Digital Assets, an Evolving Market
LAW |

Digital Assets, an Evolving Market

HOW CAN YOU REGULATE A TOKEN THAT MAY OR MAY NOT BE A FINANCIAL ASSET, BUT COULD BECOME ONE?

The answer to a simple question could decide the fate of Initial Coin Offerings (ICOs), the innovative form of raising funds from individual investors by selling digital assets, the so-called coins or tokens. The question is: are ICOs financial products? Filippo Annunziata (Department of Legal Studies) is working on a paper focused on their definition and regulation.
 
“Tokens are usually – and simplistically – divided into security (or financial) tokens and utility tokens. The former are digital assets that come with a right, which is similar to the right of an investor who expects to receive a risk-related remuneration. Utility tokens come with the right to receive goods or services. According to legislators and scholars alike, only the former are financial products. In hybrid cases, the trend is to check which component is predominant”. Annunziata says this is a narrow idea because it neglects the size of the secondary market. In other words, what happens to tokens after an ICO?
 
“Once a token is exchanged on a trading platform, for instance on a Multilateral Trading Facility, it can qualify as a financial asset regardless of whether it was issued as a security or as a utility token”. Secondary markets are struggling to take off because of technical issues inherent to the design of a blockchain platform as fast and efficient as a trading platform. However, this technological constraint will sooner or later be removed. In the meantime, the lack of a secondary market is holding back the primary market.
 
“It is worth making another point clear, that is the relationship between ICOs and cryptocurrencies”, Annunziata says. “They are structurally different and should not be confused. In ICOs there is a company that issues digital assets that come with a right. In the case of cryptocurrencies like Bitcoin there is not a single issuer”. The two may interlace, nonetheless. An ICO can be paid for with a cryptocurrency and a token could turn into an exchange currency over time.

Read more about this topic:
Balance of Money in the Past, Present and Future
How Are We Going to Pay in the Third Millennium?
The risks of monetary democracy
Remo Giovanni Abbondandolo (Checkout.com). Making Online Payments Easier
Michele Centemero (Mastercard). Smile at the Camera, Your train Is About to Leave
Solidarity Currencies for Immigrants in Italian Communities
When Paying Online, People Like to Be Anonymous
Raise Prices or Keep Customers?
Blockchains and Their Imitators: Efficiency or Hype?
Bringing Buyers Back to Insolvency Auctions
The Trojan Horse with a Mobile Wallet Inside
 

by Claudio Todesco

News

All News
  • Cutting Edge Topics of Private Law

    On the occasion of the twentieth anniversary of the CLMG, a series of seminars will deal with digital transformation and Brexit  

  • Top Finance Scholars at Bocconi for the New Frontiers in Banking Conference

    The differences between the American and European systems and the new risks for banks are among the topics of the event, in collaboration with The Review of Financial Studies. Gary Gorton is the keynote speaker  

Seminars

  May 2019  
Mon Tue Wed Thu Fri Sat Sun
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    

Seminars      

All Seminars
  • Technology-based initiatives to improve the lives in developing countries

    Viswanath Venkatesh - Walton College of Business, University of Arkansas

    Meeting room 4E4SR03 - Via Roentgen, 1

  • Coalition Formation in Legislative Bargaining
    Economic Theory, Decision Theory and Experimental Economics

    Marco Battaglini (Cornell University)

    Meeting room 3.e4.sr03 ' Via Roentgen, 1