Tokens vs. financial authorities

[gregory51gosh]

In what country it is legal to make emission of tokens?

A lot of countries gives status for the BTC as "legal", but tokens, sometimes discovered as securities are not as clear situation.

I was thinking, for example, about Malta.

[gentlemand]

I don't think there's one single country that has fully clarified their legal status, let alone regulated them.

It's going to take a while before any country comes out fully for them. China is now certainly against them and the US is starting to make rumbles about bringing them to heel.

If I was in the token business I would reject Chinese and American citizens and hope for the best. That's about all anyone can do.

[PeterKh]

The issue is not as much about a specific state, as it is about complying with that state's securities regulations. Practically every country has securities regulations in place and regulators to enforce them (SEC being the most prominent one). If a regulator sees that Company A is offering securities to its nationals, it has the right to go after Company A. The idea is to make token not a security, and them most countries would be fine for the purposes of ICO/TGE.

[gregory51gosh]

The problem is more complex. I am searching for the right jurisdiction for my project for couple of month. My token is not a security, but lack of knowledge in some jurisdictions blocks the business model. For example, after the change of authorities in Poland, ANY token is seen as security, despite what it really does (and token sale itself seen as securities emission). So anyone who wants is to make legal way, has a problem..
Malta responded quite good info, that is why I am asking for other countries (maybe someone has made such analysis).
Offshore companies aren't also as clear as anyone thinks. I would risk assumption that 50-80% of people that has done ico's in offshore does not acknowledge the risk (if they want to make it legally)..

[PeterKh]

The problem is more complex. I am searching for the right jurisdiction for my project for couple of month. My token is not a security, but lack of knowledge in some jurisdictions blocks the business model. For example, after the change of authorities in Poland, ANY token is seen as security, despite what it really does (and token sale itself seen as securities emission). So anyone who wants is to make legal way, has a problem..
Malta responded quite good info, that is why I am asking for other countries (maybe someone has made such analysis).
Offshore companies aren't also as clear as anyone thinks. I would risk assumption that 50-80% of people that has done ico's in offshore does not acknowledge the risk (if they want to make it legally)..

Agreed, some jurisdictions are just going with a full ban. Some jurisdictions have pretty much said that they distinguish between a product token and a security: US, Canada, Singapore, HK, South Korea, UK, and a few others.

From personal experience, I know that Singapore, Switzerland and Cayman Islands are fine, as long as the token is not a security.

I've heard good things about Gibraltar, Isle of Man and Estonia.

[gregory51gosh]

The problem is more complex. I am searching for the right jurisdiction for my project for couple of month. My token is not a security, but lack of knowledge in some jurisdictions blocks the business model. For example, after the change of authorities in Poland, ANY token is seen as security, despite what it really does (and token sale itself seen as securities emission). So anyone who wants is to make legal way, has a problem..
Malta responded quite good info, that is why I am asking for other countries (maybe someone has made such analysis).
Offshore companies aren't also as clear as anyone thinks. I would risk assumption that 50-80% of people that has done ico's in offshore does not acknowledge the risk (if they want to make it legally)..

Agreed, some jurisdictions are just going with a full ban. Some jurisdictions have pretty much said that they distinguish between a product token and a security: US, Canada, Singapore, HK, South Korea, UK, and a few others.

From personal experience, I know that Singapore, Switzerland and Cayman Islands are fine, as long as the token is not a security.

I've heard good things about Gibraltar, Isle of Man and Estonia.

Thanks. Well, my token will be representing the value of loyalty tokens in a loyalty program I am building with partners. But we have entered into a wall with the jurisdiction. For example, on Seychelles, it requires a brokerage license. For me, this is hilarious, as we do not construct dividends - the loyalty token is based on similar mechanics to such (already) operating mechanisms. Gibraltar - also problem, I have talked to legal advisors. Isle of man - license (English common law), Estonia - the problem of token sale vs. EU regulations (KYC/AML + 1.5M EUR limit). Switzerland - only ZUG (50k EUR upfront just to talk to you). I hope the legal office will find a solution. But any help or "track" possible - appreciated.

