This raises the question to what extent EU securities regulation is applicable to ICOs and, particularly, whether issuers have to publish and register a prospectus in order to avoid criminal and civil prospectus liability in the EU. The question is of great practical relevance since, despite the high stakes involving more than USD million in some ICOs, to our knowledge not a single token issuer has up to now published or registered any such prospectus.
Against this background, our article develops a nuanced approach that distinguishes between three archetypes of tokens: currency, investment, and utility tokens. It analyzes the differential implications of each of these types, and their hybrid forms, for EU securities regulation. While the variety of tokens offered necessitates a case-by-case analysis, the discussion reveals that at least some types and hybrid forms of tokens are subject to EU securities regulation.
Where this is the case, EU securities regulation and, in particular, the EU prospectus regime apply whenever the EU market is targeted. By and large, pure investment tokens typically must be considered securities, while pure currency and utility tokens are exempted from securities regulation in the EU. In identifying these archetypes, regulation and market oversight will have to put substance over form.
We also spell out criteria for the application of EU securities regulation to hybrid token types. In essence, tokens will have to be considered securities if the promotion materials raise significant expectations of profit among investors; or if, despite silence in the materials, investors are known to speculate on a token mainly for profit motives.
The scrutiny of promotion materials is consonant with regulatory practice both in the US and the EU. The paper closes by offering two policy proposals to mitigate legal uncertainty concerning token sales. First, we suggest tailoring disclosure requirements to the code-driven nature of token sales.
Such an ICO-specific safe harbor would offer a clear and less burdensome path to EU law compliance for token sellers who suspect that their tokens may qualify as securities. This only requires the Commission to amend its delegated Commission Prospectus Regulation, or to include the safe harbor in the future delegated regulation according to Art. Second, we propose that, on an international level, governments form a compact to bestow certainty about the application of their respective securities regulation regimes to token sales.
This is, first, to avoid regulatory overkill on the one and regulatory lacunae on the other hand in online-mediated, global token sales. More recently, it was announced on Sept. COIN , for further regulatory clarity on a new program called Lend. A few days later, Coinbase ended the program. Regulators have generally taken a proactive stance toward crypto in Canada. It became the first country to approve a Bitcoin exchange-traded fund ETF , the first launched on Feb.
From a taxation standpoint, Canada treats cryptocurrency similar to other commodities. The United Kingdom considers cryptocurrency as property but not legal tender. Additionally, cryptocurrency exchanges must register with the U. Although investors still pay capital gains tax on crypto trading profits, more broadly, taxability depends on the crypto activities undertaken and who engages in the transaction.
The land of the rising sun takes a progressive approach to crypto regulations, recognizing cryptocurrencies as legal property under the Payment Services Act PSA. The land down under takes a relatively proactive stance toward crypto regulation. Australia classifies cryptocurrencies as legal property, which subsequently makes them subject to capital gains tax.
Similarly to the United Kingdom, the island state classifies cryptocurrency as property but not legal tender. Singapore, in part, gets its reputation as a cryptocurrency safe haven because long-term capital gains are not taxed. However, the country taxes companies that regularly transact in cryptocurrency, treating gains as income. The country didn't use to consider cryptocurrencies as legal tender or financial assets. A few months later, parliament approved a new tax on digital assets to take effect in Now any cryptocurrency income earned above 2.
But anything valued under the threshold will remain tax-free. The exact location of the company's headquarters is unknown, though there are rumors the company is in Malta or the Cayman Islands. Furthermore, China placed a ban on bitcoin mining in May , forcing many engaging in the activity to close operations entirely or relocate to jurisdictions with a more favorable regulatory environment.
Like most countries, the subcontinent outlines that cryptocurrencies are not legal tender. In , the Reserve Bank of India RBI banned financial institutions from transacting in virtual currencies; however, the Supreme Court reversed this decision in March Still, regulations remain uncertain in the country.
For instance, India proposed a law in early that would make it illegal to issue, hold, mine, and trade cryptocurrencies other than state-backed digital assets. Cryptocurrency is legal throughout most of the European Union EU , although exchange governance depends on individual member states. In September , the European Commission proposed the Markets in Crypto-Assets Regulation MiCA —a framework that increases consumer protections , establishes clear crypto industry conduct, and introduces new licensing requirements.
Commodity Futures Trading Commission. S Securities and Exchange Commission. Internal Revenue Service. Securities and Exchange Commission. The Coinbase Blog. Evolve ETFs. Global NewsWire. Canadian Securities Administrators. Government of Canada. Financial Conduct Authority. National Tax Agency Japan. Australian Taxation Office.