Philipp Maume and Mathias Fromberger from the Technical University of Munich recently published a paper where they discuss the initial coin offerings market and its regulation. The authors draft that the European law should see tokens launched and promoted via ICOs as securities.
The research named Reconciling US and EU Securities Laws further implies that the EU regulators can simply follow the course set by the US Securities and Exchange Commission. The authors undoubtedly pose that there should be a clear regulatory framework regarding cryptocurrencies and ICOs in the European Union.
An excerpt from the paper reads:
“It is our view that investment tokens (including hybrid tokens with some investment functions) are ‘transferable securities’ under Directive 2014/65/EU on Markets in Financial Instruments.”
Maume and Fromberger note that a token running on a blockchain is considered a security if it is “transferable, negotiable, and standardized,” according to the EU. Blockchains do exactly that – by using public and private keys they transfer tokens between senders and receives.
The EU explicitly gives an answer to the term “negotiable”. In fact, if an exchange lists an investment token it instantly becomes negotiable. Hybrid tokens also fall in this category. The only kind of token that cannot be deemed a security is the one that acts only as a payment method. Having said that, we can easily agree that ICO associated tokens are indeed securities. In addition, we can all agree that developers do use standards when building cryptocurrencies.
Unified crypto regulation
The authors point that if there isn’t one global regulatory framework the market is going to die in the near future. The researchers emphasized that we are already “racing to the bottom”. This term is often used to describe a situation where different nations are all trying to be at the forefront of something in particular and are ready to drop taxes and regulation in order to attract businesses. However, this usually impacts the quality of the industry in a negative way.
In fact, we are already witnessing companies hopping from one country to another, regardless of whether we are talking about exchanges, ICOs, fintech startups, wallet providers, or cryptocurrency miners. Not to mention that launching a cryptocurrency token is extremely easy. The paper notes that “less than 100 lines of code seem to be typical in the industry,” implying that via platforms like Ethereum everyone can set up their own token.
Should we note that the cryptocurrency industry is full of shitcoins? Should we say again that we need quality, not quantity?