[PeterKh]

Thanks. Well, my token will be representing the value of loyalty tokens in a loyalty program I am building with partners. But we have entered into a wall with the jurisdiction. For example, on Seychelles, it requires a brokerage license. For me, this is hilarious, as we do not construct dividends - the loyalty token is based on similar mechanics to such (already) operating mechanisms. Gibraltar - also problem, I have talked to legal advisors. Isle of man - license (English common law), Estonia - the problem of token sale vs. EU regulations (KYC/AML + 1.5M EUR limit). Switzerland - only ZUG (50k EUR upfront just to talk to you). I hope the legal office will find a solution. But any help or "track" possible - appreciated.

AML/KYC can be an issue. I'm a lawyer myself, and we are helping to set up an index crypto fund for conducting an ICO. For tax/legal reasons we are working with Caymans now. We are cooperating with Cayman counsel on this. The Cayman counsel first concluded that client's token was not a security. But the AML/KYC requirements still stand, so the client will have to implement the requisite procedures.

[gregory51gosh]

Thanks. Well, my token will be representing the value of loyalty tokens in a loyalty program I am building with partners. But we have entered into a wall with the jurisdiction. For example, on Seychelles, it requires a brokerage license. For me, this is hilarious, as we do not construct dividends - the loyalty token is based on similar mechanics to such (already) operating mechanisms. Gibraltar - also problem, I have talked to legal advisors. Isle of man - license (English common law), Estonia - the problem of token sale vs. EU regulations (KYC/AML + 1.5M EUR limit). Switzerland - only ZUG (50k EUR upfront just to talk to you). I hope the legal office will find a solution. But any help or "track" possible - appreciated.

AML/KYC can be an issue. I'm a lawyer myself, and we are helping to set up an index crypto fund for conducting an ICO. For tax/legal reasons we are working with Caymans now. We are cooperating with Cayman counsel on this. The Cayman counsel first concluded that client's token was not a security. But the AML/KYC requirements still stand, so the client will have to implement the requisite procedures.

I think KYC/AML requirement may be the project killer. Are there any limits on Caymans that don't have to be KYC/AML? For example, like in EU 2k EUR per single payment? Are you acquiring a license for the ICO token sale?Or just making a donation scheme (for the registered foundation)?

[PeterKh]

I think KYC/AML requirement may be the project killer. Are there any limits on Caymans that don't have to be KYC/AML? For example, like in EU 2k EUR per single payment? Are you acquiring a license for the ICO token sale?Or just making a donation scheme (for the registered foundation)?

Unfortunately, any token purchase/redemption needs to be covered, regardless of the amount. This function can be outsourced to firms who specialize in this. The client is selecting a partner for the task. I think the cost is about USD 2-3 per person check.
Regarding the license, we aren't offering securities or are otherwise involved in investment activities. So no license.

[gregory51gosh]

Can you recommend such partner companies for KYC/AML? In Poland there is coinfirm, I was thinking to make a token sale through an exchange - that would solve the problem, as I have seen such constructions recently (exchange is also an escrow).

[iamTom123]

I don't think there's one single country that has fully clarified their legal status, let alone regulated them. It's going to take a while before any country comes out fully for them. China is now certainly against them and the US is starting to make rumbles about bringing them to heel. If I was in the token business I would reject Chinese and American citizens and hope for the best. That's about all anyone can do.

This is quite expected as cryptocurrency is still new and there are so many grey areas that has to be addressed first before any country can grant some legal status for any coin/token most especially Bitcoin. Here in my country, Bitcoin is being treated as a foreign money on the same level as US Dollar or any other well-known international currencies we have. The taxes are levied on the exchanges where we do transactions and we don't see it directly imposed on individual users.

I find it really more acceptable. And soon there would be more Bitcoin exchanges to be operating here and they are already granted the permit to do so. I am proud of my country that it has no myopic vision for cryptocurrency like what China is doing right now. China has an overreaching agenda of global domination and Bitcoin (if not regulated strictly) can do harm to their goals. Anyway, Bitcoin can survive and flourish without the big China market.

As to issuing ICO, there are countries which are not viewing them favorably because of its decentralized and unregulated nature. Maybe soon there can be a legal platform for this but issuers have to go through strict vetting before they can have the permit for such a crowdfunding activity.

