How are initial coin offerings treated in your jurisdiction? Do you foresee any change in this over the next 12-24 months?

Fintech (2nd edition)

Belgium Small Flag Belgium

Initial coins offerings (“ICOs”) are not specifically regulated (or forbidden) in Belgium. This does not mean, however, that they may not be subject to existing (general) regulations.

The local FSMA, EBA and the ESMA, have made it clear that depending on their legal structure and on the characteristics of the issued tokens, ICOs could be subject to various laws and regulations.

For instance, an ICO with tokens that are considered to be transferable securities could fall directly or indirectly under:

  • the Law of 16 June 2006 on public offers of investment instruments and on the admission of investment instruments to trading on regulated markets. This law requires notably the preparation of a prospectus to be approved by the FSMA in the event of a public offering of investment instruments within the territory of Belgium;
  • the Law of 18 December 2016 regulating the recognition and definition of crowdfunding. this Law sets out the conditions for authorisation as a recognised alternative finance platform (that is, the financial form of crowdfunding) and the rules that apply to the providers of alternative finance service;
  • the Law of 2 August 2002 on the supervision of the financial sector and on financial services (Belgian transposition law of MiFID 2) as well as the delegated MiFID Regulations at the EU level;
  • the Law of 19 April 2014 on alternative investment funds and their managers.

The legal regime applicable to ICOs should be assessed on a case-by-case basis.

In Belgium, the FSMA pro-actively looks into ICO projects having a connection with Belgium and invites issuers to clarify their projects (through questionnaires focussing on the scope of the offer, the underlying assets, the business model and AML aspects) in order to verify whether any of the existing financial legislation applies.

Bermuda Small Flag Bermuda

Bermuda launched the world's most progressive initial coin offering (ICO) legislation in the form of the Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 which came into effect on 9 July, 2018 and the Companies (Initial Coin Offering) Regulations 2018 and Limited Liability Company (Initial Coin Offering) Regulations 2018 which came into effect on 10 July, 2018 (collectively, the ICO Legislation). As of the date of writing, the ICO Legislation applies to companies issuing ICOs (which also captures security token offerings or STOs) and imposes certain legal requirements which a company must comply with, including publishing an offering document (often referred to as a ‘white paper’) with mandatory disclosures and certain risk language to be included.

We anticipate that the ICO Legislation may be further honed in the future as necessary to keep up with international trends and regulatory demands.

Brazil Small Flag Brazil

Markets Law and the potential characterization of virtual currencies as securities in Brazil have gained relevance due to the growth in interest in virtual currencies and other virtual assets throughout 2017, especially in initial coin offerings (ICOs).

ICOs consist of making an offer to the public of virtual currencies or virtual assets (financial or otherwise). The market has conventionally named these tokens or coins, as they are created within a blockchain or distributed ledger technology.

Virtual currencies offered through an ICO may represent any type of asset or instrument, from a share to a feature to access a certain platform. In this sense, as mentioned above, a given virtual currency may be subject to a specific legal and regulatory framework depending on the intrinsic characteristics of each virtual currency, including its purpose and usage, existence of remuneration, and distribution and issuance methods. If a new virtual currency created in the scope of an ICO has characteristics that match the requirements to classify as a security in Brazil, it will be subject to the Brazilian capital markets legal and regulatory framework.

In light of the growth in the number of ICOs in 2017, the CVM published two notices to the market confirming that any given virtual currency may or may not be subject to the Capital Markets Law and CVM regulatory framework and scrutiny depending on whether or not it is classified as a security in light of the concept of security provided by the Capital Markets Law, and the analysis should be made on a case-by-case basis.

Additionally, the CVM has issued specific opinions dealing with offerings of securities using the internet that occurred abroad whereby the authority has stated that an offering made using the internet is generally considered public, and that even if a certain public offering occurs abroad, in cases where it targets Brazilian investors it will be subject to Brazilian capital markets laws and regulation.

