Compliance: "Non-Profit" vs the "For-Profit" Models and Token Sales

[BlueChipper]

I am very interested in regulatory & legal issues and attended several conferences over the last couple of weeks, especially the #CryptoCapital2017 in London and the Berlin session last week have been very interesting.

As far as I understood the lasted compliance developments "non-profit" models are becoming quite fashionable for token sales (ICO/ITO) with the Canadian kik guys just being the most prominent on this list.

But it seems to me that just because I make the token issuer a non-profit doesn't make the issuance "more" compliant, right? Although a charity organization seems an appropriate governance model for a token-based ecosystem, it doesn't solve all the compliance & regulation issues under all the different jurisdictional regimes, right?

What's your take on that?

[iamTom123]

You are right. Just because you are now following a charitable model it does not mean that the essence of the project has already changed. You can call a rose by any other name but it remains to be a rose. Now, having said that, there is actually some validity with the non-profit model and it can be a good idea to explore but I don't think all ICOs can qualify for this model. Now, we have to remember that there are also laws governing non-profit organizations and these laws have to considered if we have to adopt this non-profit model platform.

Compliance is really the big issue here because we have to protect the potential investors so that they will not be victimized by scam artists who can be using the ICO platform to enrich themselves leaving the investors just holding empty bags. Maybe a self-regulating group or a body can be a big help to advanced the ICO platform.

[BlueChipper]

Compliance is really the big issue here because we have to protect the potential investors so that they will not be victimized by scam artists who can be using the ICO platform to enrich themselves leaving the investors just holding empty bags. Maybe a self-regulating group or a body can be a big help to advanced the ICO platform.

I agree and very much appreciate self-regulating initiatives like Williams Tokenfilings but besides regulation, I do see big issues on the tax side as well as on future class actions if some (scams or not) ICO projects do not deliver as expected (and the pixie dust is blown away). This then would make foundations a more safe vehicle for token issuance, I guess.

Would be great to hear your ideas on how you structured and/or would structure a token issue in your respective jurisdiction.   

[GreenBits]

Compliance is really the big issue here because we have to protect the potential investors so that they will not be victimized by scam artists who can be using the ICO platform to enrich themselves leaving the investors just holding empty bags. Maybe a self-regulating group or a body can be a big help to advanced the ICO platform.

I agree and very much appreciate self-regulating initiatives like Williams Tokenfilings but besides regulation, I do see big issues on the tax side as well as on future class actions if some (scams or not) ICO projects do not deliver as expected (and the pixie dust is blown away). This then would make foundations a more safe vehicle for token issuance, I guess.

Would be great to hear your ideas on how you structured and/or would structure a token issue in your respective jurisdiction.   

Per the recent SEC guidance, if there is any profit sharing scheme or dividend dispersion attached to the token/coin, it is considered a security and thus cannot be offered as part of a crowdfunding venture attached to a non profit, as non profits cant issue shares. the dudes that are issuing the TribeToken and ACT token may need to rethink their model. it seems the cleanest way to structure this, in my novice eyes, would be to to issue a scrip of sorts; dollars that can be used on the platform for enhanced functionality or to redeem for prizes/rewards that dont have an equivalent fiat value. An example would be the Kin token (if Kik Messenger were a non profit) . The only thing you can do with a Kin token is buy stickers and emoji and stuff like that on the Kik platform. There is no transfer of real value; no way to facilitate money laundering or tax avoidance.

this is what crowdfunded game developers do; they offer enhanced functionality or pay for play game perks for early adopters.

but, people will not be interested in these as much (ICOs) if they have no profit motive

[BlueChipper]

An example would be the Kin token (if Kik Messenger were a non profit) . The only thing you can do with a Kin token is buy stickers and emoji and stuff like that on the Kik platform. There is no transfer of real value; no way to facilitate money laundering or tax avoidance.

this is what crowdfunded game developers do; they offer enhanced functionality or pay for play game perks for early adopters.

but, people will not be interested in these as much (ICOs) if they have no profit motive

That's exactly how I feel. The #SEC report (see here) goes even beyond that and says that if you reasonably expect a value from your token aka cooin (not restricted on dividends of other periodical payments) it's perhaps a security. I'd suggest that more than 90% of all ICOs happening these days would then issue equity in this broad #SEC definition. It seems to be completely clear to me that SEC is going the road to regulate all cryptographic tokens if they may be of value in the "real world", i.e. in a *non-kik scenario".

What would that mean to the ICOs?