Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Fintech International
UK FCA Plans Full Crypto Licensing Regime by 2026
UK Crypto Regulation | April 2, 2025
Image: FCA Crypto Roadmap (Financial Conduct Authority)
FCA Confirms UK Crypto Registration to Begin in 2026 Following Legislation this Year
In a recent interview with CoinDesk, FCA Director Matthew Long said that the UK intends to officially start licensing crypto firms under a comprehensive framework in 2026. It's contingent on consultations and final rule-making this year in 2025, and then being approved by Parliament.
Current Registration Landscape
As of April 2 2025, the FCA has registered 51 cryptoasset firms under a temporary anti-money laundering (AML) framework to ensure basic compliance until a more comprehensive framework is developed. Bookmark the above link if interested in tracking and verifying the registration status of crypto firms in the UK. The resource page is managed and kept up-to-date by the FCA. Crypto businesses were given ample time to register for the temporary regime including an extension.
Transitioning to New Comprehensive Framework
The new UK crypto licensing rules will go beyond just anti-money laundering checks. They’re expected to cover areas like how crypto is stored (custody), how tokens are listed on platforms, how market abuse is prevented, and how consumers are protected. This plan builds on two key FCA documents published in late 2024.
First in November 2024, the FCA published a Crypto Policy Roadmap outlining the FCA’s policy direction and timeline for implementing its comprehensive crypto framework. Then, there's a Discussion Paper DP24/4 (December 2024) that evaluated options for regulating cryptoassets with a focus on market abuse rules and establishing disclosure standards. Together, along with numerous updates to industry, its clear that the FCA is aiming to create transparent and fair crypto regs that support innovation while keeping the market safe and trustworthy.
The National Crowdfunding & Fintech Association (NCFA) has tracked and reported the FCA's progress towards crypto regulation by 2026 including initiatives like stablecoin rules and the Digital Securities Sandbox. Learn more: "UK’s Regulatory Crypto Roadmap from Sandbox to Mainstream
Implications
By providing clear regulatory guidelines, the FCA aims to enhance consumer confidence and attract legitimate crypto businesses.
See: UK vs. Canada: A Tale of Two Different Crypto Consumers
It aligns the UK with global efforts to standardize crypto regulation, and continues to position the UK competitively among jurisdictions like the European Union and the United States.
Conclusion
Given that the UK is entering a new phase of crypto regulation, with full licensing expected to begin in 2026, crypto firms looking to operate in the UK should stay engaged with the FCA to prepare for the new rules, and implement the required compliance and governance procedures.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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OpenAI Secures $40B – What It Means for Canada
Funding | April 1, 2025
Image: Freepik AI
The Largest Private Tech Raise in History Just Happened
On March 31 2025, OpenAI announced the largest private tech raise in history (according to CNBC), raising a whopping $40 billion valuing the AI giant at $300 billion including major backing by SoftBank, Microsoft, Thrive Capital, and others.
OpenAI's blog post:
"Today we’re announcing new funding—$40 billion at a $300 billion post-money valuation, which enables us to push the frontiers of AI research even further, scale our compute infrastructure, and deliver increasingly powerful tools for the 500 million people who use ChatGPT every week."
OpenAI’s record-setting raise shows where AI is headed
The $40 billion raise was led by Japan’s SoftBank who contributed $30 billion together with a syndicate of other players like Microsoft, Thrive Capital, Coatue, and Altimeter who contributed the remaining $10 billion, for a $300 billion valuation.
See: Altman Rejects Elon’s Unsolicited $97.4B OpenAI Bid
Approximately $18 billion is being set aside for the Stargate Project, which is building a new network of AI data centers across the U.S. that would provide OpenAI the computing power to develop even more advanced AI systems towards artificial general intelligence or AGI.
OpenAI's flagship product, ChatGPT, now has over 500 million weekly users who rely on the tool as part of their everyday life and work. Despite such massive growth, OpenAI reported a $5 billion loss on $3.7 billion of revenue last year in 2024, and doesn't project that it'll be cash flow positive until 2029.
