Corporate formation of your ICO
One of the very first things you need to choose is how your business is going to be established. Your location will impact the ICO regulations. The majority of ICOs tend to create two separate companies: one for operations and one for issuing the tokens. Separating the two elements of your business with not only distribute the liability. It will also enable you to operate in two different jurisdictions.
How to choose the right jurisdiction
Where your company operates from will have a substantial effect on the number of regulations you will have to deal with. Blockchain technology is still a relatively new concept, and not all regional authorities have been working out guidelines to the very same extent. Research each jurisdiction to identify which one has the most favorable conditions for your ICO.
Understanding ICO regulations
Taking a look at the legal aspect of releasing your ICO is perhaps the least fun part, however essential. It would be a shame to put a lot of work into creating an item, forming a group, and marketing the whole project just for it to fall afoul of the law. The laws you have to follow much depend upon your place, so it pays to do some research study before you start.
Attorneys specializing in ICOs
You may desire to hire a legal professional to assist you to remain on the right side of the law. If you’re based in the United States, three law firms have started specializing in ICOs:
Securities and products laws
The kind of token you’re using investors and users of your product will likewise impact which laws you require to comply with. While the SEC has explained regulations for security tokens, not all nations are at the same level of progress. Whether or not your token is classified as security depends upon the Howey test.
Anti-Money Laundering (AML) and Know Your Customer (KYC
AML and KYC laws will likely apply no matter where you’re situated. You will usually be required to identify your customers (KYC) by asking for their proof of ID and proof of address. You are obligated to keep this info on file and share it with the authorities when asked to do so.
Crowdfunding laws
While ICOs is a reasonably novel concept, crowdfunding isn’t brand-new. You might want to look into any local laws about crowdfunding, as that is basically what an ICO is.
Taxation laws
How you will be taxed on your profits will also depend on which jurisdiction you’re operating out of. Depending on the jurisdiction, your earnings may be imposed with sales or capital gains tax– or both.
Marketing regulations
You have to be honest and straightforward when you market your ICO token. If the language you employ to advertise your token misleads the public, then you will likely face legal consequences. For example, don’t pretend your token is a security token if it’s a utility token.
Remember to patent your ICO product
If the technology behind your ICO is revolutionary, then patenting is something you need to think about. Not a great deal of blockchain-based companies are licensing their options. Some legal experts have nevertheless recommended that ICO white papers could certify as an Intellectual Property Disclosure.