In this sense, an ICO is for all purposes a public offering as it uses the internet as the main distribution method, and even if the public offering is occurring elsewhere, it should observe Brazilian capital markets laws and regulation if Brazilian investors are targeted.

As a result, the CVM may administer the applicable sanctions and penalties in the event of offers of virtual currencies that fit the definition of security in disregard of the capital markets applicable regulation, an understanding that has already been publicly confirmed by the CVM.

In early 2019, the CVM published a new internal regulation modifying its rule-making process. Among the main changes are the introduction of a phase for assessment of the regulatory impact as a means to consider the cost-effectiveness of a proposed rule and the possibility of introducing a regulatory sandbox phase through issuance of temporary rules for empirical testing of their adequacy to market requirements.

Chile Small Flag Chile

There is no specific regulation in relation to Initial Coin Offerings (ICOs) in Chile, and The White Paper does not mention initial coin offerings.

Furthermore, there is no legislative project or draft project concerning ICOs and we do not foresee that it will change in the near future.

United States Small Flag United States

The SEC, which regulates the issuance and trading of security instruments, has been the most active regulator of initial coin offerings (ICOs). Beginning in Dec 2017, the SEC brought several enforcement actions against the entities behind several ICOs, asserting that the ICOs constituted unlawful securities offerings. The SEC asserted that the cryptocurrencies in the ICOs were securities (as “investment contracts,” as defined in SEC v. W.J. Howey Co.). Generally, any offering of securities must be either registered with the SEC or exempt from registration; the SEC alleged these ICOs were neither registered nor exempt.

The SEC has established a new division within the SEC dedicated to cooperation with innovators, developers, and entrepreneurs in the fintech and blockchain industries (FinHub) for, among other issues, ICOs. In the next 12-24 months, we expect that entities contemplating ICOs will engage with FinHub prior to conducting an ICO. This will not only slow the number of new ICOs but will also produce ICOs that are on sound legal footing. Additionally, the SEC has released at least one public “no action letter” to a digital coin project, and there is the possibility of more over the next 12-24 months.

China Small Flag China

Initial Coin Offerings (ICOs) are officially banned in China. They have been deemed illegal financing activities per a PBOC circular issued in 2017, under which all organizations and individuals are prohibited from engaging in fundraising activities involving ICOs; banks and other financial institutions are also prohibited from involvement in transactions relating in any way to ICOs.

United Kingdom Small Flag United Kingdom

Initial coin offerings – i.e. a fundraising method akin to crowdfunding under which retail investors pre-purchase crypto-assets on platforms that typically have not been built yet, at a reduced price – reached their peak in the autumn and winter of 2017, on a wave of enthusiasm that was likely fuelled by the huge rise in the value of ‘cryptocurrencies’ leading up that period. There were a huge number of ICOs carried out in many different jurisdictions, that raised vast amounts, and not infrequently on the back of vague or even entirely unfounded promises of technical development. Amongst those were a number of genuinely good offerings, but a relatively small proportion of those ICOs have launched products to date.

The vast majority of ICOs are not financial regulated offerings, since most cryptotokens do not quite fall within any of the “specified investment” definitions that would trigger compliance with the existing regulatory mechanisms. This broad framework, and classification of tokens into: exchange tokens and utility tokens outside the regulatory perimeter, and security tokens and e-money tokens within it, was confirmed in FCA guidance in July 2019 (PS 19/22). In advance of this, in September 2017 the FCA issued a warning to consumers about the risks of ICOs, describing them as “very high-risk, speculative investments”, pointing out that most are not regulated and have no form of investor protection, and often inadequate documentation. Whilst some ICOs offer tokens which do constitute “transferable securities”, as per the July 19 FCA guidance in PS 19/22, and therefore trigger compliance with the prospectus regime as with normal share offerings, the majority do not.

Two main points emerge from this, for fintechs considering engaging in an ICO.

