Technical and legal framework of Initial coin offerings
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Jun 8, 2023
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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Abstract
Today, blockchain-based technologies, such as the Initial Coin Offering (ICO), are capable of providing solutions for financing SMEs. ICOs are the issuing of digital tokens that will be sold to investors in return for a cryptocurrency, allowing a project to be funded. This research examines the process of this novel and alternative method of business financing. At first glance, the ICO protocol appears to be very similar to the Initial Public Offering (IPO) procedure raising the question of how ICOs ought to be regulated. To answer this question, descriptive and analytical research will be conducted.
On a legal level, the study found that three approaches to the regulation of ICOs exist, with the American option being the most fascinating because it represents a middle ground between banning and developing a new independent law for token issuance, allowing ICOs to be included within an existing legal framework. The study recommends that the Qatar Financial Markets Authority adopt this American approach, so ICOs will be introduced in Qatar smoothly and without the need for new legislation. This will result in a desired goal of promoting Qatari SMEs.
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Keywords
BlockchainCryptocurrencySecuritySMETokens
References
I- Legal books and reports
De vaulpan, H., "Overview of ICO regulation around the world", 2018, pp. 1-56. Available at: https://www.kramerlevin.com/images/content/4/6/v2/46184/181115-presentation-ICO.pdf (Last visit, 14 February 2022).
Doing Business 2020 - Economy profile Qatar, pp. 1-66. Available at: https://www.doingbusiness.org/content/dam/doingBusiness/country/q/qatar/QAT.pdf (Last visit, 7 April 2022).
Durovic, M., Trimidas, T., New directions in European private law, Hart publishing, 2021.
Gurcan, B., "The legal framework of the cryptocurrencies and initial coin offerings (ICOs)", Thesis, Budapest business school - Faculty of international management and business, 2018.
Qatar Development Bank, The state of small & medium enterprises (SMEs) in Qatar, 2020, pp. 1-108. Available at: https://www.qdb.qa/en/Documents/State%20of%20SMEs%20in%20Qatar%202020%20EN.pdf (Last visit, 28 March 2022).
Initial coin offerings (ICOs) for SME financing, OECD, 2019, pp. 1-72. Available at: https://www.oecd.org/finance/ICOs-for-SME-Financing.pdf (Last visit, 15 February 2022).
II - Legal articles
A- Legal articles in English
Alagos, P., "Qatar hosts global launch of world’s 1st Islamic digital e-token ‘iDinar’", 19 March 2019. Available at: https://www.gulf-times.com/story/626327/Qatar-hosts-global-launch-of-world-s-1st-Islamic-digital-e-token-iDinar (Last visit, 14 February 2022).
AlThani, M., "How can Qatar improve SME support?", 4th International conference on management, economics & finance, 10-12 September 2021, Zurich, Switzerland, pp. 10-21. Available at: https://www.dpublication.com/wp-content/uploads/2021/08/F8-8418.pdf (Last visit, 28 March 2022).
Arnold, L., Brennecke, M., Fridgen, G., Guggenberger, T., & "Blockchain and Initial coin offerings: Blockchain's implication for crowdfunding", pp. 1-30. Available at: https://www.researchgate.net/publication/325128747_Blockchain_and_Initial_Coin_Offerings_Blockchain's_Implications_for_Crowdfunding (Last visit, 16 February 2022).
Brau, J., Fawcett, S., "Initial public offerings: an analysis of theory and practice", The journal of finance, Vol. 61, n. 1, 2006, pp. 399-436.
Cohney, S., Hoffman, D., Skarloff, J., & Wishnick, D. "Coin-operated capitalism", Columbia law review, Vol. 119, n. 3, 2019, pp. 591-676.
Dahdal, A., Truby, J., & Botosh, H., "Trade finance in Qatar: Blockchain and economic diversification", Law and financial markets review, Vol. 14, I. 4, 2020, pp. 223-236.
Dell'Erba, M., "Initial Coin Offerings: The Response of Regulatory Authorities", New York University Journal of Law and Business, Vol. 14, n. 3, 2018, pp. 1107-1136.
Dierksmeier, C., & Seele, P., "Cryptocurrencies and business ethics", Journal of business ethics, Vol. 152, n. 1, pp. 1-14.
Essaghoolian, N., "Initial Coin Offerings: Emerging Technology's Fundraising Innovation", UCLA Law Review, Vol. 66, no. 1, 2019, pp. 294-344.
Fenwick, M., & Vermeulen, E., "Technology and Corporate Governance: Blockchain, Crypto, and Artificial Intelligence", Texas Journal of Business Law, vol. 48, n. 1, 2019, pp. 1-16.
Fitts, W., "Initial Coin Offerings: Getting Rid of the Venture Capitalist", The Tennessee Journal of Business Law, Vol. 20, n. 2, 2019, pp. 927-932.
Howell, S., Yermack, D., & Niessner, M., "Initial coin offerings: Financing growth with cryptocurrency token sales", pp. 1-66. Available at: https://www.researchgate.net/publication/344944152_Initial_Coin_Offerings_Financing_Growth_with_Cryptocurrency_Token_Sales (Last visit, 15 February 2022).
Mammadov, R., "White paper for the Qatari development bank - Improving the Impact of SME Lending to Establish a Vibrant National SME Sector", July 2011, pp. 1-10. Available at: https://www.researchgate.net/publication/308730700_White_Paper_on_Improving_the_Impact_of_SME_Lending_in_Qatar/link/5bd35e4a92851c6b2791f812/download (Last visit, 28 March 2022).
Maume, P., & Fromberger, M., "Regulations of Initial Coin Offerings: Reconciling U.S. and E.U. Securities Laws", Chicago Journal of International Law, Vol. 19, n. 2, pp. 548-585.
Mendelson, M., "From initial coin offerings to security tokens: A U.S. federal securities law analysis", Stanford technology law review, Vol. 22, n. 1, 2019, pp. 52-94.
Momtaz, P., "Initial coin offerings", 2020, pp. 1-30. Available at: https://www.researchgate.net/publication/341555998_Initial_Coin_Offerings/link/5ecbc5dd299bf1c09add4646/download (Last visit, 13 February 2022).
Moran, J., "The impact of regulatory measures imposed on initial coin offerings in the United States market economy", the catholic university journal of law and technology, Vol. 26, n. 2, 2018, pp. 213-258.
Oren, I., "ICO's, DAO's, and the sec: A partnership solution", Columbia business law review, Vol. 2, 2018, pp. 617-658.
Ozeysil, M., "Initial coin offerings (ICOs): a comprehensive review on start-up firms", Pearson journal of social sciences and humanities, Vol. 6, I. 6, 2020, pp. 285-294.
Park, J., Park., H., "Regulation by Selective Enforcement: The SEC and Initial Coin Offerings", Washington University Journal of Law & Policy, Vol. 61, 2020, p. 99-132.
Parlow, A., "Securities liability and the role of D&O insurance in regulating initial coin offerings", University of Pennsylvania law review, Vol. 167, n. 1, pp. 211-237.
Plaweski, S., Initial coin offering regulation: a comparative examination, University of Glasgow, 2019, pp. 1-61.
Preston, J., "Initial Coin Offerings: Innovation, Democratization and the SEC", Duke Law & Technology Review, Vol. 16, n. 1, 2018, pp. 318-332.
Riaa Barker, G., "A guide to Initial coin offerings in the United Arab Emirates", pp. 1-2. Available at: https://www.riaabarkergillette.com/uae/wp-content/uploads/2018/05/RIAABG-Insight-Initial-Coin-Offerings-RIAA-BG-03.05.2018.pdf (Last visit, 14 February 2022).
Ritter, J., "Initial public offerings", Contemporary finance digest, Vol. 2, n. 1, 1998, pp. 5-30.
Robinson, R., "The New Digital Wild West: Regulating the Explosion of Initial Coin Offerings", Tennessee Law Review, Vol. 85, n. 4, 2018, pp. 897-960.
Rohr, J., Aaron, W., "Blockchain-based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets", Hastings Law Journal, vol. 70, no. 2, 2019, pp. 463-524.
Ryan, R., & Donohue, M., "Securities on blockchain", The business lawyer, Vol. 73, 2017, 2018, pp. 85-108.
Shoeb, M., "World's first gold-backed digital e-token launched", 20 March 2019. Available at: https://thepeninsulaqatar.com/article/20/03/2019/World%E2%80%99s-first-gold-backed-digital-e-token-launched (Last visit, 14 February 2022).
Shrestha, P., Arslan-Ayaydin, O., Thewissen, J., & Torsin, W., "Institutions, regulations and initial coin offerings: an international perspective", 2020, pp. 1-46. Available at: https://www.researchgate.net/publication/344632580_Institutions_regulations_and_initial_coin_offerings_An_international_perspective/link/5f85be34a6fdccfd7b5d04dc/download (Last visit, 13 February 2022).
Steverding, F., & Zureck, A., "Initial coin offerings in Europe - The current legal framework and consequences for investors and issuers ", pp. 1-63. Available at: https://www.researchgate.net/publication/340023639_Initial_Coin_Offerings_in_Europe_The_Current_Legal_Framework_and_its_Consequences_for_Investors_and_Issuers (Last visit, 15 February 2022).
Subarkah, I., "Initial coin offering (ICO) in perspective law of sharia business", Al-Ahkam, Vol. 30, n. 1, 2020, pp. 1-18.
Tashea, J., "New money", American Bar Association journal, Vol. 104, n. 3, 2018, pp. 56-63.
Trotz, E., "Tangled up in blue: adapting securities laws to initial coin offerings", Northern Illinois university law review, Vol. 39-3, 2019, pp. 428-544.
Wis, A., "Initial coin offering as a funding source for projects", ACC journal, Vol. 25, I. 2, pp. 90-98.
B- Legal articles in French
François, B., "Les offres au public des jetons (Initial coin offerings - ICO) en droit français et en droit comparé", In Blockchain et droit des sociétés, Dalloz, 2019, pp. 61-75.
Guionnet-Moalic, C., & Dubois, M., "Le b.a.-ba sur l'ICO (initial coin offering) et sa fiscalité", La semaine juridique Générale, n. 43, 2019, pp. 1924-1925.
Houben, R., "Initial coin offerings (ICOs)", Revue de droit bancaire et financier, n. 4, 2019, pp. 1-3.
Laprade, F. M., "Premier encadrement des ICO en France: étude pratique", In Blockchain et droit des sociétés, Dalloz, 2019, pp. 77-83.
Legeais, D., Blockchain, Fascicule 534, Jurisclasseur Commercial, 2020.
Le Guen, J., "Tokenisation et crypto-actifs: Relaite plurielle et enjeux de qualification", Cahiers de droit de l'entreprise, n. 6, 2021, pp. 22-28.
Renoux, V., Bernard, S., "Crypto-monnaies et initial coin offerings: voyage en terre inconnue", Revue de droit fiscal, n.5, 2018, pp. 1-7.
Reygrobellet, A., "Projet de loi Pacte: les aspects intéressant le droit des affaires", La semaine juridique Notariale et immobilière, n. 27, 2018, pp. 597-598.
III - Judgments and decisions
328 U.S. 293 (1946).
De vaulpan, H., "Overview of ICO regulation around the world", 2018, pp. 1-56. Available at: https://www.kramerlevin.com/images/content/4/6/v2/46184/181115-presentation-ICO.pdf (Last visit, 14 February 2022).
Doing Business 2020 - Economy profile Qatar, pp. 1-66. Available at: https://www.doingbusiness.org/content/dam/doingBusiness/country/q/qatar/QAT.pdf (Last visit, 7 April 2022).
Durovic, M., Trimidas, T., New directions in European private law, Hart publishing, 2021.
Gurcan, B., "The legal framework of the cryptocurrencies and initial coin offerings (ICOs)", Thesis, Budapest business school - Faculty of international management and business, 2018.
Qatar Development Bank, The state of small & medium enterprises (SMEs) in Qatar, 2020, pp. 1-108. Available at: https://www.qdb.qa/en/Documents/State%20of%20SMEs%20in%20Qatar%202020%20EN.pdf (Last visit, 28 March 2022).
Initial coin offerings (ICOs) for SME financing, OECD, 2019, pp. 1-72. Available at: https://www.oecd.org/finance/ICOs-for-SME-Financing.pdf (Last visit, 15 February 2022).
II - Legal articles
A- Legal articles in English
Alagos, P., "Qatar hosts global launch of world’s 1st Islamic digital e-token ‘iDinar’", 19 March 2019. Available at: https://www.gulf-times.com/story/626327/Qatar-hosts-global-launch-of-world-s-1st-Islamic-digital-e-token-iDinar (Last visit, 14 February 2022).
AlThani, M., "How can Qatar improve SME support?", 4th International conference on management, economics & finance, 10-12 September 2021, Zurich, Switzerland, pp. 10-21. Available at: https://www.dpublication.com/wp-content/uploads/2021/08/F8-8418.pdf (Last visit, 28 March 2022).
