An ICO ( Initial Coin Offering ) is, from a practical point of view, a new method used by companies with disruptive projects to obtain financing. Through these, investors participate in the purchase of so-called tokens. However, from a legal point of view, its nature is not clear, causing the majority of ICOs to suffer from a great lack of legal security for their promoters and a lack of transparency for investors. So, currently, if a [Spanish] company wants to launch an ICO, what happens with its regulation? What criteria should be taken into account when carrying it out?
Jurisdiction and regulation The first thing we must take into account is the jurisdiction in which the ICO will take place and the applicable regulations. In Spain, currently, no ICO has been carried out and, therefore, there are no white-label crypto launchpads or tokens issued whose acquisition or possession in Spain can benefit from any of the assurances or safeguards mentioned in the rules about investment or banking goods. (this was established by the National Securities Market Commission ( CNMV ) in a statement dated February 8, 2018).
This is because the CNMV considers that, at a minimum, rules of custody or registration, management of conflicts of interest between clients, and transparency in terms of commissions should be applied to this type of platform (in addition to the rules of prevention of money laundering), therefore it is [Mandatory] recommended that these platforms voluntarily apply the principles of securities market regulations related to the aforementioned matters to guarantee the correct functioning of their activity. Furthermore, in all probability, the CNMV would intervene in an ICO (cessation of activity of the company that carries it out, responsibility of the administrators and promoters of the project, fines, etc.) if it does not comply with the applicable requirements (obligation of registration and presentation of an informative prospectus) to any company that intends to carry out an IPO (Public Offer of Sale) in our country.
Consideration of the offer (Offering) as an IPO for the LMV
3 solutions to legally carry out an ICO
Without going into detail about each of the alternatives, we can distinguish between the following modalities:
Yo. Carry out the ICO abroad
This is the option that all Spanish companies have chosen. There are different places in the world where ICOs can be carried out legally or, at least, not illegally. Some of these legal systems are those of Estonia, the Canton of Zug (Switzerland), Gibraltar (UK) and Singapore.
The great advantage is not worrying about the uncertainty generated by an unclear legal system in this regard. The great disadvantage is, without a doubt, the cost of relocation (unknown jurisdiction, foreign lawyers, etc.). Furthermore, many ICO projects by Spanish companies would be focused, at least at an initial level, on the Spanish territory or market.
- Other aspects: corporate, tax, intellectual property, RGPD, PBCFT, technological development...
Although the most relevant and critical aspect when launching an ICO in Spain is the regulatory aspect, ICOs require a complex legal and technological system. In this sense, attention should be paid to the following aspects:
2.1. corporate system
The corporate system on which the ICO will depend must be studied and created. It is necessary to create a clear, transparent and simple structure. It will be necessary to be attentive to each specific case, without ever failing to agree on a partners' agreement that regulates the economic, control and exit or disinvestment aspects in case of success of the project, as well as the contracts with the developers, auditors and all suppliers.
2.2. Documentation
An ICO involves a large number of legal relationships between the company and the investors, applying different regulations to them. This regulation will require the drafting of different documents:
a) Contracts with investors: the investment must be formalized through the corresponding contract that will legally bind the parties. When drafting this documentation, sector regulations and the Securities Market Law must be taken into account.
b) Drafting of legal texts of the platform: the platform from which investors will be informed of the project, carry out the transfer of White-label Crypto launchpad or FIAT money, manage their account or other uses, must comply with different regulations applicable to said platforms (Law of Information Society Services, General Law for the Defense of Consumers and Users, General Data Protection Regulation).
c) White Paper: This document is the information brochure that is published for ICO investors. Reference must be made to all aspects of the project: business plan, investment modality, duration and deadlines, technological development, team, regulatory compliance... The more detailed and transparent, the better, since it is the main way that the society is convinced that investors are convinced that investing in the project is a wise option.
2.3.Intellectual property
The project as a whole must protect the intellectual and industrial property of the following elements:
Project brands and logos; Public and private documentation; Exploitation rights over the source code; Security over software development; Domains of platform addresses;
2.4. Tax planning
The financial operation carried out will entail a series of tax implications that must be taken into account. The success and profitability of the operation will depend largely on the tax planning of the entire project in all phases that have tax implications. Thus, for example, in the fundraising phase, raising FIAT money or cryptocurrencies does not have the same implications, nor does it have the same implications as disinvesting in FIAT money or cryptocurrencies.
Conclusion Is it viable to carry out an ICO in Spain?: Yes. However, companies that want to launch an ICO in Spain must take into account everything mentioned in the post if they do not want to have problems with regulatory or supervisory bodies due to non-compliance. formal requirements, nor with investors for not transmitting transparency and legal certainty.