Firstly, the structure of the tokens and their proposed usage will need to be looked at with great care, as small changes could mean that the tokens and therefore the ICO fall into the regulated sphere. In accordance with the latest guidance, true “utility tokens” will sit outside the regulated sphere, compared to “security tokens” that sit with it, but the distinctions between them can be subtle.

Secondly, although there is no specific regulatory regime in relation to ICOs, other legal principles will still apply, particularly in relation to consumer rights, misrepresentation and fraud. As such, those offering ICOs need to be clear that what they are offering to consumers is genuine and evidenced – even if heavily caveated – so that they do not fall foul of these protections. At the time of writing, a ban on the offering of derivatives and ETNS in relation to cryptoassets to retail customers is under consultation (CP 19/22).

Colombia Small Flag Colombia

Law 964 of 2005 regulates securities and states that any negotiable right issued with the purpose or effect of raising money from the public may be deemed a security and, as such, require registration with market authorities and authorization for public offering. Whereas utility tokens or coins clearly do not fall under this category, some ICOs may be classified as securities requiring a detailed analysis in each case. However, SFC has issued several non-binding opinions that cryptocurrencies are not considered to be securities leading to no action being taken against any ICO issuer so far.

UAE Small Flag UAE

UAE Onshore
The SCA announced on 9 September 2018 the approval of a plan to regulate initial coin offerings and recognise them as securities. The plan developed is part of an integrated project to regulate digital securities and commodities. The relevant regulations are expected to be issued in 2019.

The DFSA issued an investor warning stating that cryptocurrencies are “high-risk investments” and that it does not currently regulate these types of product offerings.

The ADGM permits initial coin offerings subject to specific conditions, including that the applicable cryptocurrency be an “Accepted Crypto Asset”. The FSRA has issued a Regulation of Initial Coin/Token Offerings and Crypto Assets under the FSMR.

Taiwan Small Flag Taiwan

Thus far, there is no law or regulation specifically dealing with initial coin or token offerings ("ICO") or other investment activities involving cryptocurrencies in Taiwan. The FSC expressed the following view on ICO through several press releases. An ICO refers to the issuance of "virtual commodities" and the sale thereof to investors to raise funds. Whether the tokens in an ICO would be deemed "securities" under the SEA would depend on the facts of each individual case. In the event that an ICO involves any offering and issuance of "securities", it should be subject to the SEA. Meanwhile, the Central Bank of China (Taiwan) formed a taskforce to study the issues regarding whether the Taiwan government shall issue "Central Bank Digital Currency, CBDC" since May 2019.

Wellington L. Koo, the Chairman of the FSC, indicated in press interviews in October 2018 that the FSC was drafting regulations for ICO, and that the draft regulations may be published in 2019. While the regulations on ICO have not been promulgated, the FSC publicly announced the framework for the Taiwan government to regulate “STO” in June 2019 and ordered the Taipei Stock Exchange to further stipulate the relevant rules for launching “STO” in Taiwan. One important STO principle under the framework that the FSC announced is that for a “STO” with a total value of NTD30 million or more, the “STO” must be conducted via a sandbox experiment pursuant to the Fintech Innovation Act. The STO that may be exempted from the relevant filing requirements under the SEA shall be of an issuance size no more than NTD30 million.

Switzerland Small Flag Switzerland

Finma was the first regulator to issue detailed guidelines on ICOs; these are not expected to change in the upcoming 12 to 24 months but were specified with respect to their applicability to STOs. Finma accepts ICOs to be legal in Switzerland; however, it requests ICO projects to be submitted to its fintech desk prior to beginning the presale and if not, will transfer the file to its enforcement desk which will proceed to investigate the ICO. Finma distinguishes three different classes of tokens, with differing regulatory treatment:

A cryptocurrency token can only be issued by a company that is an SRO member (or subject to Finma supervision) and is subject to AML rules.

A utility token can be issued without license or AML checks, provided the token is operative at the time of issuance.

A security token can be issued subject to the rules applicable to the respective security, which may mean it is subject to prospectus requirements.

