06 December 2018

ESBG: Risky business - ICO, crypto assets innovation

Innovation brought by the development of crypto-assets and ICOs should not allow a new era of fraud, deception, money laundering, tax evasion and financial instability, ESBG argues in a recently published position paper on the regulatory treatment of Initial Coin Offerings and crypto-assets.

The ESBG notes that problems associated with Initial Coin Offerings (ICOs) and crypto-asset innovation are also the very reasons the banking sector is exceptionally regulated.  

ESBG Managing Director Chris De Noose said: “The rapid development of these new practices and assets seriously challenges the EU’s legislative framework and the level playing field between financial markets participants that it aimed to create. Furthermore, it allows for the re-emergence of well-known risks that find new ways to develop, such as money-laundering and financial stability, and gives new ones the opportunity to flourish, such as cyber-risks.”

To address the issues presented in the introductory part of its position paper, ESBG suggests that the following actions be considered:

• Organise market venues for virtual currencies and tokens. These venues would fight the new money-laundering opportunity created while allowing for the development of investor protection in places where it is currently virtually non-existent.
• Crypto assets should be properly legally defined and classified among existing or new categories. There is need to ensure a level of investor protection that would be at least on par with the one that investors in regulated assets benefit from. It is also important to depart from this situation where National Competent Authorities are taking diverging views. On this point, ESBG welcomes ESMA’s SMSG Own Initiative Report on Initial Coin Offerings and Crypto-Assets published on 19 October.
• ​A regulatory framework for ICOs must be defined. Regulatory arbitrage within the EU should not be tolerated. A specific legislative proposal for a regulation with a dedicated impact assessment should be put forward by the EC.

Full press release

Full position paper

© ESBG