ICO: Selection of jurisdiction

ICO выбор юрисдикции

Organization of ICO, as well as selection of jurisdiction, where the initial offering of the tokens will be directly carried out, depends on the features of the project.

An extremely important stage is not only the very conducting of the ICO, but also the selection of the correct jurisdiction.

In order to avoid mistakes and select the country with the most optimal conditions for your project, contact the lawyers of Law&Trust International.

Unfortunately, the Russian Federation does not have special regulation regarding the circulation of cryptocurrencies at the moment.

For the above reason, the companies select the countries with more favorable tax and legislative regime for conducting ICO.

More recently, Liechtenstein, which financial regulator has approved conducting of ICO in the territory of that jurisdiction, has joined these countries.

Jurisdiction for carrying out ICO

Due to the active representations made by financial regulators of many countries regarding their position with respect to conducting ICO and initial offering of tokens, it is necessary to clearly identify the group of jurisdictions with the most favorable environment, and also to mention those in which carrying out ICO is unprofitable / prohibited.

Certain jurisdictions, where favorable conditions have been created for ICO, will be listed below. Information was added concerning countries in which important changes regarding the initial offering of tokens have recently taken place.

It is worth mentioning separately about conducting of ICO in China and Hong Kong

In China, ICO is outlawed. The foregoing was announced by 7 major Chinese regulators. The prohibition occurred after the Central Bank of China has recorded a huge number of cases when companies with fraudulent intent were engaged in illegal fundraising from the population.

Those companies that have exchanged tokens for cryptocurrencies and fiat money within ICO are required to cease operations.

The prohibition applies both to cryptoexchanges and to projects that have launched crowdfunding companies.

The companies that collected funds for their projects are required to return them to investors. Also, credit institutions were barred from cooperation with the ICO companies.

Taking into account all of the above, by starting to conduct operations on the exchange of cryptocurrencies for fiat funds, tokens or other cryptocurrency, or by starting to conduct ICO, it is recommended to:

- make (by legal means) it impossible to use the company's services by Chinese citizens.
- make it technically impossible in the territory of China to use the company's services by Chinese citizens.

Moreover, the company needs to stop all marketing activities in China that were organized to attract the attention of Chinese citizens to the company's activities.

Most likely, China can no longer be called the jurisdiction for ICO.

ICO in Hong Kong

Following the statement of China's regulators, the Hong Kong Futures and Securities Commission issued own statement regarding ICO, and the position of the commission was more liberal.

Depending on the actual circumstances, the token (tokens) can be recognized as an investment instrument.

Such instrument can be recognized as token given the following conditions:

- if it provides for proprietary rights, participatory interests or equity rights;
- if by its nature it is a stake in the collective investment scheme;
- if it is a debt instrument.

Any operation with such token will be part of the regulated financial activity. When carrying out such operations, the company must have the necessary permissions and licenses.

ICO in Canada

Canada's financial regulator issued the statement regarding the conduct of ICO in the territory of this jurisdiction. The statement indicated that, under certain actual circumstances, the securities legislation may be applied to ICO.

Also, there were certain factors indicating that the token is the investment instrument.

In addition, the Financial regulator of Canada has requested cryptocurrency exchanges to properly maintain accounting statements, follow all AML procedures and comply with identification requirements.

ICO in Singapore

Earlier, the Financial Regulator of Singapore published the main risks that investors should take into account when participating in ICO.

Further, the Monetary Authority of Singapore published the risk roadmap for the ICO projects.

The ICO project has a high degree of risk if it:

  • has no incorporation in the territory of Singapore

  • has no guarantees of liquidity of tokens in the secondary market

  • promises extremely high profit-making capacity of token

  • does not have at all, or has unverified information about sellers of tokens and / or issuers

Singapore's Financial regulator called on investors to take all risks into account and try to minimize them.

ICO in the USA

The US Securities and Exchange Commission (SEC) in its report indicated a set of means within which it began to undertake measures aimed at closing the companies involved in cryptoeconomy and at the same time not in compliance with the law.

SEC reported to investors about the high risk of possible manipulation in the markets of cryptocurrency. Also, investors were informed of the widespread practice of "pump-and-dump", which is prohibited in the US at the legislative level.

Conducting ICO in the United States is beneficial primarily for residents of this jurisdiction.

ICO in Malaysia

The Securities Commission is closely scrutinized of carrying out the initial offering of tokens in Malaysia.

The Commission often reminds investors that participation in ICO is associated with a number of risks, one of which is the initial lack of sufficient legal protection, as well as the risks of sharp fluctuations in the token on the secondary market.

Given significant variation in the conditions for ICO, investors are advised to assess the risks individually for each project, as well as seek the help of qualified consultants who will help not make a mistake.

Nevertheless, the Securities Commission of Malaysia has a very restrained position regarding ICO and does not consider it a source of massive abuse.

ICO in Israel

Recently, the securities market regulator has formed a committee which main task is to develop rules for the regulation of ICO.

The regulator took a clear position and advocates the introduction of mechanisms that will help protect investors, as well as the implementation of ICO in the legal field.

To select the appropriate jurisdiction for conducting ICO and not to be mistaken, contact the lawyers of Law&Trust International.

Consultations are possible by phone, through chat or during personal conversation in the office of the company.