Speak, if you can: what are you? An alternative approach to the qualification of tokens and initial coin offerings


In Act 1, Scene III, of Shakespeare’s Macbeth, the encounter between the protagonist and the witches is marked by a question, that Macbeth addresses to the strange creatures he meets – together with Banquo – in “a heath near Forres”: “Speak, if you can: what are you?”, whereby the witches reply with the three prophecies, triggering the entire development of the Story. A similar issue of identification, and attractiveness-aversion, seems to occur, today, in the area of capital and financial markets regulation, as one stumbles across a wide range of strange, new assets, born out of the depths of the dashing – and mysterious, at least for neophytes - technological developments over these last years. Recently, also regulators and supervisors have been quite active in providing support with regard to the possible classification of crypto-assets. However, the approach taken until today seems to be a bit unsatisfactory, or – rather – doomed to be overcome by the development and gradual dissemination of crypto-trading platforms. Looking at the current ongoing of the debate, the qualification of crypto-assets is focused on the attempt to frame such assets within the standard categories provided for by the overall system of financial regulation, according to what can be defined as a “bottom-up” approach. In this context, areas that are being dealt with are, on the one hand, the regulation of payment services and, on the other, rules on public offerings, prospectus and – obviously – MiFID. We believe, however, that the bottom-up approach should be combined and integrated with a “top-down” approach, by better framing, into the analysis, the status of the trading platforms where crypto-assets are eventually exchanged on the secondary market. In particular, if tokens are traded on platofrms that present the features of trading venues as defined under MiFID, they should be considered as financial instruments, as long as they have derivative components and may, therefore, qualify as commodity derivatives within the scope of MiFID. This applies, in particular, to utility tokens, that would otherwise fall outside the scope of capital markets regulations according the "bottom-up" approach. In addition, also the relative trading platforms would fall into the MiFID regime. However, as truly-decentralised trading systems develop in the future, exchange platforms might fall outside the scope of MiFID rules (since centralisation is a core element of the definition of an MTF or an OTF), and utility tokens would, again, be out of the scope of EU capital markets rules. Secondary markets must therefore be taken into account in the attempt to understand the nature of ICOs tokens, and their relevance for current EU capital markets legislation.