On February 26, 2019, Steven Maijoor, the Chair of the European Securities and Markets Authority (ESMA), delivered a keynote speech to the 3rd Annual FinTech and Regulation conference in Brussels.  In his speech, he highlighted ESMA’s recent initiatives in the crypto-asset and distributed ledger technology (DLT) space and noted ongoing areas of focus.
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Part 3: Developments in the United States and the Rising Tide of Enforcement

In 2017, the use of initial coin offerings (“ICOs”) as an alternative means to raise capital took off worldwide. By the end of the year, ICO sponsors raised over $5.6 billion globally through token offerings.[1] At the same time, U.S. regulators’ focus on ICOs has rapidly expanded as well. Since releasing the DAO Investigative Report in July 2017 (the “DAO Report”), the U.S. Securities and Exchange Commission (the “SEC”) has steadily increased its focus on ICO activity. As exemplified by numerous investor advisories, the creation of the Cyber Unit within the Enforcement Division with the purpose to halt and deter cyber-related misconduct in the securities markets, enforcement actions against ICOs, and the Office of Compliance Inspection and Examinations’ (“OCIE”) announcement that monitoring ICO sales will be one of its top 2018 priorities, it is clear that the SEC views ICOs as squarely within the scope of its mandate for regulation and enforcement. Unsurprisingly, state enforcement actions and private class action litigation targeting ICOs are also on the rise.
Continue Reading Around the World in ICOs: ICOs in the United States

The Directive states that “in light of modern advances”, it is important “for reasons of clarity and rationality” to “apply uniform rules that are as strict as possible”. Indeed, the regulatory regime established by the Directive is of considerable rigour: it contains detailed registration, disclosure and marketing requirements. We are, of course, referring to the EU Potatoes Directive (2002/56/EC). When it comes, however, to initial coin offerings (“ICOs”) of cryptographically encoded digital “tokens” to retail investors via distributed ledger technology – almost anything goes! At least, that appeared to be the case until recently, when a multitude of EU regulators issued warnings and statements on the application of EU regulations to ICOs.

In this post, we seek to decipher some of those statements and offer some practical observations to determine how EU securities laws might (or might not) apply to ICOs.
Continue Reading Around the World in ICOs, Part 2: Catching up With Potatoes? The Regulatory Response to ICOs in the EU so Far

Part I: The Basics

Everyone is talking about “ICOs” or “initial coin offerings.”  Celebrities are tweeting about them.  You cannot open the Wall Street Journal or Financial Times on any given day without at least one story about ICOs.  Prominent CEOs of financial institutions have taken to the bully pulpit to fulminate about ICOs and cryptocurrencies, using words such as “bubble” and “fraud.”  Parallels are drawn to 17th century tulip mania.  And securities and financial regulators around the world are taking notice, with varying degrees of reactions.

But why have ICOs elicited such attention?   In this series of posts, our aim is to shed light on this innovative way of raising funds, the regulatory responses (thus far), the challenges to regulation in various jurisdictions, the factors motivating regulators and possible future actions by regulators.
Continue Reading Around the World in ICOs: A series examining regulatory responses to ICOs

The Securities and Exchange Commission (the “SEC”) recently sent a warning to the burgeoning market for initial coin offerings (“ICOs”): assets that exist only on the blockchain may be securities subject to registration, anti-fraud and other requirements under the U.S. federal securities laws.  The outcome of the SEC’s analysis was unsurprising, representing a reasonably straightforward application of longstanding securities law principles.  However, the SEC’s discussion left several key questions and potential paths forward for ICO issuers and other participants in the ICO marketplace to consider.
Continue Reading Open Questions and Potential Paths Forward Following the SEC’s Analysis of Digital Assets as Securities