Blockchain Startups and Prospectus Regulation

European Business Organization Law Review, vol. 20, 665–694 (2019)

Posted: 6 Jan 2020

See all articles by Dmitri Boreiko

Dmitri Boreiko

Free University of Bozen-Bolzano - School of Economics

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance; European Corporate Governance Institute (ECGI); EUSFIL Jean Monnet Center of Excellence on Sustainable Finance and Law

Paolo Giudici

Free University of Bozen, Bolzano - School of Economics and Management; European Corporate Governance Institute (ECGI)

Date Written: December 16, 2019

Abstract

ICOs are a new way for blockchain startups to finance project development by issuing coins or tokens in exchange for fiat money or Bitcoin or other cryptocurrencies. In this article, we start from the current distinction between different types of tokens and argue that it can create confusion and should be at least partially abandoned. We believe that the conceptual difference between a currency token and a tradable utility token is just the dimension of the crypto environment in which the token is spent. More specifically, ‘utility tokens’ combine the customer payment mechanism with the utility component and, when tradable on a secondary market, the investment one. We argue that they blur the traditional distinctions between currencies, financial assets and consumption goods. Moreover, we stress the increasing importance of online crypto exchanges. Recently some exchanges also took up the role of a trusted intermediaries and staked their reputation on token offerings, which are termed initial exchange offerings (IEOs) and have gained in popularity. We argue therefore that the crypto market increasingly looks like a segment of the capital market and behaves as such. Given that tokens have a clear investment component, we show that they are tradable securities under the Prospectus Regulation (PR). We compare the European securities regulation with its US counterpart and focus on prospectus exemptions, highlighting the great differences between Europe and the US which make Europe less amicable to blockchain startups.

Keywords: Cryprocurrencies, tokens, coins, Initial coin offerings, Initial exchange offerings, startups, prospectus, financial, capital markets regulation, exemptions, qualified investors, accredited investors

JEL Classification: G23, G32, M13, K22

Suggested Citation

Boreiko, Dmitri and Ferrarini, Guido and Giudici, Paolo, Blockchain Startups and Prospectus Regulation (December 16, 2019). European Business Organization Law Review, vol. 20, 665–694 (2019), Available at SSRN: https://ssrn.com/abstract=3504534

Dmitri Boreiko

Free University of Bozen-Bolzano - School of Economics ( email )

Sernesiplatz 1
Bozen-Bolzano, BZ 39100
Italy

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance ( email )

Via Balbi, 22
16126 Genova, 16100
Italy
+39 010 209 9894 (Phone)
+39 010 209 9890 (Fax)

HOME PAGE: http://www.clfge.org

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

EUSFIL Jean Monnet Center of Excellence on Sustainable Finance and Law

Italy

HOME PAGE: http://www.eusfil.eu

Paolo Giudici (Contact Author)

Free University of Bozen, Bolzano - School of Economics and Management ( email )

Via Sernesi/Sernesistraße 1
39100 Bozen-Bolzano (BZ)
Italy
+39 0471 013140 (Phone)
+39 0471 013009 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org/members_directory/member.php?member_id=120

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