By James Inness and Stuart Davis

Following our 7 November 2017 blog “Europe as a Hub for Initial Coin Offerings”, the European Securities and Markets Authority (ESMA) has published two statements on Initial Coin Offerings (ICOs). The statements underline ESMA’s interest in ICOs as a means to raise capital for enterprises, particularly given their rapid growth in recent months, as well as highlighting ESMA’s concerns for investor protection given the potentially high risks to investors.

Interestingly, one of the issues ESMA has focussed on is the requirement for ICO issuers intending to raise capital in the EU to comply with the EU Prospectus Directive in circumstances in which the ICO is structured as a security offering (as opposed to a non-security utility offering). ESMA acknowledges that the exemptions from the requirement to publish an approved prospectus under the EU Prospectus Directive would potentially be available to ICO issuers in the same manner as for issuers in relation to other types of securities offering, as noted in Latham’s earlier blog.

For more information on the exemptions that may be available to an ICO issuer under the EU Prospectus Directive, please refer to our 7 November blog. The ESMA statements also highlight other EU regulatory regimes that may apply to ICO issuers and advisors/service providers, in which the ICO is structured as a security offering. For more information, please see Latham’s Client Alert, ESMA Highlights EU Regulatory Rules Applicable to ICOs.