Italy: CONSOB Approach On Initial Coin Offerings (ICOs): How To Make The Most Out Of The Status Quo When Dealing With A New Legal Issue

ICOs and the relevant legal issues

On the wave of the significant growth of blockchain technology and relevant market awareness of this phenomenon, initial coin offerings (ICOs) had a tremendous boost in the last year, proving to be an alternative way of funding for many small entrepreneurial projects. It is well known that an ICO consists in the offering of a token (or coin) to the public through a digital platform by a company (generally a small enterprise or start-up) in exchange for either traditional currencies or cryptocurrency. The token offered by the company is a digital piece of information registered in a digital public distributed ledger (a blockchain) which, depending on the type of services rendered by the company promoting the ICO, gives certain rights to its owner.

Considering their features, ICOs have immediately posed many legal issues worldwide. Indeed, it is undisputed that this kind of transaction might entail a number of risks for the purchasers of tokens. In particular, in November 2017, the European Securities and Market Authority (ESMA) warned investors of the potential risk of losing their money in ICOs, given the highly speculative nature of an investment in tokens, the high volatility of the price of tokens and the high risk of fraud1.

In this context, one of the most significant challenges for the supervising authorities of the EU Member States has been and continues to be, the answer to the following question: is the traditional EU legal framework granting transparency and symmetry of information to investors applicable to ICOs?

To answer this question, it is necessary to verify whether a token can be legally qualified as a transferable security as defined by Directive 2014/65/EU (MiFID II) - i.e. a "security which is negotiable on the capital market" - such definition being the cornerstone of the applicability, inter alia, of Directive 2003/71/EC (Prospectus Directive) and MiFID II.

Given the different nature of tokens offered in the market, this assessment is not straightforward and the supervising authorities of the EU Member States have adopted slightly different approaches.

The approach of the Italian supervising authority

In 2018, the Italian supervising authority (CONSOB), suspended many ICOs carried out in Italy in accordance with the provisions of Legislative Decree no. 58 of 24 February, 1998 (Italian Consolidated Financial Act) regarding the offering of securities to the public. In particular, instead of trying to legally qualify tokens as transferable securities, CONSOB chose to use the broader domestic category of "financial product".

Indeed, according to article 1, paragraph 1, letter "u" of the Italian Consolidated Financial Act a "financial product" is not only a "financial instrument" (a definition including the category of transferable securities) but also "any other financial investment".

CONSOB used this category many times in the context of its supervising activity, therefore, creating a consolidated interpretation on this matter. In particular, according to CONSOB, in order for a product or a contractual scheme to be considered a "financial investment", such product or scheme shall have the following three features:

  1. require the payment of a sum of money by the investor;
  2. entail an expectation of return; and
  3. entail a risk directly associated with the payment of the sum of money.

Accordingly, should a token have all of the above features, its offering would be subject to the provisions of article 94 of the Italian Consolidated Financial Act regulating the offer to the public of securities requiring the publication of a prospectus approved by CONSOB. However, the same token would not be considered a transferable security, thus the provisions implementing MiFID II in Italy would not apply. Therefore, the activities carried out in respect of this token (e.g. placing or management) would not be qualified as financial services and the entities carrying out these activities would not need to be investment firms2.

One of the latest CONSOB resolutions3 on this topic involved the offering of a token named "token TGA" carried out by Togacoin Ltd. In this case, on its website, the company (i) presented its ICO as a "sure investment" linked to the "Toga project", concerning the "creation of a data centre focused on cryptocurrencies mining", (ii) gave to the users the possibility of calculating their potential return, and (iii) set out the nominal value of a token and the relevant minimum amount of tokens to be purchased in order to participate in the ICO. Considering the above, CONSOB was of the opinion that the contractual scheme embedded in the tokens offered by Togacoin Ltd (i) required the payment of a sum of money, (ii) expressly promised a return on the tokens, and (iii) entailed a financial risk directly associated with the investment of money. Accordingly, the authority qualified the "token TGA" as a financial product pursuant to the Italian Consolidate Financial Act and suspended its offering due to the lack of publication of the relevant approved prospectus.

Given the lack of a specific regulation on tokens and the relevant ICO, CONSOB decided to use the above "financial investment" test on a case by case basis in order to prevent at least the offering of products entailing a high degree of risks without proper disclosure. However, this approach does not grant full and certain protection of investors which, as specified above, could not benefit, inter alia, from the provision of MiFID II.

Final thoughts

Even though the case by case approach adopted by CONSOB might ensure a certain level of protection during this phase, a legislative intervention of the EU providing for a clear regulation of ICOs seems to be the best way not only to grant effective protection to investors but also to promote this alternative way of funding.

In this respect, it should be noted that in 2018 ESMA conducted a survey assessing the approaches regarding the legal qualification of tokens and ICOs adopted by the supervising authorities of the EU Member States. Following this survey, on 9 January, 2019, ESMA published advice4 showing that these approaches are different and therefore highlighting the need for general harmonization on this matter.

The hope is that the EU might draft a tailor made regulation which grants legal certainty and protection on the one hand and does not limit the great possibility of alternative funding offered by ICOs on the other hand.

For a discussion of the applicable framework for crypotcurrencies in the United States please see this article from our Summer 2018 Global Insights Brochure: Cryptocurrencies: What is the applicable regulatory framework in the United States?


1. Please see

2. Please note that neither CONSOB nor the other Italian competent authorities expressed a formal position on whether a token could or could not be deemed a transferable security, therefore triggering, inter alia, the application of the MiFID II provisions. It is worth noting that some Italian scholars maintain that – depending on its features – a token could be considered a transferable security thus triggering the application of MiFID II provisions. In addition, some scholars are of the opinion that ICO could be also qualified as a specific type of equity crowdfunding.

3. Please refer to CONSOB resolution no. 20660 of 31 October 2018.

4. Please see

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions