According to the Irish Discussion Paper on Virtual Currencies and Blockchain Technology, “ICOs remain unregulated and therefore carry risks not normally associated with the issuance of financial instruments such as equities and bonds.“

However, the European Securities and Markets Authority (ESMA) have issued a statement saying that ICOs may fall within the scope of securities regulation. The statement reads, “Depending on how they are structured, ICOs may fall outside of the scope of the existing rules and hence outside of the regulated space. However, where the coins or tokens qualify as financial instruments it is likely that the firms involved in ICOs conduct regulated investment activities, such as placing, dealing in or advising on financial instruments or managing or marketing collective investment schemes. Moreover, they may be involved in offering transferable securities to the public.”

Regulation of cryptocurrencies in the E.U. is evolving at the time of writing. There were very few regulations on blockchains in the E.U. in early 2018, but on April 20, 2018 the E.U. Parliament just voted that crypto exchanges had to be registered and have to comply with due-diligence procedures including customer verification in response to anti-money laundering and anti-terrorist financing concerns.

Sources:

• ESMA alerts firms involved in Initial Coin Offerings (ICOs) to the need to meet relevant regulatory requirements
• Anti-money laundering: MEPs vote to shed light on the true owners of companies
• Article: EU Parliament Votes for Closer Regulation of Cryptocurrencies
• Jan 31, 2018, Blockchain and Virtual Currency Regulation in the EU
• Finance Department of Ireland Forms Blockchain Working Group to Formulate Crypto Regulations
• Discussion Paper: Virtual Currencies and Blockchain Technology