Finally, in case a token has characteristics of more than one class, it needs to comply with the requirement of each such class (hybrid token).

Entitlements to tokens issued prior to the ICO (e.g. in the presale) will be qualified as security rights.

Denmark Small Flag Denmark

At the moment, an initial coin offering (ICO) is not directly regulated in Denmark. This will change when the new Anti-Money Laundry directive enters into force the 1st of January 2020.

Suppliers of currency exchange-services between cryptocurrencies and FIAT-currencies and suppliers of custodian-wallets will have to comply with the Danish Anti-Money Laundry Act (In Danish: Lov nr. 930 af 6. september 2019 med senere ændringer, hvidvaskloven,). A FIAT-currency is defined according to the Danish Anti-Money Laundry Act as a legal mean of payment issued by a central bank.

If the ICO involves the exchange of FIAT currencies, which is likely to be the case in the majority of all ICOs, based on the assumption that the purpose of the ICO is to gain financing through an exchange of the cryptocurrency for a FIAT currency, then the issuer of the coin must comply with the Danish Anti-Money Laundry Act.

Whether an ICO is covered by the EU Prospectus Regulation/ Danish Capital Markets Act (In Danish: Lov nr. 931 af 6. september 2019) or the Danish Payments Act (In Danish: Lov nr. 652 af 8. juni 2017 med senere ændringer, om betalinger), is based on an individual assessment of each case.

The Danish Financial Supervisory Authority has issued a statement, stating that certain tokens, if the token resembles transferable securities, is regulated in Danish Capital Markets Act & the EU Prospectus Regulation. Hence, if the ICO is covered, the issuer must issue a prospectus.

According to the Danish Financial Supervisory Authority, this will often not be the case if the token does not grant the investor any economically or decisional-making power over the issuing company. However, this is still down to a case-by-case assessment.

Spain Small Flag Spain

As referred in our previous point, there is no current regulation addressing cryptocurrencies, and the same goes for Initial Coin Offerings (“ICOs”).

Nonetheless, tokens issued through an ICO may qualify (depending on the specific circumstances) as a financial instruments in Spain, which in turn would make them automatically fall under the scope of several other legislation, such as MiFID, Prospectus Directive, AIFMD and AML rules.

The CNVM stated in the guidance published on its website that a good number of the operations structured as Initial Coin Offerings should be treated as issues or public offerings of transferable securities.

Among other reasons, they refer to the broad concept of “transferable security” as contained in Art. 2.1 of the Spanish Capital Markets Regulation.

Therefore, harmonizing the concept of “transferable security” in Europe is another urgent call for regulators in order to tackle the lack of convergence around Europe on this critical concept for financial services.

As well as with cryptocurrencies, ESMA has already expressed the need for a European regime to cover Initial Coin Offerings.

Germany Small Flag Germany

At present ICOs are not subject to any specific regulation. However, in February 2018, BaFin has published an advisory letter regarding the regulatory classification of tokens in the area of securities supervision. BaFin has pointed out that it has to be determined on a case-by-case basis whether a specific token constitutes a financial instrument within the meaning of the German Securities Trading Act (Wertpapierhandelsgesetz – ‘WpHG’) or the Markets in Financial Instruments Directive (MiFID II), a security within the meaning of the German Securities Prospectus Act (Wertpapierprospektgesetz – ‘WpPG’), or a capital investment within the meaning of the German Capital Investment Act (Vermögensanlagengesetz – ‘VermAnlG’).

Such supervisory classification has an impact on the potential obligations at issuance (e.g. prospectus obligation) as well as potential obligations for third parties participating in the issue and in secondary market trading (e.g. license requirement for investment brokerage).

If, for example, ownership of a token entitles to profit distributions, interest payments or the exercise of participation rights, the token may constitute a security or a capital investment. In Germany, the public offering of such tokens that are classifiable as securities or capital investments requires the preparation of a prospectus that needs to be approved by BaFin.