Global AI spending is exploding. According to a Gartner report highlighted on VentureBeat, global generative AI spending will reach $644 billion in 2025 - that's up 76% from 2024. 80% of that spend is expected to be invested into hardware infrastructure like servers, chips, and power. It's advancing a reordering of global economic power through AI infrastructure.
AI is no longer a research field, it's now global infrastructure at scale, and those building the platforms, data centers, and models today will likely control the economic upside tomorrow.
Canada’s Research Momentum Isn't Enough Anymore
Canada was ahead of the curve when it launched its initial Pan-Canadian AI Strategy in 2017. Our research labs, Mila, Vector, and Amii, are world class, and more recent efforts like Canada's $2 billion Sovereign AI Strategy, including a $300M Compute Access Fund for SME growth are important initiatives.
But in scale? They’re a fraction of what’s needed. OpenAI alone just raised 20x what Canada has committed over the next 5 years, and in the face of a projected $644 billion global spend in 2025, Canada risks being left behind unless we rethink our approach.
A Smarter Path Forward for Canada
Going toe to toe chasing gazillion parameter large language models may not be realistic, or even necessary, for Canada. There's a growing case for investing in smaller, efficient, and open source models that cost vastly less to train and operate. They also require less energy and hardware infrastructure and are relatively easy to govern and fine tune for regulated sectors.
Initiatives like Hugging Face’s tiny LLMs, ongoing research at Canadian institutions, and Cohere's $240 million AI data center project, open the door to develop an AI commercialization strategy around lightweight, safe, and sovereign models that are suitable for practical needs from fintech to healthcare and public services.
To stay in the game and lead responsibly, Canada must:
- Put more funding into AI businesses (not just research labs) that help Canadian companies turn AI ideas into real products by giving them better access to both government and private investment
- Invest and build in shared infrastructure like data centers and cloud systems here in Canada so startups and researchers don’t have to rely on foreign tech giants for computing power (👉 Brookfield Invests €20 billion in France’s AI Infrastructure)
- Focus on developing compact AI systems that are safer, cheaper, and easier to use in areas like finance, healthcare, education, and government
See: A Look Inside Canada’s AI Commercialization Challenge
- Offer incentives to banks, hospitals, utilities, and others to choose local AI solutions instead of imported ones
- Create smart and agile regulations that keep AI safe and fair without blocking new ideas or slowing down growth
- Make Canada a magnet for top AI talent. Give companies, developers, researchers access to the tools, compute power, and support they need to build in Canada and thrive here
Why It Matters
AI is out of the bottle and no longer just research. It's forging global infrastructure for the future economy. While Canada still has amazing talent and values, without larger investment, smarter models, and real infrastructure at home, we risk being left behind. Canada should be building smaller, safer, and sovereign AI ecosystem that works for Canadians and the world.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Musk Expands AI Power Amidst Twitter Stake Lawsuit
AI | March 31, 2025
Image: Freepik/8photo
$33B xAI-X Merger Deepens Musk’s Control Amid Fraud Lawsuit
On March 282025, Elon Musk announced on X that xAI was acquiring X in an all-stock deal to merge data, computing power, AI models, distribution and top talent under one roof. xAI after the merger is valued at $80 billion. At the time of the acquisition, X was valued at $33 billion (includes $12.5 billion debt).
In many ways, the two companies are already working together in some respects, as xAI's chatbot Grok already uses posts on X to train its systems, and moving forward will likely become a larger part of an AI-powered platform, especially for paying users.
See: Elon Musk’s “Magic Money” Discovery and What It Means
Musk originally bought Twitter for $44 billion in 2022 but since taking over the platform which is now called X, the company's valuation has dropped in value and lost major advertisers.
Fraud Lawsuit Moves Forward
On the same day the merger was announced, a U.S. judge ruled that a shareholder lawsuit alleging securities fraud against Musk directly can proceed. Plaintiffs said Musk ignored a March 24, 2022 deadline to disclose that he had acquired more than 5% of Twitter’s shares, and waited 11 more days before filing with the SEC that he owned 9.2%. According to plaintiffs, that delay saved Musk more than $200 million while other investors sold at lower prices.
