A token crowdsale is a way for companies to raise funds from the interested investors, that are later used for developing new products. The tokens are a cryptocurrency traded on decentralised platforms using the smart contracts technology.
It is possible to do ICOs in Estonia and many projects find their way here. We have consulted several ICO project and have substancial know how. Still, you should have to consider some key issues, before you choose Estonia as your place for ICO.
The Estonian Finacial Superrvising Authority (FSA) has given following guidelines for for entities engaging with virtual currencies and ICOs. In case the token will give voting and participating right in profit sharing, the token will be considered as security – a security token. Issuing a security token means, that the same obligations arise for issuer, as on IPO. The IPO prospect must be registered and approved by Estonian Financial Supervision Authority (FSA).
1. I am mining cryptocurrency. Which regulations apply to this activity?
Mining cryptocurrency as a field of activity does not fall under the supervision of the Estonian Financial Supervision Authority (EFSA). However, we suggest to pay attention to income taxation aspects.
2. I would like to organise a (public) offering of tokens (ICO). Which regulations apply to this activity?
The first step is to analyse the rights granted by the tokens to identify whether they are securities or not as provided in § 2 of the Securities Market Act. Depending on the result of the analysis, the offering of tokens shall be either registered with the EFSA or not. Tokens are classified as securities, if, for example, they (being proprietary right, obligation or contract) can be transferred on the basis of an at least unilateral expression of will or if they provide voting or decision making rights in the issuer or give the investor a certain return expectation regarding their investment (e.g. a right to a part of the issuer’s profit, regular cash flows, or any other promise about future profit), regardless of whether the funds raised are repayable by maturity date or no maturity date exists (e.g. a perpetual bond).
3. I am trading/investing tokens. Do I need an authorisation for these activities?
An activity licence of an investment firm is necessary when the tokens qualify as securities and the firm offers one or more of the following services as a permanent activity:
There is no obligation for an investment firm licence provided that the circumstances listed in § 47 of the SMA exist.
Operation of a multilateral trading facility or an organised trading facility should not be understood as a mere displaying of interests of acquisition and transfer of tokens where the relevant website does not allow making such transactions. However, if the person displaying the transactions is the other party to the transaction, § 42 (1) 3) of the SMA applies, i.e. this qualifies as trading tokens on a person’s own account.
It is also important to note that in addition to a relevant licence, such firms must also comply with the provisions stipulated in Part 3 of the SMA.