Tough Love - European Financial Regulators vs ICO

European Union consists of 28 countries, thus blockchain and crypto adoption demand detailed discussions and consideration of great number of factors. This is the reason crypto and ICO/IEO/STO regulation takes so much time.
In EU there are several supernational organizations which are eligible on the whole territory of the union. One of these organizations is ESMA (European Securities and Markets Authority). This organization has the greatest impact when it comes to adoption of crypto and development of crypto industry in EU.

ESMA has released several documents concerning ICO:

Below I will briefly disclose content of these documents for those who want to launch ICO in EU.

ESMA Recommendations

ESMA notifies investors that although ICO provides an opportunity to get an alternative income, it is rather risky tool for investing. ESMA grounds this statement with the fact there haven't been accepted all the laws that could help with the regulation of ICO and cryptos. Here is a brief list of reasons to be cautious about ICO:

  • Lack of regulations;
  • High volatility of tokens;
  • High risk of losing investments;
  • Lack of transparency, it is complicated to examine the information company provides.
ESMA also addresses ICO founders and notifies them that although there is a lack of regulation when it comes to ICO, they should still comply with the requirements applicable for the business and fundraising in EU. Particularly, projects that launch ICO should consider:

  • EU Prospectus Directive - ICO founders must provide true and precise information on project goals and status;
  • Markets in Financial Instruments Directive - projects that raise funds must follow common regulations enacted for EU financial markets;
  • Alternative Investment Fund Managers Directive - companies that launch ICO must fully comply classification of alternative investment funds;
  • Anti-Money Laundering and Counter Terrorist Financing Directive (IV edition).
In the third document which explains ESMA's attitude to ICO, it is recognized that ICO is an innovative way of fundraising. ESMA also provides its own token classification and discloses its tasks for ICO regulation:

  • Risk assessment for investors, markets and financial stability;
  • Making a single document regulating financial markets in EU;
  • Providing monitoring of specific companies activity.
Now it is important to understand the way these documents will affect crypto industry in EU.

How ESMA Regulations Can Affect Crypto Industry in EU?

All countries are trying to formulate an attitude to crypto industry. Some of them have made a great progress to solve this issue. For EU this can be a tough question because of the number of countries and differences between them. However, ESMA's press release shows that crypto and ICO will be accepted in EU - it is only left to provide proper regulations.

To conclude there are three good news:

  • EU allows investors to participate in ICO, although it has issued a document highlighting risks;
  • Although there is no proper regulation yet, companies can launch ICO legally in EU;
  • Today we can see companies that successfully launch ICOs in EU.
Here are two companies that launch ICO/STO in EU.

Stellero

Stellero - a project that serves companies launching STO. The Stellero mission is to let companies launch successful STO by:

  • Organization of business-processes in compliance with the laws of different countries;
  • Development of business model;
  • Development of token economics;
  • Audit check;
  • Taking on outsource technical works on token emission;
  • Investor relationships management:
    • KYC organization;
    • Investors onboarding;
    • Token sale organization;
    • Token distribution;
    • Dividends payout.
The company itself fully complies ESMA and IBDO (Spain) legal requirements.
At the moment Stellero is launching STO that fully complies ESMA requirements.

In order to find out more about the project, I have asked a few questions to Dror Medalion, Co-founder and GM of Stellero.

Can you say approximately how much does it cost and how much time does it take to launch an STO for the project with your help?

Costs can vary from 150K-400K and can take from 3-9 months. Really depends on the size of the funding, Roadshows, PR, marketing level, and also legal expenses in different countries.

In which jurisdictions do you help your clients to launch STO?

Great question, we are working in a few geo locations, but most preferred is Spain (CNMV) for rounds up to 5M euro. In U.S approaching only accredited under Reg D506. In any case, you need a local broker-dealer or validator.

Cresio

Cresio.io - is a platform that allows to manage accounts on several exchanges using Cresio app. Actually, you can manage all your activities with crypto using Cresio interface only.

Cresio provides you with features below:

  • Trading signals;
  • Create buy/sell orders for crypto;
  • Analysis on the market status;
  • Mining pools performance monitoring;
  • Notifications on new airdrops;
  • Manage wallets of different cryptos from one app.
Cresio - is a Spanish company. Now the project undergoes second round of ICO to raise funds for platform development.

In order to find out more about the project, I have asked a few questions to Marcos Paredes Morales, Founder of Cresio.

Will it be possible to manage accounts of all the crypto exchanges user wants from your app? Or is it only possible for the exchanges you make an agreement with?

We will prioritize the exchanges that have reached an agreement with us and then the exchanges with more real volume.

Are there going to be notifications on the best prices on the specified exchange for the specified crypto?

I understand that you mean it to carry out arbitration, so the answer is YES, there will be a comparison of prices between exchanges in addition to other important data.

Are there any issues with regulations for your company?

There are no difficulties with the CNMV for the regulation process for the ICO / IEO or the multi-exchange platform. At this moment we have the confirmation for both, the ICO and the use of the multi-exchange platform and we are right now in the process of drafting the terms and conditions of use of the multi-exchange platform.

Conclusion

At the moment EU is not the most progressive jurisdiction when it comes to ICO. However, financial regulator of EU has made a clear point about the future of ICO regulation which is going to be developed. For now, startup founders just need to consider the laws on fundraising that are already enforced in EU. It is likely that ESMA will provide advanced regulation for crypto industry regulation after there is held outcomes of crypto adoption in countries like Malta and Switzerland.
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