Initial Coin Offerings in Europe – The Current Legal Framework and its Consequences for Investors and Issuers

Abstract

Various authorities are currently working on the regulation of new technologies in the financial sector. Initial Coin Offerings (ICOs) are under special consideration, as they enable entities to collect money with an extended range and without the involvement of intermediaries. The following paper provides an overview of the legal framework and implementation of Initial Coin Offerings in Europe. By analyzing different aspects, such as countries of ICO issuance, notable ICO industries and failure/success rates of ICOs, the European ICO market was characterized in a first step. Secondly, the current status of regulations within Europe as a whole and individual countries was investigated by using statements of European and national authorities. The key results of the paper indicate the rapid expansion of the European ICO market and the relevance for issuing companies and investors. In addition, several risks due to unstable and inconsistent legal frameworks in European countries and to a multitude of frauds are pointed out. Between European states, legal approaches vary widely, ranging from proactive to undefined approaches. This again makes issuing tokens difficult for globally acting companies as multiple legal frameworks must be considered and figured out. Moreover, different regulations can lead to a heterogeneous European ICO market with various investor protection standards.