Initial Coin Offerings (ICOs) and Decentralised Autonomous Organisation (DAO) are new forms of entity that use cryptocurrencies and exploit Blockchain technology. Have you seen this in your jurisdiction, and what are your thoughts from a legal perspective

The Commission de Surveillance du Secteur Financier has very recently endorsed the position of the European Securities and Markets Authority (ESMA) regarding ICOs and the related risks for investors entering that non-regulated world.

Today, organisations that intend to launch an ICO in Luxembourg should self-assess whether they fall outside the scope of the regulation applicable to the issuance of securities, or request a negative clearance from the CSSF that will assess each case on its particular merits. A white paper containing all the necessary information for a potential token buyer may be considered and reviewed as a prospectus. It is paramount for the supervisor and the issuer to agree on the legal basis of the proposed ICO.

As such, ICO issuing platforms may well require ministerial prior authorisation and CSSF ongoing supervision, if assimilated as a professional entity of the financial sector.

The banking regulation (raising funds from the public with a view to lending) and investment fund regulation might also apply, with all the related requirements (capitalisation, governance, risk management policies, transparency and reporting, valuation, AML/FT and KYC obligations).

The US Securities and Exchange Commission (SEC) has issued a report into ICOs, concluding that they have the same characteristics as securities issuances and are therefore subject to the same regulatory and legal regime. In response, many ICOs have begun to exclude US investors from participating.