Further, U.S. District Judge Andrew Carter said Musk’s filings and tweets like the one jokingly turning Twitter’s logo into Doge could be intentionally misleading and expose Musk to financial penalties while raising questions about transparency and investor protection in large cap private tech deals, especially when ownership and management overlap.
Political Influence
Elon Musk has also waded big time into U.S. politics and is now a senior adviser to Donald Trump’s administration and tasked to consolidate or shut down parts of the federal government via the Department of Government Efficiency (DOGE), sparking significant backlash against DOGE which has extended to Musk's business ventures. National wide protests known as the 'Tesla Takedown' movement have occur at Tesla dealerships. Tesla's stock price has experienced a huge decline, partly because of the public's dissatisfaction with Musk's political involvement including prominent celebrities and politicians.
See: Trump’s Inauguration Marks New Chapter for Tech Giants
Meanwhile,Musk still runs Tesla, SpaceX, Neuralink, and The Boring Company, all of which rely on public contracts or infrastructure. Musk holds an unprecedented mix of public and private power, raising real concerns about accountability, fairness, and how much influence a person should have over technology and the public's agenda.
Why It Matters
This M&A deal is a new kind of vertical integration where tech, compute power, communication and political influence all fall under one roof. Investors, regulators, and the public must deal with the risks and implications of when the same person builds AI models, trains them on global conversations, distributes them on his own platform, and advises political leaders.
It's not just about scale, it's about the infrastructure of influence itself.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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eToro Files Nasdaq IPO After Crypto Revenue Surge
Public Market Funding | March 31, 2025
Image: Freepik/macrovector
Trading platform eToro officially files to go public on Nasdaq as IPO interest builds
On March 24, 2025, an Israeli fintech platform known for social trading and crypto investments, eToro filed paperwork with the U.S. Securities and Exchange Commission, confirming intent to go public on the Nasdaq under the ticker symbol “ETOR". After several years of IPO uncertainty and decline, here's a
of 10 private fintech companies watching and waiting to see how IPOs in early 2025 perform before announcing their own.
About eToro
eToro is an Israeli fintech company with offices in Cyprus, UK, US, Australia, Germany and the UAE, and not currently available to Canadian residents. It's an online, multi-asset trading platform founded in 2007 where users can trade stocks, exchange-traded funds (ETFs), cryptocurrencies, and commodities. Uniquely it offers social trading features where users can view, follow, and copy the investment strategies of other traders. This innovation makes investing more accessible for those new to trading and financial markets.
See: 10 Fintech and Crypto IPOs 2025 – Boom or Bubble?
eToro is a digital-first platform that operates entirely online via web and mobile apps, reducing many of the barriers traditionally associated with investing. It was one of the first early fintech players to embrace crypto trading which helped democratize digital assets among retail investors. With a friendly UX/UI, real time data tools, and low starting requirements, eToro is often compared to fintech giants like Robinhood, Revolut, and Wealthsimple and is part of the broader movement to challenge incumbents by using new technologies to offer simpler, faster, and often cheaper alternatives.
eToro’s financial performance has been strong heading into 2025. In 2024, the company generated $931 million in commissions, an 31% increase over the year prior. Net income also jumped to $192 million from just $15 million the year before. Why the growth? A surge in crypto trading made up 38% of their commissions last year which is up more than double from 17% in 2023 per investopedia reporting.
IPO Market 2020-2025
Initial Public Offering markets have been hit or miss over the past five years, due to economic uncertainties, investor sentiment and global events. Below is an overview.
2020-2021 - IPO activity surged. Low interest rates and a bullish stock market created favourable conditions that leads to a record number of companies going public. In 2021, global IPO proceeds raked in $508.9 billion, an 80% increase compared to 2020.