Conversely, the usage, issuance or trading of pure utility tokens (e.g. app tokens, product use tokens, consumption tokens) shall in most cases not trigger any authorisation or prospectus requirements under German supervisory law.

South Korea Small Flag South Korea

On Sept. 29, 2017, the Korean authorities concerning the regulation of cryptocurrency including the FSC, Ministry of Strategy and Finance and Ministry of Justice have announced a comprehensive ban on all forms of ICOs, regardless of technology and/or terminology. As no law has been enacted to support such policy yet, however, it is difficult to conclude that ICOs are legally prohibited.

Korean companies are taking a very cautious position regarding ICOs in Korea, considering the government’s negative stance on ICOs. That said, it should be noted that there is still a possibility that the Korean government may take a more lenient approach as they seem to under the technical and economical utility and impact of the cryptocurrency—in such case, the Korean government may positively consider allowing security type tokens via security token offering with certain limitations.

Iceland Small Flag Iceland

Currently there is no guidance from the FSA on how it would treat ICO’s in Iceland. However, the FSA would likely have regard for ESMA’s statement on the application of the Prospectus Directive, the amended Markets in Financial Industry Directive (MiFID 2) or the Alternative Investment Fund Managers Directive (AIFMD) if tokens are structured and tradeable in a way, that resembles common financial instruments.

Should the FSA determine that a token issued in an ICO is a financial instrument, an ICO cannot occur without the issuance of a prospectus which has been approved by the FSA. The volatility associated with cryptocurrencies may have an impact on the FSA’s determination as one of its roles is to safeguard the interest of unsophisticated investors.

Portugal Small Flag Portugal

Please refer to our reply to the previous question, above.

We do not envisage that Portuguese regulators will take the first step in reviewing the legal and regulatory treatment for ICOs, and we should probably expect them to closely follow the guidance issued by EBA and ESMA in this respect before any paradigm shifts take place at a national level.

India Small Flag India

Initial coin offerings are not viewed favourably by Indian regulators, especially in light of the stand taken by the RBI against cryptocurrency in India. With the introduction of a proposed legislation ‘Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019’, the Indian government has made its stand clear on non-recognition of cryptocurrency as legal tender.

Peru Small Flag Peru

There is no specific regulation on Initial Coin Offerings (ICOs) in Peru. Nevertheless, the Law N° 30050 mandates that the advertising or offer made in Peruvian territory for buying or selling any financial asset using any mass media, like technological platforms, may only be carried out by entities authorized or supervised by either the Stock Market Superintendency (SMV) or by the Superintendency of Banking, Insurance and Private Administrators of Pension Funds (SBS). Therefore, the advertising of ICOs in Peru is not permitted for unauthorized or unsupervised entities.

Furthermore, there is not any legislative project or draft concerning ICOs and we do not foresee that it will change in the near future.

Israel Small Flag Israel

The treatment of ICOs depends on the type of the crypto token or currency offered and the rights attached thereto. In the event that the token is classified as a security token, it shall be treated as security. Utility tokens and payment tokens are theoretically not subject to the Israeli Securities Law, 5728-1968. To the best of our knowledge, the lack of regulatory clarity in this area resulted that no coin offering had been carried to investors residing in Israel. The difficulties in integrating into the traditional banking system make it very difficult for crypto and blockchain projects in Israel and until there is a solution, probability for ICOs of TGEs in Israel is likely to remain low.

Following a recent court ruling, which forced banks to provide certain services to crypto service providers, we might see some changes in the policy of banks to cryptocurrency activity in the upcoming 12-24 months.

The Netherlands Small Flag The Netherlands

We refer to paragraph 14. The European Union’s financial services commissioner Valdis Dombrovskis recently announced its intention to create an uniform European regulatory framework for cryptocurrencies (

The Dutch minister of finance, Wopke Hoekstra, already called for such an approach in March 2018 ( As Hoekstra notes in his letter to the Dutch parliament, due to the inherent cross-border character of crypto currencies on, in particular, public blockchains, any regulatory initiatives taken should have a broad level of support. Aiming for a mere Dutch framework does not make much sense.

