The Securities and Markets Stakeholder Group (SMSG) of the European Securities and Markets Authority (ESMA) has published a report on initial coin offerings (ICOs) and crypto assets. The goal of the report is to give advice to ESMA on steps it can take to contain the risks of ICOs and crypto assets (on top of existing regulation). The report mainly focuses on risks for investors as the SMSG states that there are no obvious market stability risks yet in this respect.
The first part of the report defines relevant concepts including crypto asset, virtual currency, cryptocurrency, token and ICO. There is taxonomy of crypto assets including payment tokens, utility tokens, asset tokens and hyrbids. The report also includes an overview of recent ICOs and of existing regulations of crypto assets, ICOs and sandboxes in 36 jurisdictions, including the European Union member states and Switzerland. The SMSG gives specific recommendations to ESMA on potential regulatory changes.
In addition, the SMSG advises that although sandboxes and innovation hubs should not be overly regulated, some coordination is necessary. The SMSG advises ESMA to provide guidelines with minimum criteria for national authorities. These criteria should relate to (a) information to ESMA on the exact scope, operating conditions and investor protections of the sandbox; (b) public transparency; and (c) regular reporting to ESMA and the public on the experiences with the use of sandboxes.