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.