Taken these developments and in particular the recent announcement of Dombrovskis, we expect the European legislature to publish and discuss draft European Level I legislation within the upcoming 12-24 months.

Japan Small Flag Japan

Tokens issued by way of ICOs take many forms, and the Japanese regulations applicable to each token vary depending on the ICO scheme involved.

15.1 Securities-type Tokens

The FIEA Revisions introduced the concept of ERTRs, which has served to clarify the scope of tokens governed by the FIEA. The concept of ERTRs relates to the rights set forth in Article 2, Paragraph 2 of the FIEA that are represented by proprietary value transferrable by means of an electronic data processing system (but limited only to proprietary values recorded in electronic devices or otherwise by electronic means), excluding those rights specified in the relevant Cabinet Office Ordinance in light of their negotiability and other factors. Although Article 2, Paragraph 2 of the FIEA refers to rights of various kinds, tokens issued in “security token offerings” (“STOs”) are understood to constitute, in principle, “collective investment scheme interests” (“CISIs”) under the FIEA. CISIs are deemed to have been formed when the following three requirements are met: (i) investors (i.e., rights holders) invest or contribute cash or other assets to a business; (ii) the cash or other assets contributed by investors are invested in the business; and (iii) investors have the right to receive dividends of profits or assets generated from investments in the business. Tokens issued under STOs would constitute ERTRs if the three requirements above are satisfied.

To put it simply, rights treated as “Paragraph 2 Securities” (i.e., rights that are deemed securities pursuant to Article 2, Paragraph 2 of the FIEA) and represented by negotiable digital tokens will be treated as Paragraph 1 Securities unless they fall under an exemption. As a result of the application of disclosure requirements to ERTRs, issuers of ERTRs are in principle required, upon making a public offering or secondary distribution, to file a securities registration statement and issue a prospectus. Any person who causes other persons to acquire ERTRs or who sells ERTRs to other persons through a public offering or secondary distribution must deliver a prospectus to such other persons in advance or at the same time.

As ERTRs are expected to constitute Paragraph 1 Securities, registration as a Type I Financial Instruments Business Operator will be required for the purposes of selling, purchasing or handling the public offering of ERTRs in the course of a business. Additionally, any ERTR issuer who solicits acquisition of such ERTR (i.e., undertaking an STO) will be required to undergo registration as a Type II Financial Instruments Business Operator, unless such issuer qualifies as a specially permitted business for qualified institutional investor.

15.2 Prepaid Card-type Tokens

Tokens that are similar to prepaid cards, in the sense of being usable as consideration for goods or services provided by token issuers, may be regarded as "Prepaid Payment Instruments", and accordingly, subject to applicable regulations under the PSA. It is noteworthy that a token subject to "Prepaid Payment Instruments" regulations under the PSA would not simultaneously be subject to PSA regulations applicable to "Virtual Currency", and vice versa.

15.3 Virtual Currency-type Tokens

A token that falls within the definition of Virtual Currency will be subject to Virtual Currency-related regulations under the PSA. Where a token is subject to the PSA, it must be sold by or through a Virtual Currency Exchange Service Provider.

Based on the prevailing view and current practices, where a token issued via an ICO is already in circulation on a Japanese or foreign cryptocurrency exchange, such token would be deemed a Virtual Currency under the PSA, since a market of exchange for that token is already in existence. It is worth noting that due to a lack of exchange restrictions, such tokens that are not yet in circulation are also likely to be considered Virtual Currencies under the PSA if they are readily exchangeable for Japanese or foreign fiat currencies or cryptocurrencies.

