Can businesses launch an ICO in the Isle of Man?
Yes. We have assisted numerous companies to conduct regulatory-compliant token offerings from the Isle of Man.
What are the benefits of conducting an ICO under a supervised framework?
Perhaps in 2016 one could launch an ICO without disclosing who the founders were, especially as the crypto community accepted the explanation of “privacy: blindly as a legitimate reason for those establishing a new tokenised business to not disclose themselves. However, in 2017/18 we saw too many “pump-and-dump” scams and the ethos has completely swung away from the privacy of the founders to absolute transparency.
This has meant that individuals running ICOs are far more concerned with the legal implications of their actions and founders understand that mistakes in the area of Anti Money Laundering & Countering of Terrorist Financing (“AML/CFT”) carry enormous personal risk and unverified source of funds leads to significant money laundering risks, terrorist financing risks and other potentially criminal activities, punishable by a significant custodial sentence.
Now we are seeing credible business people launch ICOs who are far more concerned with the long-term value and protecting themselves in a supportive jurisdiction by:
- ensuring the legal integrity of the ICO with international and domestic AML/CFT
- understand and engage with data protection rules
- efficient corporate structuring
- reducing risks of receiving the proceeds of crime/terrorism
- avoiding non-compliance with local company laws
- working with partners who have access to FIAT banking facilities to pay suppliers and staff
- paying professional and layers fees to structure the ICO correctly so they can obtain a listing on premium cryptocurrency exchanges, as failure to do so can result on not being able to list, or later delisted, vastly devaluing the tokens worth for holders
Demonstrating an ICO is conducted to globally acceptable standards under a reputable financial services regulator is a great way to alleviate fears and ‘hard cap’ the ICO.
Should an ICO take due diligence?
It is imperative that any ICO engages with regulation and does not ignore or circumvent it. This includes ensuring tokens are sold in jurisdictions it is legal to do so, verifying purchasers in compliance with international AML/CFT standards, accounting properly for cross-border transactions, utilising the best corporate vehicles for the individual project and protecting/utilising data.
Mistakes in these areas carry enormous personal risk to ICO organisers as unverified source of funds can unwittingly lead to money laundering and terrorist financing exposure which are criminal activities punishable by significant custodial sentences. Similarly, data misuse, leakage and/or breaches carries disproportionately extreme penalties. Ensuring that the contractual relationships between parties permit the transfer of personal details is the best way to avoid potential fines of up to 5x turnover, or up to €20m, whichever is higher.
Ensuring the legal integrity of the ICO with international and domestic AML/CFT, data protection, corporate structuring and contractual requirements significantly reduces the risks and protects against non-compliance with local company laws which will result in local authorities closing the Company, or Foundation, inability to obtain FIAT banking facilities to pay suppliers, staff etc., inability to obtain a listing on premium cryptocurrency exchanges, and as has been happening recently, being delisted, vastly devaluing the tokens worth for holders.
What is required to register?
ICOs are required to register with the Financial Supervision Authority as a Designated Business. The registration ensures businesses comply with customer/user verification and monitoring standards (applying a ‘risk-based approach’) while affording them the flexibility of operating unrestricted from a formal regulatory framework.
To comply with the DBA requirements, the applicant must; be an Isle of Man Company, appoint two Isle of Man resident directors, have appropriate user onboarding and ongoing monitoring and appoint a suitable Money Laundering Reporting Officer.
How long does it take to register?
The time to register is at the FSA’s discretion, but we regularly experience a three-week turnaround. To ensure a timely registration we submit an additional document covering the sensitive issues not contained within the required registration forms. We also correspond with the FSA where necessary to speed up the process.
How can SolutionsHub help?
We can advise over elements of the process in conjunction with existing partners, or as we have done with various clients, project-manage the whole process end-to-end.
To speak to our team about how we can help you, please email email@example.com or set up a consultation meeting now.