Our conclusion after reading the crypto advice

  1. the so called committee of innovation trys to understand crypto and how to put it in existing regulation or which additional regulation is necessary which does not limit innovation
  2. The explanations were very well thought through especially DLT, Wallets, Private and Public keys an explanation which normal people can easily understand
  3. Financial instruments like tokenized assets or tokenized equity are still subject to the traditional financial and securities act – depending on the jurisdiction this can change if there is a special law like for instance in liechtenstein with the blockchain law which might pass by this year in 2019
  4. risk, compliance protocols and also resources of exchanges – are they prepared for the worst case? As an example, investors could face difficulties recovering their funds in times of financial distress.
  5. Noteworthy, several centralised platforms have been hacked in the past, resulting in million losses for their users.
  6. more regulations for exchanges to make sure no market abuse exists
  7. that investors need to adopt to cold wallets like ledger nano S, the knowledge is not often there but should be! Or choose a custodian for your assets if it makes economical sense for you.
  8. Potential for 2019 alternative funding source for blockchain start-ups and other innovative businesses that would find it difficult or costly to raise capital through traditional funding channels
  9. Tokenisation of assets long term trend that could create beneficial outcomes
  10. Tokenisation of certain assets to improve liquidity
  11. That the EU regulation is more towards investor risk protection instead of development a sustainable ecosystem (legal qualification of crypto assets starts at page 18) – most interesting part
  12. Transferable assets are subject to MiFID ll regulation
  13. Noteworthy, the vast majority of respondents considered that the qualification of all crypto-assets as financial instruments has unwanted collateral effects, meaning that there may be a need to distinguish between the different types of crypto-assets. This is understandable considering the variety of crypto-assets being issued. Among the reasons given were 1) the existing regulation was not drafted having these instruments in mind; 2) acknowledging them as financial instruments would grant them potentially unwanted legitimacy; 3) the needed supervisory tools and resources may not be in place.
  14. There was little consensus as to whether a bespoke regulatory regime for those crypto-assets that do not qualify as financial instruments should be designed within the scope of MiFID or outside of it.
  15. Exemptions were listed as well for offerings where no prospectus is necessary
  16. Member States may decide to exempt offers below EUR8m (EUR8m calculated over 12 months) from the requirement to publish a prospectus prepared in accordance with the PR [Art 3.2(b) of the PR which applies from 21 July 2018].
  17. Offers would also be exempt if The offer is addressed to fewer than 150 natural or legal persons per Member State other than ‘qualified investors’ [PD Art 3.2(b)]; or
  18. Will further regulation be under MiFID ll or an individual one?
  19. Certain Member states have a different understanding of certain crypto assets (page 28 point 128)
  20. How can a DLT act as a securities settlement system under SFD? Page 33 point 152
  21. Esma also believes that holding private keys in behalf of a client should be subject to usual custody/safekeeping services regulations with some technical changes to requirements and/or to provide more clarity on how to interpret them. point 72 page 37
  22. Finally, the results of the Survey made clear that the Member State NCAs in the course of transposing MiFID into their national laws, have in turn defined the term financial instrument differently. While some employ a restrictive list of examples to define transferable securities, others use broader interpretations. This creates challenges in both in the regulation and supervision of crypto-assets.
  23. Risk education should have a bigger focus in this space – whitepapers are usually more selling documents than showing all the potential risks.

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