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Author Topic: shall a utility-token-ICO request KYC and prevent US/China contributions.  (Read 75 times)
Jekbolt
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February 28, 2018, 11:27:35 PM
 #1

Dear Experts, kindly inform:

Shall an company registered in Hong Kong make KYC and ALM for its Utility token sale (ICO) and at the same time prevent US, China, etc. citizens from doing contributions? 

The Overall Risk Score is 10 from 100 due to "The Howey Test".

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February 28, 2018, 11:51:44 PM
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 #2

Dear Experts, kindly inform:

Shall an company registered in Hong Kong make KYC and ALM for its Utility token sale (ICO) and at the same time prevent US, China, etc. citizens from doing contributions? 

The Overall Risk Score is 10 from 100 due to "The Howey Test".




This is not legal advice whatsoever. The reason why ICO issuers do this is to exercise extreme caution in fear of future regulations by the United States that currently aren't in place. They are showing legal due diligence to make sure that they are not in violation of any potential ruling. KYC and AML requirements became rampant after the SEC's DAO report. The Howey Test is a good place to start but there are so many factors that can deem a ICO/crypto a security. Even if it's token is no where near considered a security, how it's sold, marketed, amongst other things could still define it as one. In my opinion, it will most likely come down to a case to case basis in determining this.
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March 01, 2018, 03:07:41 AM
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Dear Experts, kindly inform:

Shall an company registered in Hong Kong make KYC and ALM for its Utility token sale (ICO) and at the same time prevent US, China, etc. citizens from doing contributions?  

There are a whole lot of unknowns packed into your question. The reality is that we are waiting for precedent from the SEC and its Chinese counterpart. I don't know much about Chinese regulations, but I would urge caution regarding US investors. You mention that the ICO is for a "utility token." Merely calling it a "utility token" (especially if you market it as an investment) does not mean the token is not a security. If it turns out your token is an unregistered security, you may have a lot of headaches and legal worries in your future.

If your token is a security, you need to register it with the SEC and go through all the associated red tape. Otherwise, you risk SEC enforcement actions. Otherwise, it's commonplace to prohibit US investors entirely (and at least enforce some sort of IP ban along with disclaimers).

From their December statement:
Quote
Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.  Tokens and offerings that incorporate features and marketing efforts that emphasize the potential for profits based on the entrepreneurial or managerial efforts of others continue to contain the hallmarks of a security under U.S. law.

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March 01, 2018, 08:47:43 AM
 #4

Dear Experts, kindly inform:

Shall an company registered in Hong Kong make KYC and ALM for its Utility token sale (ICO) and at the same time prevent US, China, etc. citizens from doing contributions? 

The Overall Risk Score is 10 from 100 due to "The Howey Test".




This is not legal advice whatsoever. The reason why ICO issuers do this is to exercise extreme caution in fear of future regulations by the United States that currently aren't in place. They are showing legal due diligence to make sure that they are not in violation of any potential ruling. KYC and AML requirements became rampant after the SEC's DAO report. The Howey Test is a good place to start but there are so many factors that can deem a ICO/crypto a security. Even if it's token is no where near considered a security, how it's sold, marketed, amongst other things could still define it as one. In my opinion, it will most likely come down to a case to case basis in determining this.

Thanks for advice! +1 )
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March 02, 2018, 01:51:25 AM
 #5

Dear Experts, kindly inform:

Shall an company registered in Hong Kong make KYC and ALM for its Utility token sale (ICO) and at the same time prevent US, China, etc. citizens from doing contributions? 

The Overall Risk Score is 10 from 100 due to "The Howey Test".




This is not legal advice whatsoever. The reason why ICO issuers do this is to exercise extreme caution in fear of future regulations by the United States that currently aren't in place. They are showing legal due diligence to make sure that they are not in violation of any potential ruling. KYC and AML requirements became rampant after the SEC's DAO report. The Howey Test is a good place to start but there are so many factors that can deem a ICO/crypto a security. Even if it's token is no where near considered a security, how it's sold, marketed, amongst other things could still define it as one. In my opinion, it will most likely come down to a case to case basis in determining this.

There are securities laws in the United States that would prevent the sale of an unregulated/unexempted security from being sold to someone in the states. The issue for the state or federal regulator would be getting the entity to appear in their jurisdiction, as its quite easy to just ignore them if you do not operate or have a place of business there. Caviar.io is a recent example of a company that got pinged, even though they had anti-us measures in place they still sold to a US person and got in trouble for it. The principal operated out of a US state and so they were able to slap his wrist easily. Now they are having to do a full scale KYC audit to show the regulator in which ever state the principal operates out of that they are willing to play ball.

I think KYC and AML precautions show a capable and risk averse team which in my opinion is a good thing. If they are willing to play ball with global authorities and have done their research about how to conduct themselves then that shows at least they care.

On the utility token point there are a number of concerns with proving that the token has actual utility and isnt just a non-dividend bearing security. My understanding is that Paypie is having to wait until their platform is 100% operational in order to show the Canadian authorities that their token has genuine utility and should be exempt from securities regulations. Voting rights on platforms, staking rights on platforms & proper use cases are what your after. Simply swapping a token for something that money could buy can mean that the 'utility' of the token is questionable (ie you can buy stuff from X using x token isnt really utility because why cant you do that with $).

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Jekbolt
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March 07, 2018, 12:39:15 PM
 #6

So what is the recommendation?)

1) Support KYC and AML checking procedures?
2) Don't allow contributions from US citizens?

What about restrictions for other countries?
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March 07, 2018, 11:03:08 PM
 #7

So what is the recommendation?)

1) Support KYC and AML checking procedures?
2) Don't allow contributions from US citizens?

What about restrictions for other countries?


Personally I don't support giving out my personal identification data to some company which is new and I am not aware of their legal status. Majority of the ICOs are scam, accept it or not, it is the harsh reality. So a huge risk factor is associated with the KYC data. So if anyone is willing to share their KYC data to any ICO, that would be his personal call. I have already expressed the risk factors in a different thread. Check the link below,

https://bitcointalk.org/index.php?topic=2946614.0

Cryptocurrency is based on the idea of decentralization. KYC norms are making it strictly centralized. So this the second reason why I don't support providing KYC data to ICO companies.

USA and China are two countries where ICOs are banned. That is the reason why their citizens are not allowed to participate in any ICOs to avoid any future conflict. But that certainly can't be the reason for ICOs to ask KYC from all participants.

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Jekbolt
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March 31, 2018, 09:49:07 AM
 #8

So what is the recommendation?)

1) Support KYC and AML checking procedures?
2) Don't allow contributions from US citizens?

What about restrictions for other countries?


Personally I don't support giving out my personal identification data to some company which is new and I am not aware of their legal status. Majority of the ICOs are scam, accept it or not, it is the harsh reality. So a huge risk factor is associated with the KYC data. So if anyone is willing to share their KYC data to any ICO, that would be his personal call. I have already expressed the risk factors in a different thread. Check the link below,

Well, but what if the information is being requested by a reliable start-up that has legal entity (in good jurisdiction), office, EV SSL on its domain name, team that does not hide their faces, etc. ? 
But due to restrictions this start-up HAS TO check documents of its contributors-(

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April 04, 2018, 07:41:47 PM
 #9

It's my understanding that even if you don't sell to US people, but if yourself is US resident, there's still trouble. Would love to hear more comments on this.

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