ICO Europe - Strengthening Europe s Blockchain Industry

Transcription

1 ICO Europe - Strengthening Europe s Blockchain Industry Working Document Draft Version 1.2 April 8,

2 THE OPPORTUNITY FOR EUROPE With $5.4 bn raised in 2017 alone, Initial Coin Offerings, or ICOs, have rapidly developed into very effective instruments for the financing of technology start-ups. Blockchain and cryptocurrency-related companies have so far benefited most. In its most common construction, though, ICOs are not governed by any financial regulation regime. Thus, those companies operate in a dangerous grey zone, as neither the provenance nor the use of funds are transparent to both the market participants, and the regulator. Increased volumes and intensified AML / CTF discussions - some of them triggered by the amendment of Fourth Anti-Money Laundering Directive to cover Virtual Currency (VC) issues, in parallel to the evolvement of national AML/CTF regimes - have limited the number of financial markets where ICOs are feasible. Moreover, the main European market place for ICOs in Zug /Switzerland is currently closing down, leaving successful ICO companies stigmatized for fraudulent and potentially criminal conduct, independent of any particular wrongdoing. Europe still is the nexus of the quickly expanding blockchain industry. Ecosystems in cities like Berlin, Amsterdam/Rotterdam, Ljubljana, and London are continuing to attract global talent to learn from entrepreneurs of the first and second start-up wave. Here, ICO-money paired with entrepreneurial density bears the opportunity for Europe to lead global innovation - after a global leadership position was not achievable in so previous digital growth cycles like e-commerce (E-Bay und Amazon), data analytics (Google, Apple und Facebook), or recent platform businesses (Facebook, Twitter, AirBnB and Uber). Some of these young companies, often from the FinTech, IoT, Ethereum and BitCoin context, have already successfully completed an ICO, others are in advanced planning. In order to counteract a criminalization or emigration of this high technology segment to "obscure financial centers", Europe should seize the opportunity and 1. provide a secure and well-governed environment for ICOs, in parallel to 2. defining procedures and processes to migrate existing ICO money into a legally viable and well-regulated structures. 2

3 Provide a secure and well-governed environment for ICOs kenup has identified six dimensions for the governance and regulation of ICOs, empowering the instrument to become a reliable, legal and fully transparent financing instrument for innovation businesses. These are: 1. The technical construction of an ICO needs to be fully transparent, with tokens issued being clearly defined. As such, the differentiation between, e.g., protocol tokens, equity tokens, hybrid constructions, or dapps, needs to be explicit and to each follow an appropriate regime. 2. Investor and money provenance need to comply with rules of the common European financial market, while acknowledging the characteristics of the new technology. 3. Utmost transparency on the amount of tokens kept, rules for the later disposal of such tokens, as well as mechanisms for the further creation of tokens must to be provided. 4. Clear and transparent rules for the conversion of money raised in cryptocurrencies to fiat money need to be defined. 5. The use of the proceeds needs to be fully transparent. Such use must be limited to the pre-defined purpose. 6. All conflicts of interest of all involved parties need to be disclosed. Define procedures and processes to migrate existing ICO money into regulated environments Tech companies in Europe and beyond have used ICOs as instruments to raise money for the financing of their growth. Many of them have used EU or Swiss financial markets to keep and manage the raised money both fiat and virtual currency. With the current move of Swiss and other banks to exit the ICO domain, these companies are often forced to transfer their funds to non- 3

4 European and non-oecd market places. Overall, the European blockchain industry is currently seeking a homes for more than 2 bn, a lot of which is already fully KYCed. In order to prevent the migration of ICOed European tech companies and their funds to non-european marketplaces, 7. a European nexus needs to be defined and linked with the European ICO ecosystems (Berlin, Amsterdam/Rotterdam, Ljubljana, London, ); 8. clear rules for certifying the provenance of fiat money according to the European AML/CTF regulations need to be established; alongside of 9. rules and timelines for the proof of provenance for the non-fiat part of funds raised through an ICO. kenup can help you, but it needs your support kenup Foundation is convinced that providing such transparent governance and regulatory framework for the creation of a European Financial market place for ICOs and funds raised by ICOs will not just prevent Blockchain and other tech companies from leaving Europe, but will develop this novel instrument of financing technology companies to a European stronghold - alongside the creation of a next wave innovation industry. Hence, kenup is working with Parliamentarians, Governments, public innovation agencies and financial market regulators across the European Union to shape this opportunity. We are supporting legislators and governments in the Republic of Slovenia, the Republic of Malta as well as in the Federal Republic of Germany in their effort to explore options for such regulation, and in selecting cases of reference for the substantiation of considered regulatory efforts. For this work, kenup is currently identifying suitable companies to support such effort by being able and willing to act as a pilot with their compliant execution of an ICO, thus providing evidence and guidance to the regulatory 4

5 process, receiving a substantive degree of protection in exchange. If your company is interested and you would like discuss this opportunity, please get in touch at ico@kenup.eu. 5