2022-2023 -IPO decline/uncertainty. Due to rising inflation, rising interest rates, and geopolitical tensions, IPO momentum slowed in 2022 and 2023. Investors were caution leading to a big drop in IPO activity. In 2023, global IPO proceeds fell like a stone to around $117.9 billion, the lowest in the last decade.
2024 - IPO markets showed signs of recovery. While the U.S. led in IPO proceeds, India surpassed other countries in IPO volume, highlighting regional strengths. Private equity and venture capital-backed IPOs played a key role with tech, industrials, and consumer sectors leading activity.
2025 - pentup IPO demand / optimism Returns? With easing inflation and anticipation for further rate cuts, some confidence is returning to IPO outlook, proceeds in 2024 were up 45% and the number of IPOs also rose 40% from the previous year. Sectors like artificial intelligence, fintech and crypto are gaining traction due to a shift in the regulatory outlook, especially in the U.S. under the new administration. At the same time, tariffs and trade wars are dominating the narrative putting pressure on investor's outlook and economic uncertainty.
So after a period of volatility, IPO markets in 2025 appear to be ready for renewed activity but not without risks. As such, companies waiting in the IPO queue are watching with abated breath to see how proceeds and investor sentiment are before launching their own IPOs, including firms like BitGo, Gemini, Kraken, Circle, Klarna and Chime.
eToro's IPO Outlook
This isn't eToro's first kick at the IPO can. Back in 2021, eToro planned to list through a SPAC deal, a type of company that exists just to be taken over so firms can go public quickly. That deal would have valued eToro at over $10 billion but it fell through in 2022 according to investopedia.
See: How Fintechs Are Unlocking Value in Private Markets 2024
This time, eToro has big brand banks backing its IPO like Goldman Sachs, Jefferies, UBS, and Citigroup. If eToro’s IPO is successful, it could open the door for more tech and fintech firms that have been patiently watching on the sidelines and may finally be able to enter the public markets.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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One Key Differences Between USMLE Step 2 CK And Step 2 CS
March 29, 2025
Image: Freepik/wavebreakmedia_micro
Remember when your older sibling or that friend from medical school did well on the USMLE Step 2? They took a test called Step 2 CS that’s no longer around. That’s right—the Step 2 CS exam has been discontinued. But here’s the silver lining: this change opens up an opportunity for you to focus on what’s important—acing the Step 2 CK and becoming a fantastic doctor.
So, what’s the difference between CK and CS? - One major difference is that the former is discontinued. The USMLE Step 2 CK is all about testing your clinical knowledge—think of it as a way to see how well you can understand and manage different health issues by answering multiple-choice questions. It’s about applying everything you’ve learned during your medical training. Step 2 CS, on the other hand, evaluates how well you handle patient interactions—things like doing physical exams and communicating effectively.
To do well on Step 2 CK, build a solid understanding during your clinical experiences. Let’s welcome this change and use it to our advantage—after all, adapting is a key part of being in medicine. Ready to explore further? Let’s dive in!
Start Early
Too many people procrastinate their Step 2 after their Step 1's success. This can be catastrophic. Start early to connect your study materials to real-life situations. This helps you understand how to apply what you learn instead of just memorizing it.
Make The Most of Your Rotations
Your time in various clinical settings is a fantastic opportunity for preparation. Pay attention to common illnesses, how they’re treated, and the best ways to manage patients. The more experience you gain, the better you’ll remember. Make notes as they are indispensable reference points.
Use Active Learning
Simply reading is not enough. You have to proactively engage with resources like question banks to test your knowledge and learn from any mistakes. Tools like flashcards can help you remember important facts, and studying with peers can reinforce your understanding, as teaching others is a great way to learn!
Take Practice Tests
Getting used to the exam format by taking timed practice tests can make a big difference. This not only helps build your stamina for the actual exam but also allows you to track your progress and identify areas for improvement.
Stay Positive
Studying for Step 2 CK can feel overwhelming at times, but remember your motivation for this journey. Take a break and come back; it will make you feel better. You’re not just preparing for a test—you’re getting ready to make a difference in people’s lives.