Arnold, L., Brennecke, M., Fridgen, G., Guggenberger, T., & "Blockchain and Initial coin offerings: Blockchain's implication for crowdfunding", pp. 1-30. Available at: https://www.researchgate.net/publication/325128747_Blockchain_and_Initial_Coin_Offerings_Blockchain's_Implications_for_Crowdfunding (Last visit, 16 February 2022).
Brau, J., Fawcett, S., "Initial public offerings: an analysis of theory and practice", The journal of finance, Vol. 61, n. 1, 2006, pp. 399-436.
Cohney, S., Hoffman, D., Skarloff, J., & Wishnick, D. "Coin-operated capitalism", Columbia law review, Vol. 119, n. 3, 2019, pp. 591-676.
Dahdal, A., Truby, J., & Botosh, H., "Trade finance in Qatar: Blockchain and economic diversification", Law and financial markets review, Vol. 14, I. 4, 2020, pp. 223-236.
Dell'Erba, M., "Initial Coin Offerings: The Response of Regulatory Authorities", New York University Journal of Law and Business, Vol. 14, n. 3, 2018, pp. 1107-1136.
Dierksmeier, C., & Seele, P., "Cryptocurrencies and business ethics", Journal of business ethics, Vol. 152, n. 1, pp. 1-14.
Essaghoolian, N., "Initial Coin Offerings: Emerging Technology's Fundraising Innovation", UCLA Law Review, Vol. 66, no. 1, 2019, pp. 294-344.
Fenwick, M., & Vermeulen, E., "Technology and Corporate Governance: Blockchain, Crypto, and Artificial Intelligence", Texas Journal of Business Law, vol. 48, n. 1, 2019, pp. 1-16.
Fitts, W., "Initial Coin Offerings: Getting Rid of the Venture Capitalist", The Tennessee Journal of Business Law, Vol. 20, n. 2, 2019, pp. 927-932.
Howell, S., Yermack, D., & Niessner, M., "Initial coin offerings: Financing growth with cryptocurrency token sales", pp. 1-66. Available at: https://www.researchgate.net/publication/344944152_Initial_Coin_Offerings_Financing_Growth_with_Cryptocurrency_Token_Sales (Last visit, 15 February 2022).
Mammadov, R., "White paper for the Qatari development bank - Improving the Impact of SME Lending to Establish a Vibrant National SME Sector", July 2011, pp. 1-10. Available at: https://www.researchgate.net/publication/308730700_White_Paper_on_Improving_the_Impact_of_SME_Lending_in_Qatar/link/5bd35e4a92851c6b2791f812/download (Last visit, 28 March 2022).
Maume, P., & Fromberger, M., "Regulations of Initial Coin Offerings: Reconciling U.S. and E.U. Securities Laws", Chicago Journal of International Law, Vol. 19, n. 2, pp. 548-585.
Mendelson, M., "From initial coin offerings to security tokens: A U.S. federal securities law analysis", Stanford technology law review, Vol. 22, n. 1, 2019, pp. 52-94.
Momtaz, P., "Initial coin offerings", 2020, pp. 1-30. Available at: https://www.researchgate.net/publication/341555998_Initial_Coin_Offerings/link/5ecbc5dd299bf1c09add4646/download (Last visit, 13 February 2022).
Moran, J., "The impact of regulatory measures imposed on initial coin offerings in the United States market economy", the catholic university journal of law and technology, Vol. 26, n. 2, 2018, pp. 213-258.
Oren, I., "ICO's, DAO's, and the sec: A partnership solution", Columbia business law review, Vol. 2, 2018, pp. 617-658.
Ozeysil, M., "Initial coin offerings (ICOs): a comprehensive review on start-up firms", Pearson journal of social sciences and humanities, Vol. 6, I. 6, 2020, pp. 285-294.
Park, J., Park., H., "Regulation by Selective Enforcement: The SEC and Initial Coin Offerings", Washington University Journal of Law & Policy, Vol. 61, 2020, p. 99-132.
Parlow, A., "Securities liability and the role of D&O insurance in regulating initial coin offerings", University of Pennsylvania law review, Vol. 167, n. 1, pp. 211-237.
Plaweski, S., Initial coin offering regulation: a comparative examination, University of Glasgow, 2019, pp. 1-61.
Preston, J., "Initial Coin Offerings: Innovation, Democratization and the SEC", Duke Law & Technology Review, Vol. 16, n. 1, 2018, pp. 318-332.
Riaa Barker, G., "A guide to Initial coin offerings in the United Arab Emirates", pp. 1-2. Available at: https://www.riaabarkergillette.com/uae/wp-content/uploads/2018/05/RIAABG-Insight-Initial-Coin-Offerings-RIAA-BG-03.05.2018.pdf (Last visit, 14 February 2022).
Ritter, J., "Initial public offerings", Contemporary finance digest, Vol. 2, n. 1, 1998, pp. 5-30.
Robinson, R., "The New Digital Wild West: Regulating the Explosion of Initial Coin Offerings", Tennessee Law Review, Vol. 85, n. 4, 2018, pp. 897-960.
Rohr, J., Aaron, W., "Blockchain-based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets", Hastings Law Journal, vol. 70, no. 2, 2019, pp. 463-524.
Ryan, R., & Donohue, M., "Securities on blockchain", The business lawyer, Vol. 73, 2017, 2018, pp. 85-108.
Shoeb, M., "World's first gold-backed digital e-token launched", 20 March 2019. Available at: https://thepeninsulaqatar.com/article/20/03/2019/World%E2%80%99s-first-gold-backed-digital-e-token-launched (Last visit, 14 February 2022).
Shrestha, P., Arslan-Ayaydin, O., Thewissen, J., & Torsin, W., "Institutions, regulations and initial coin offerings: an international perspective", 2020, pp. 1-46. Available at: https://www.researchgate.net/publication/344632580_Institutions_regulations_and_initial_coin_offerings_An_international_perspective/link/5f85be34a6fdccfd7b5d04dc/download (Last visit, 13 February 2022).
Steverding, F., & Zureck, A., "Initial coin offerings in Europe - The current legal framework and consequences for investors and issuers ", pp. 1-63. Available at: https://www.researchgate.net/publication/340023639_Initial_Coin_Offerings_in_Europe_The_Current_Legal_Framework_and_its_Consequences_for_Investors_and_Issuers (Last visit, 15 February 2022).
Subarkah, I., "Initial coin offering (ICO) in perspective law of sharia business", Al-Ahkam, Vol. 30, n. 1, 2020, pp. 1-18.
Tashea, J., "New money", American Bar Association journal, Vol. 104, n. 3, 2018, pp. 56-63.
Trotz, E., "Tangled up in blue: adapting securities laws to initial coin offerings", Northern Illinois university law review, Vol. 39-3, 2019, pp. 428-544.
Wis, A., "Initial coin offering as a funding source for projects", ACC journal, Vol. 25, I. 2, pp. 90-98.
B- Legal articles in French
François, B., "Les offres au public des jetons (Initial coin offerings - ICO) en droit français et en droit comparé", In Blockchain et droit des sociétés, Dalloz, 2019, pp. 61-75.
Guionnet-Moalic, C., & Dubois, M., "Le b.a.-ba sur l'ICO (initial coin offering) et sa fiscalité", La semaine juridique Générale, n. 43, 2019, pp. 1924-1925.
Houben, R., "Initial coin offerings (ICOs)", Revue de droit bancaire et financier, n. 4, 2019, pp. 1-3.
Laprade, F. M., "Premier encadrement des ICO en France: étude pratique", In Blockchain et droit des sociétés, Dalloz, 2019, pp. 77-83.
Legeais, D., Blockchain, Fascicule 534, Jurisclasseur Commercial, 2020.
Le Guen, J., "Tokenisation et crypto-actifs: Relaite plurielle et enjeux de qualification", Cahiers de droit de l'entreprise, n. 6, 2021, pp. 22-28.
Renoux, V., Bernard, S., "Crypto-monnaies et initial coin offerings: voyage en terre inconnue", Revue de droit fiscal, n.5, 2018, pp. 1-7.
Reygrobellet, A., "Projet de loi Pacte: les aspects intéressant le droit des affaires", La semaine juridique Notariale et immobilière, n. 27, 2018, pp. 597-598.
III - Judgments and decisions
328 U.S. 293 (1946).
How to Cite
Fadlallah, H. . (2023). Technical and legal framework of Initial coin offerings. International Review of Law, 12(1). https://doi.org/10.29117/irl.2023.0261
Section
Articles in English