Initial Coin Offerings (ICOs): Economics and Regulation

Abstract

Initial Coin Offerings (or Token Sales) are currently the “hottest game in town” in capital markets law. The discussion revolves around two core questions: Do token sales fall within the scope of existing EU capital markets legislation and do they warrant specific regulation? We will try to answer the first question while building a foundation for discussing the second question. To provide a complete picture, we examine the key economics of ICO-financed projects, their up- and downsides for investors and draw a comparison to regulatory activities both in the US and Switzerland.

Keywords: Initial Coin Offerings, ICOs, Token Sale, Blockchain, Ethereum, Cryptocurrencies, EU Securities Law, Financial Instrument, Investment Contract

JEL Classification: K22, G02, G20