
Transcript of Part I: ICOs and Existing EU Financial Law
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Crypto-Securities Regulation: ICOs under EU Financial Law
Dr. Philipp Hacker, LL.M. (Yale)WZB Berlin Social Sciences Center/Humboldt
University of Berlin/UCL
Part I:
ICOs and Existing EU Financial Law
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The Law’s Impact
Types of Token and Their Regulation
3 Archetypes
Currency Tokens Investment Tokens Utility Tokens
= German Blockchain Association, Token Statement (February 9, 2018)
= FINMA Guidelines („Wegleitung ICOs“, February 16, 2018)
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Types of Token and Their Regulation
3 Archetypes
Currency Tokens
• Means of payment for external goods/services
• Example: early bitcoin• Not Securities: exception of
„instruments of payment“• But: potentially subject to
payment services regulation
à PSD 2
Investment Tokens
• Promise of future cash flows• Example: DAO• Securities
à Prospectus Regulation etc.
→ free put option→ crypto bank run
Utility Tokens
• Product functionality• Example: filecoin• Securities: ??
Utility Tokens as Securities?
Comparable to shares in companies?a) Negotiability (+)b) Voting rights (+/-)c) Future cash flow (dividends) (-)d) Possible appreciation in value (+)
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Utility Tokens as Securities?
Comparable to shares in companies?a) Negotiability (+)b) Voting rights (+/-)c) Future cash flow (dividends) (-)d) Possible appreciation in value (+)
Drawing the Line for Utility Tokens
Two possibilities and zero case law:1) AIV enough if: expectations of profit raised by
promotional materials à SEC: Munchee decision (11 Dec. 2017)à chilled US ICO markets
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Drawing the Line for Utility Tokens
Two possibilities and zero case law:2) AIV generally not enough:
- financial risks stem from product functionality risksà better addressed by consumer law
Exception: AIV clearly dominates consumptive aspects
Types of Token and Their Regulation
3 Archetypes
Currency Tokens
• Means of payment forexternal goods/services
• Example: early bitcoin• Not Securities: exception of
„instruments of payment“• But: potentially subject to
payment services regulation
à PSD 2
Investment Tokens
• Promise of future cash flows• Example: DAO• Securities
à Prospectus Regulation etc.
→ free put option→ cryto bank run
Utility Tokens
• Product functionality• Example: filecoin• Generally not securities (≠ US)• But: consumer protection
regulation, e.g. Consumer Rights Directive → disclosure duties and withdrawal rights→ also free put option (1 y) → crypto bank run
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Part II:
Regulation Going Forward
The Future of EU Crypto-Securities Regulation
Current EU Law
Internal development: safe harborfor tokens
• Specific disclosure requirements(code, real owners, rights & obligations, proceeds etc.)
• Competence of the Commission (2004 Comm. Prosp. Reg.), but not for consumer protection law
External development: international convention
• Global passport
• Minimum harmonization
• Realistic? At least: G20
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International Convergence: A Realistic Option?
Source: CoinDesk, G20 Calls for Crypto Regulation byJuly (20 March 2018)
Thank you!