[wakedcoder]

I can't speak for other jurisdictions, but in the UK the Financial Conduct Authority seems to be taking a light-touch approach for now and keeping an eye on how the markets run (and presumably also whether substantial numbers of retail investors get burnt). They just put out a warning, but what I take from this is that in general it is possible to structure an unregulated ICO in the UK:
https://www.fca.org.uk/news/statements/initial-coin-offerings

By this I mean unregulated for Financial Services and Markets Act purposes - you'd need to look separately at money-laundering disclosures and things like the Payment Services Regulations.

Personally I think the community should engage with regulators and maybe we should develop some sort of workable voluntary code for whitepapers to help drive the direction of regulation, rather than waiting for a top-down solution which may end up being so onerous and expensive to comply with that ICOs become a thing which only big banks and companies can do.

There's a good precedent to look at with regard to regulation of withdrawable share issues by charitable 'community benefit societies' in the UK. Co-operatives UK produces a sort of light touch prospectus with guidance on best practice which is a lot lot easier to comply with than the full FCA-approved passported prospectus regulation requirements which apply in relation to the issue of listed securities on EEA regulated markets!!

https://www.uk.coop/developing-co-ops/model-governing-documents/charitable-community-benefit-society

[GreenBits]

In what country it is legal to make emission of tokens?

A lot of countries gives status for the BTC as "legal", but tokens, sometimes discovered as securities are not as clear situation.

I was thinking, for example, about Malta.

there is basically no country with lax enough laws to issue a "howey" token without registration/regulation. even the cayman islands, the grey finance haven of the world, doesnt have loose enough regulation for any old person to issue a security. even if you went through the proper motions to set up the corporate structures, you are beholden to the body that governs the people you sell the token to. you have a responsibility to prevent "unauthorized participants", and if you dont do this diligently, you can at least face civil liability from that respective government.

to be honest, it seems best to wait til guidance is issued an act accordingly, issue a non Howey token (good luck selling it) or hurry up and do this is the little time that is left, and hope for the best.

[gregory51gosh]

I'm working on it, probably I will acquire a license and make it as security, however, I'm waiting for the reply of an analysis of the legal advisors.

[jhanson]

Both institutions will come head to head with the legality of crypto. There are conflicts of interest and regulation.

[Jovovich]

Both institutions will come head to head with the legality of crypto. There are conflicts of interest and regulation.

And it would take months for at least legislative to authorize if ever one state opted to legalize the regulation of bitcoin. So far also it is not easy to make ammends pertaining to this cryptocurrencies. The main issue from states would be the comparison of other states if their economy is increasing with the help of cryptocurrency.

[wakedcoder]

Does anyone know of any jurisdiction where they apply formal insider trading/market abuse/market manipulation rules to listed altcoins? Considering this: http://www.cityam.com/272451/jamie-dimon-faces-market-abuse-report-after-his-comments

[Falgorn]

Most countries have not yet decided on the status of the crypto currency. In the world there is no unity on this issue. Therefore, their legal status is uncertain. However, in the near future, given the sharply increased interest of the population in the crypto currency, this issue of the state will have to be considered and regulated.

[GreenBits]

Does anyone know of any jurisdiction where they apply formal insider trading/market abuse/market manipulation rules to listed altcoins? Considering this: http://www.cityam.com/272451/jamie-dimon-faces-market-abuse-report-after-his-comments

Apparently, Sweden. They filed the complaint with the Swedish Financial Supervisory Authority, I dont think they would have gone through the motions if they didnt have jurisdiction. Alas, in this states cryptos are property. There is no market to affect, per se, so you can talk shit about an asset as long as it isnt a product (as this would roll into libel/defamation territory. In any jurisdiction where similar rules would apply, complaining about the price of bitcoin would be akin to complianing about the ever rising cost of gas. Annoying, but not illegal, and certainly protected under free speech.

[gregory51gosh]

we figured out a solution. it seems only english-based common law countries + utility (non-security) token unfortunately, so we had to change business model several times not to go with our token into securities model, which limits some solutions. However, it is strong still in the limited form (utility).