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In a new report, the European Securities and Markets Authority ("ESMA") addressed the need for a uniform set of EU-wide regulations applicable to Initial Coin Offerings ("ICOs") and other crypto-assets.
In Advice: Initial Coin Offerings and Crypto-Assets, ESMA stated it had concerns with respect to transactions in (i) crypto-assets that qualify as financial instruments under the EU Markets in Financial Instruments Directive ("MiFID") and (ii) crypto-assets that do not qualify as financial instruments under MiFID.
For the former, ESMA stated that such instruments would be subject to existing requirements under applicable EU regulations, and highlighted issues to be addressed regarding the application of existing regulations to transactions in crypto-assets.
As for crypto-assets that do not qualify as financial instruments under MiFID, ESMA expressed concern that the lack of applicable regulatory requirements might expose investors to substantial risks. In order to address these concerns, ESMA recommended that, at a minimum, all transactions in crypto-assets be subject to anti-money laundering requirements. In addition, ESMA recommended the use of appropriate risk disclosures to alert customers to relevant risks prior to entering into transactions in crypto-assets.
ESMA also stated that, while certain EU member states were adopting rules at a national level with respect to transactions in crypto-assets, issues relating to crypto-assets "would be best addressed at the European level" in order to "have a level playing field and to ensure adequate investor protection across the EU."
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