On June 25, 2019, the Japan Virtual Currency Exchange Association (“JVCEA”), a self-regulatory organisation established under the PSA, published a draft of its self-regulatory rules and guidelines regarding ICOs for Virtual Currency-type tokens entitled “Rules for Selling New Virtual Currency” (“ICO Rules”). According to the ICO Rules, there are two types of ICO. The first is where an Exchange Provider issues new tokens and sells such tokens by itself, while the second is where a token issuer delegates Exchange Providers to sell the newly issued tokens. As a general matter, the ICO Rules stipulates the following requirements for each type of ICO:

(i) maintenance of a structure for the review of a business that raises funds via an ICO;

(ii) disclosure of information on the token, the token issuer’s purpose for the funds, and the like;

(iii) segregated management of funds (both fiat and crypto assets) raised by an ICO;

(iv) maintenance of proper accounting practices and records and financial disclosure of funds raised by an ICO;

(v) ensuring the security of newly issued tokens, and of the blockchain, smart contracts, wallet tools, and the like in respect of such tokens; and

(vi) proper valuation of newly issued tokens.

Jersey Small Flag Jersey

Jersey has seen a large number of ICOs. This is in part because the JFSC recognised that ICOs with proper substance and backed by a credible promoter should be nurtured.

As ICOs involve the issuance of a coin, consideration must be given as to whether such coin/token/asset constitutes a “security” under Jersey law, and therefore whether it falls within the existing regime regulating securities and their issuances. To assist with this analysis, the JFSC Guidance was issued.

As set out at question 14, the JFSC Guidance outlines the three key areas of the JFSC’s regulatory focus, being:

  • the economic function and purpose of the digital assets to be issued;their underlying purpose; and
  • whether they are tradeable and transferable.

It has been confirmed that the JFSC Guidance has a wider application and can be used to inform how digital assets and, cryptocurrencies more generally, will be treated.

The JFSC Guidance is available at:

Liechtenstein Small Flag Liechtenstein

Currently the FMA's view of an Initial Coin Offering (ICO) depends on the specification of the tokens offered. If a token is considered a utility or a payment token by the FMA the ICO is not subject to any licensing requirement governed by special legislation. However the FMA may request a legal opinion showing the classification of the token under Liechtenstein law. If a token is considered a financial instrument, the token and subsequently the ICO are subject to financial market law.

In principle the FMA regards all activities relating to financial instruments as subject to licensing (by the FMA) on the basis of special legislation and these activities may require publication of a prospectus. In all cases, the specific design and de facto function of the tokens are decisive as mentioned above.

The Liechtenstein Blockchain Act will classify issuers of tokens as Trustworthy Technology (TT) service providers. TT service providers who are domiciled in Liechtenstein and wish to provide their services there must (with some exceptions) apply in writing for registration in the TT service provider register. The service may not be performed until the registration has been approved.

The new statutory minimum capital requirement by the Liechtenstein Blockchain Act for token issuers is CHF 50'000.00 for issues of up to CHF 5 million during a calendar year, CHF 100'000.00 for issues of more than CHF 5 million to CHF 25 million during a calendar year and CHF 250'000.00 for issues of more than CHF 25 million during a calendar year.

In addition, token issuers must generally (there are some exceptions) publish 'basic information'. These provisions are following the obligation to publish a prospectus. In the event of breaches of this obligation, the responsible persons shall be liable to each buyer for the damage caused thereby. However the damage is limited by law to the damage actually suffered directly and lost profit is excluded. Furthermore, this claim for damages shall become statute-barred within one year of knowledge of the damage and the damaging party and in any case after 10 years from the day of the damaging action.

Mexico Small Flag Mexico

See Q14 above; coin offerings are, therefore, forbidden in Mexico.

Luxembourg Small Flag Luxembourg

For the time being, Luxembourg has no specific legal regime for initial coin offerings in place. Contrary to other EU Member States, Luxembourg's Draft Law implementing AMLD V does not contain any "goldplating regime" covering ICOs. It is currently safe to say that there are no changes to be expected for the next 12-24 months. In this respect, however, it should be noted that the CSSF has issued on 14 March 2018 two warning statements to inform and warn investors for cryptocurrencies (Warning regarding virtual currencies ) and the risks of investing in ICOs (Warning regarding initial offerings ("ICOs" and tokens)).

