Legal management of ICOs and cryptocurrencies
ICO are hard : the first problem is the lack of knowledge related to this type of investment. Unlike the earlier days of ICOs, when launching an ICO with some basic preparation was all you needed, the ICO market has matured. There are some informal standards in place and a successful ICO must adhere to all of them.
The success of a Security Token Offering (STO) or of an Initial Coin Offering (ICO) project depends on various factors. For instance :
- Having an anonymous team for your cryptocurrency project is the sure shot way to fall short on your fundraising targets. Start by forming a team that has at least some crypto-currency industry experience; Investors trust familiar faces. When marketing your project, offer complete information about your team with their photos and social media profiles. In case you do not have any industry expert in your team, reach out to relevant industry professionals and get them on your advisory board.
- Starting with realistic goals for your ICO, prepare a roadmap for the project. You will require a whitepaper that clearly explains your business goals, what you intend to achieve with the project, and how you intend to achieve it. Discuss the technical aspects of the project in detail and it is even better if your project is under development. Investors prefer a project under development at some stage. Having a working prototype is the best play. Your entire ICO will revolve around your prototype.
However, there is something as important as setting up a good team or drafting a whitepaper, the legal management of the project.
What is an ICO legal management ?
The industry of Blockchain seems quite unregulated, but countries are constantly trying to exert more control on then. Recently, for instance, both France and Switzerland organized the previously unregulated ICO market.
In France, the creation of this regime was inserted in the 2019 version of the loi “Pacte-Dutreuil” – a fiscal regime set to facilitate the company and commercial activities survival – articles 26 and following((http://www.assemblee-nationale.fr/15/ta/ta0179.asp)).
This marks the creation of a French regime for token offers and Initial Coin Offerings (or “Initial Token Offering“), i.e. fundraising via a shared recording device (in particular using the so-called “blockchain” technology) via the issuance of digital “tokens”. The special situation for the cryptos regime is especially marked by a fiscally oppressive situation. The French financial authority is also given much larger powers. Even more recently, the ICO became even more regulated through a hard qualification of all token as financial assets.
In the Helvetic Confederation (the actual name of Switzerland), the ICO is regulated by the FINMA((https://www.finma.ch/en/authorisation/fintech/)), the local financial authority. It has recently updated is cryptocurrency and crypto market policies, changing a few elements. This updated has gained little attention for the markets, but undeservingly so.
If you want to launch an ICO that’s available to American consumers, it has to clearly pass the Howey Test. Regulations in the European Union also closely mirror the Howey Test’s guidelines.
Securities commissions exist to protect consumers from dangerous or fraudulent investments, and the recent increase in ICOs has also meant an increase in pump and dump schemes where the tokens have no inherent value. Regulators are understandably concerned about fraudulent ICO activity. In many cases, it’s difficult to perform an audit of an ICO or to evaluate a token’s legitimacy without a specialist legal background.
Start a cryptocurrency business
Starting a cryptocurrency business is not complicated if you are well adviced, the success of such venture is almost guaranteed considering how you are legaly assisted.
When dealing with other people’s money it’s crucial to make sure that the STO or ICO project is not breaking any laws every step of the way. With our STO and ICO legal advice we help Blockchain, STOs and ICOs projects avoiding legal issues that can compromise the entire activities.
Eternos Corporation is already working with entrepreneurs and cryptopreneurs to ensure their legal regime protects both their and their clients interests such as CEX helping them to get their FinCEN registration((https://www.fincen.gov/money-services-business-msb-registration)) and forming their compliance officers.
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