ICOs, Cryptoassets and MiFID II: Are Tokens Transferable Securities?
19 Pages Posted: 6 Nov 2020
Date Written: November 5, 2020
Following the recent popularity of Initial Coin Offerings (ICOs) as a form of obtaining funds in the financial market on the one hand and investment opportunity on the other, and related investor protection concerns, regulatory issues arise. The crucial question relates to the legal nature of tokens as units issued through an ICO under the EU capital markets regulatory regime. Especially, when certain categories of tokens, namely asset tokens, have similar characteristics as conventional securities. The present paper deals with the following research question: Shall such tokens be regarded as transferable securities within the meaning of the Markets in Financial Instruments Directive II, as well as implementing national legislations? Based on the analysis of the defining characteristics of transferable securities, the paper provides the positive answer. Indeed, the asset tokens should be regarded as transferable securities within the meaning of MiFID II and treated like that at the EU level, because they generally meet the defining characteristics of this category of financial instruments. Moreover, due to the autonomous interpretation of EU law concept of a transferable security, this conclusion applies to the specific national implementing legislation as well, irrespective whether the asset tokens are considered as securities or book-entry securities under the Member State’s general law.
Keywords: Cryptoassets, tokens, transferable securities, MiFID II, EU law
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