Malta Small Flag Malta

The VFA regulates the offering of virtual financial assets (or ‘ICOs’) and related service providers. It imposes licensing requirements and on-going obligations to be complied with by ICO-issuers. Akin to the disclosure and regulatory obligations in the securities world, the VFA Act safeguards investors’ rights by mandating a lite regulatory regime for when, an issuer established in Malta, offers VFAs to the public in or from within Malta or applies for a VFA’s admission to trading on a DLT exchange, as such term is defined therein. To complement the VFA Act, the MFSA also published a comprehensive VFA Rulebook entailing a three-tier set of regulations applicable to operators of crypto-financial services and ICO issuers, which provides that in such instances an ICO issuer, while ensuring that the whitepaper entails all the information outlined in the First Schedule of the VFA Act, has to appoint a number of functionaries, including without limitation to, an approved VFA Agent. Furthermore, the VFA Act outlines the manner in which advertisements relating to VFAs are to be carried out.

Malaysia Small Flag Malaysia

Under The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, Initial Coin Offerings (ICO’s), otherwise known as ‘Digital Tokens’ are defined as a digital representation which is recorded on a distributed ledger whether cryptographically-secured or otherwise.

The Order further defines that a Digital Token which represents a right of interest of a person in an arrangement made for the purpose of, or having the effect of, providing facilities for the person is prescribed as securities for the purpose of the securities law, where:

a) The person receives the digital token in exchange for a consideration

b) The consideration or contribution from the person, and the income or returns are pooled

c) The income or returns of the arrangement are generated from the acquisition, holding, management or disposal of any property assets or business activities

d) The person expects a return in any form from the trading, conversion or redemption of the digital token or the appreciation in the value of the digital token

e) The person does not have day-to-day control over the management of the property, assets or business of the arrangement, and

f) The digital token is not issue or guaranteed by any government body or central banks as may be specified by the commission

In addition to this, The Malaysian Securities Commission then issued an updated Guideline on Recognised Markets on the 31st of January 2019 covering Market Operators, Equity Crowdfunding Platform, Peer-to-Peer funding platform, Digital Exchange and Digital Asset. Digital Asset refers collectively to a Digital Currency or Digital Token.

Pursuant to Paragraph 15.17 on the latest guidelines on recognized markets, if a person wishes to issue a Digital Token, it must comply with the relevant guidelines issued by the SC. Such Digital Token would still require approval from the SC prior to being traded on any digital asset exchange.

Singapore Small Flag Singapore

MAS has stated that it may regulate ICOs if, as highlighted above, the digital tokens sold constitute capital markets products regulated under the SFA. This would depend on the characteristics and the rights attached to the digital token in the offering exercise.[38]

Regardless of the applicability of the SFA, the offeror would be subject to ongoing AML / CFT laws, such as the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap. 65A), Terrorism (Suppression of Financing) Act (Cap. 325). This would include a mandatory suspicious transaction reporting requirement for any person who reasonably suspects that any property or part thereof is linked to the prescribed drug dealing or serious crimes, which must be reported to the Suspicious Transactions Reporting Office of Singapore.

Whilst the PSA is not yet in force, we note that the PSA provides for a licensing requirement for carrying on a business of providing certain payment services such as “account issuance services”, which may be applicable to e-wallets, and “digital payment token services”, which may apply to persons dealing in digital payment tokens or facilitating the exchange of digital payment tokens. Under the PSA, depending on the scope of payment services, offerors conducting ICOs or operating cryptocurrency exchanges may potentially be required to obtain a licence under the PSA to carry out such activities.

[38] Paragraphs 2.1 and 2.2 of the Guide to Digital Tokens Offerings (available at

Updated: November 11, 2019