EU Parliament Debate ICO Regulation
EU members met earlier this week for an event called “Regulating ICOs — Is the Crowdfunding Proposal what we were looking for?”. The attendees debated questions related to the ICO industry, present and future. While no specific regulations were enshrined, Parliament’s discussion lays out future possibilities for this dynamic fundraising model.
Parliament discussed 3 main topics:
- Problems related to current ICO fundraising campaigns
- The effectiveness of current regulations
- The industry’s future, and the best way for regulations to adjust for it
The Parliament noted that ICOs have only increased in 2018, including the number of fraudulent ICOs in the pipeline. Peter Kerstens noted that ICOs raise millions in capital much more easily than traditional fundraising models. Kerstens expressed concern that there is no middleman between ICOs and their investors. This is the main vulnerability point, in Kerstens’ opinion, for fraud.
Kerstens went on to emphasize that current regulations targeting crowdfunding platforms (Kickstarter, etc.) were not at all sufficient to address the potential quandaries of ICOs. This is doubly true because ICOs may represent a new class of financial instrument, something the last generation of crowdfunding methods never approached.
Julio Alejandro from Aeternity opined that there is no way to stop ICOs without outlawing cryptocurrency exchanges. Alejandro went on to discuss how decentralization is central to the philosophy of ICOs. He concluded that any attempt to interject a new regulatory step between ICOs and their buyers would essentially eliminate the value of the process, making ICOs “obsolete”.
On September 7, EU economic and finance ministers meet to discuss the cryptocurrency industry at large. More advanced regulations may be debated and outlined. The Austria convention will address topics related to the dark side of cryptocurrency: money laundering, tax evasion, and terrorist funding.
What is unclear is what effect, if any, could more draconian ICO regulations could have on the ICO industry. While the EU might conceivably ban centralized crypto exchanges like Binance or Bittrex, it’s likely that decentralized exchanges like Switcheo could continue unabated. This has happened in some nations where ICOs have been banned.
Blockchain, by its very design, is able to circumvent governmental regulation. As many ICO investors know, no nation on Earth has been entirely successful at blocking ICOs from being conducted within its borders. However, an ICO industry that cooperates with government oversight may be integral for a healthy industry to evolve and thrive. We’ll follow these discussions with interest.