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Regulating initial coin offerings and DAO tokens under the EU’s financial instruments framework

Much has been written already about virtual currencies primarily serving as means of payment, such as bitcoin. However, it is becoming clear that the success of such virtual currencies on the payments market is limited at best. More and more, they are being used as a means of investment, with investors speculating on their often dramatic value fluctuations. Moreover, a new class of virtual currencies has emerged that serves primarily or even only as a means of investment. These virtual currencies, generally issued through what is called an “Initial Coin Offering” or as part of a decentralized autonomous entity, may have to be regarded from the perspective of securities laws, rather than from the perspective of payments laws. This paper analyses a few of those investment virtual currencies and assesses them from the perspective of the EU’s Markets in Financial Instruments Directive.