Conclusion
If you look at the bright side, the discontinuation of CS will not impact as much. Ultimately, your goal hasn’t changed: to be the best doctor we can be. So let them bring it in while you adapt to the new landscape, and keep moving forward.
See: Disruptive Innovations Driving Global Change in 2025
You’ve got this! Now, go out there and give your honest and best shot at the second stage of the licensure exam.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Robinhood’s WealthTech Push and Lifestyle Finance
Robinhood | March 28, 2025
Image: Robinhood Banking (Robinhood's Newsroom)
Robinhood Unveils Low-cost Wealth Management, AI Tools, and Luxury Banking Perks for Retail Users
On March 27 2025, during Robinhood's Lost City of Gold event keynote, the company announced 3 major launches that katipult the company well beyond trading, including Robinhood Strategies, Robinhood Banking, and Robinhood Cortext. The new suite of tools is moving towards a lifestyle finance platform, targeting a future where personalized financial services aren't just for the rich. Built for Gold members, these moves could disrupt Canada's fintech landscape if local players start following suit.
Robo-Advisory for a Fraction of the Cost
Mostly everyone dislikes expensive service fees in finance. That's the pitch of many fintechs who are competing directly with traditional banks. But Robinhood Strategies takes a different approach to investment fees. Instead of charging you proportionately more (in fees) as your total portfolio grows, Robinhood is keeping it simple and low cost by charging an annual flat fee of 0.25%, and Gold members never pay more than $250 a year (no matter how large their portfolio is or how much they invest)!
See: Wealth Management Insights for Fintechs and Investors
To put that in perspective, that's half the price of Wealthsimple’s 0.5% standard tier, and with a low $250 fee cap that means investors with larger portfolios pay even less. Let's do the math. If you invest over $100,000, any money above that is managed for free (due to the fee cap). Someone with $250,000 ends up paying just 0.1%, and at $500,000, the total fee drops to only 0.05%. So as your portfolio grows, you don't pay more fees - you pay less!
Like most robo-advisory models, portfolios are built to match your risk and financial goals, using a mix of ETFs and selected individual stocks. The service also includes built-in tax optimization, loss harvesting tools,and performance insights, all through a user friendly app.
Banking Perks That Feel Exclusive (But you don't have to be rich)
Chalk this one up to the marketers but Robinhood Banking certainly sounds good by way of bringing premium banking features to regular users. When the platform launches later this year, Gold members will get access to many services that you'd expect from a private bank like 4% interest on savings, ability to send money globally in over 100 currencies, help with estate planning, taxes, and get this....even have cash delivered to your door like a pizza. The platform will also include some family friendly banking features like accounts for kids with embedded spending controls.
See: Open Banking Delayed to 2026, Favours Banks Over Innovation
On top of all that, Robinhood is adding some luxury experiences like access to high profile events, private helicopters, and global concierge services, apparently as part of a broader push to become more than just a finance app. The goal is to be a full lifestyle platform for money management.
Real-Time AI Tools in Your Pocket
All launches these days include AI and Robinhood is no different. Cortex is the financial platforms brain or real time analysis engine that can answer most basic questions that investors ask all the time, such as Why is this stock moving? What strategy fits my risk tolerance and market perspective?
In response, Cortex will generate short summaries explaining stock price movements and help users build trades aligned with their outlook, which can be helpful when trading complex strategies like options trading. While Cortex isn't designed to place fully autonomous trades on your behalf, it aims to bridge the gap between newish investors and pro-trader research tools, towards a new type of AI powered investing experience for every day users.
What This Means for Canadian Investors
On July 15 2024, Robinhood celebrated the opening of their Toronto office and the hiring of a 50 person team to kickoff their Canadian expansion. As of March 2025, Canadian users still don't have access to the Robinhood app and there isn't a public update on the status of any sort of banking license application or timeline, so Robinhood's banking services remain unavailable in Canada at this time.
