Earlier this year, legal researchers out of the Technical University of Munich School of Management did an analysis of securities classification for tokens in the EU, US, Singapore and Oceania countries. There are many points to be gleamed from this paper. Fundamentally, the point is that tokens likely to be considered a security by the SEC will likely be similarly classified in the EU even though the mechanisms for arriving at that classification are different.
“The pivotal term of EU financial markets regulation is ‘transferable securities’. For example, EU prospectus regulation applies to offers of securities to the public (Art. 1(1) of Regulation (EU) 2017/1129). Directive 2014/65/EU on Markets in Financial Instruments (MiFiD2) revolves around ‘financial instruments’, which pursuant to Section C of Annex I includes ‘transferable securities’. Regulation (EU) 596/2014 on Market Abuse (MAR) also applies to ‘financial instruments’ as defined under MiFiD2 (see Art. 2(1) and Art. 3(1)(1) MAR). Thus, the question is whether tokens are ‘transferable securities’ within the meaning of the uniform definition under EU financial regulation. It is obvious from the wording that the definition is based on the transfer of units in the secondary market, not the underlying investment characteristics. This is a major deviation from the US approach which focuses on the ‘investment contract’.
It is important to note that market supervision and law enforcement are still vested in the national financial markets regulators of the EU member states. The European Securities and Markets Authority (ESMA) is, inter alia, tasked with the promotion of supervisory convergence and the consistent application of market rules.101 However, front line regulation is still carried out by national agencies. The result is that financial markets supervisors in the EU are not speaking with one voice.”
The paper goes on to examine laws in the UK, Germany, France, Australia, New Zealand, Singapore as well as the EU in general. This examination covers pages 16-27 (double spaced) and are well worth going through.