ABSTRACT
Over the years, blockchain has developed a strong relationship with the financial industry. In fact, the first mention of blockchain dates back to 2008, where it appeared in Satoshi Nakamoto’s white paper “Bitcoin: A Peer-to-Peer Electronic Cash System”, which aimed to lay the basis for “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution”. At the core of Bitcoin system was in fact the blockchain technology. Blockchain is an innovative and decentralized technological architecture, which allows transactions to take place under a common and verified protocol. Since its inception, blockchain has experienced impressive growth and has expanded beyond its initial close ties with Bitcoin. Moreover, it has clearly demonstrated its ability to operate as an autonomous technological innovation in the eyes of both investors and institutions. One of the areas in which blockchain has emerged as a particularly important player is that of initial coin offerings (ICOs). ICOs offer an innovative new way of raising capital for companies based on the emission of “digital tokens” through blockchain-based platforms. This shift in market practice, together with the development and widespread adoption of innovative finance-related tools and services (commonly identified as “FinTech”), has prompted global regulators and national supervisory authorities to play a more prominent regulatory role. This is a significant change from the soft regulatory approach (that can be traced back to the “Do no harm approach” pursued by the US Commodity Future Trading Commission) that was averse to stifling the FinTech-related stream of innovation. It is now clear, however, that a more sophisticated regulatory approach will look towards designing comprehensive regulatory frameworks that guarantee investor protection and market integrity.
In summary, this chapter will provide a contextual background of blockchain technology in the financial industry, as well as an overview of the ICO regulatory frameworks and of the developments concerning the recent trend of launching security token offerings, by analyzing how regulators from different countries decided to handle the phenomenon.