See: Wealthsimple’s 10th Anniversary and Path to $1 Trillion AUM
As Robinhood continues to build, Canadian fintechs like Wealthsimple, Questrade, Koho, and other local players are enjoying an early market lead. But now that Robinhood is pushing the boundaries of what's possible, such as expert portfolio management at an ultra low cost, the expectations of the market are bound to change. Canadian firms will need to keep up or risk falling behind. Competition is going to ramp up, so fasten your seat belts and get ready for an interesting ride.
Closing Outlook
Fintech continues to evolve. It’s no longer just about cheap or no fee trading. It’s about offering full financial experiences. With AI tools, pro-managed portfolios, and even banking with luxury perks. Robinhood is setting a new standard. Canadian platforms may have a head start but they better adapt quickly because users will start expecting more, and may look elsewhere to get it.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Are Your Tokens Securities? New EU Rules Say Maybe
EU Crypto Guidelines | March 28, 2025
Image: Guidelines - Crypto assets as financial instruments (ESMA)
New EU Guidelines Help Clarify the Line Between Crypto and Securities
Last month, the European Securities and Markets Authority (ESMA) published detailed guidelines (21 page PDF) as part of Markets in Crypto Asset Regulation (MiCAR) that help regulators and crypto companies figure out whether or not a specific crypto asset should be treated like a financial instrument and be regulated under Europe’s traditional investment rules, affecting how it's issued, traded, and supervised. This article provides an overview of the guidelines for your review.
Tokens That Act Like Shares or Bonds Will Be Regulated Like Them
For anyone new to securities laws, one of the first things you'll hear and/or learn is the expression, "If it walks like a duck, and talk like a duck, then it's probably a duck!" This means that regulators aren't necessarily looking how a token is built or which blockchain it runs on. What really matters is how it behaves.
See: 10 Insights from IOSCO’s Report for Crypto Investors
Under MiFID II, a token or crypto asset is probably a tradeable security if all 3 conditions are true:
- the crypto asset functions as a payment tool (i.e. not just used to buy stuff)
- the crypto asset belongs to a group or “class” with identical rights (like dividends or votes)
- the crypto asset is tradeable on capital markets
That includes tokenized shares, debt instruments, and some structured products. So if it walks and talks like a stock, Europe will treat it like one. Having said that, if any one of the above conditions is false then it doesn't qualify as a transferable security under EU rules.
Other Financial Products Can Be Tokens Too
Not every token that’s regulated is a stock or share. Some crypto assets are more like short-term loans (or money market instruments). Other tokens might give you a piece of a shared investment fund, placing them in the pooled fund category. Some tokens are derivatives where the price simply follows the price of something else like a stock or index.
See: Crypto Meets Wall Street as SEC Approves Yield Stablecoin
There’s even the potential for carbon credit tokens, if they enable the right to emit greenhouse gases under Europe’s trading system. Each of these different types of token behaviours has its own legal checklist but generally, if a token offers financial returns and matches one of the above types, it will probably be treated as a regulated investment.
Utility Tokens, NFTs & Hybrids? It Depends.
Some tokens are meant to unlock access to perks like discounts, special features, or premium content. The ESMA calls these utility tokens which aren't treated like investments unless they also come with for profit rights or trade on open markets like stock/shares.
Now, what about NFTs in the EU? Just because an NFT may be considered 'unique' doesn't mean it avoids the rules. If the NFT provides financial benefits or trades like a stock, then it could still be recognized as an investment. This is true even for fractional NFTs but if they act like tiny investments then they could be regulated just like regular securities.
See: Stablecoins Are Growing Faster Than You Think
Some tokens combine utility and investment features together and are considered hybrid tokens. In these cases, the ESMA says the financial part trumps the utility part, and like in all cases, if the token looks like an investment, it needs to follow investment rules, regardless how many other functions it provides.
Conclusion
This new crypto guidance (translated versions in multiple languages) helps reduce the grey area between securities and crypto assets. It also puts pressure on projects to think very carefully when designing a token's feature set, value proposition, and how it's marketed. It also shows that regulators in the EU are trying to adapt and not just crack down.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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