Consob publishes its final Report on ICO
| Insights
On 2nd January, the Italian Companies and Exchange Commission (“Consob”) published the final report (hereafter the “Report”) on the initial coin offers (the ICOs) and the exchanges (IEOs) of crypto assets (the so-called tokens) which constitute one of the numerous ways in which the distributed ledger technology (DLT) and also blockchain technology. These technologies, pointed-out the Consob, shall be distinguished since DLT is a wider category in which blockchain technology is developed.
The Report has been drafted also with the contribution of the comments that Consob received in the public consultation started on 21st May 2019 and closed on 5th June 2019 and opened to academia, law firms and category association.
The Report provides the guidelines for a future legislative framework for ICOs (and IEOs) of non-financial instruments such us utility token or crypto-activities that attribute to those who hold them the right to have a future performance (e.g. the use of a certain good or service). By contrast the offer (and the exchange) of financial token (security token) should fall, according to the Consob, under the application of the MIFID and the Consolidated Law on Finance.
Regarding the ICOs Consob clarifies that their promoters (natural and/or legal person) should not have specific organizational and capital requirements, otherwise the risk would be to compromise the development of the phenomenon of the ICOs. This does not prevent, Consob notes, from introducing certain safeguards aimed at making the operation as transparent as possible for the market and investors:
- the publication of an initial documents containing elements on the offer and on crypto- (the so called white paper)
- the publication of annual updates of the white paper and extraordinary updates on the occasion of exceptional events likely to significantly change the initiativ
Furthermore, the crypto-activity offer shall be linked to an entrepreneurial project: the offered token shall allow the public to use a good or a service that the issuer has realized or is already providing (or in the short period has planned to do so) .
The compliance with these safeguards should be under the responsibility of the online platforms that manage the ICO. For Consob, the best ICO platform would be the subjects authorized to manage the crowdfunding portals (as well as those who hold subjective requirements similar to those envisaged for such portals). However, platforms with different requirements are admitted.
Crowdfunding platforms, and those suppliers that have similar subjective requirements, can request to be registered in a special register (and therefore be subject to the related Consob impositions). However registration is not a necessary requirement to carry out the offer of crypto activities (opt-in mechanism).
Consob then also opens the offer of tokens by operators based in a foreign country with “a regulatory and supervisory framework that has characteristics that are in line with the provisions of Italian legislation and provided that, in relation to the exchange system itself, Consob has entered into a specific cooperation agreement with the corresponding competent foreign Authority “.