CRS Compliant ICO Operational Trading Platform

The one CRS and FATCA compliant ICO operational trading platform, exempt from SEC registration, is overseas retirement

[box type=”note”]Regulatory focus on ICO’s: 2017 saw an enormous increase in the number of “Initial Coin Offerings” (ICOs) that have been arranged.[/box]

[box type=”tick”]Over US$5.68 billion was said to have been raised in 2017, with over 1.4 billion in December 2017 alone, for example. The key advantages of ICOs for fund raisings have been:[/box]

• speed;
• lack of bureaucratic “red tape”;
• interest generated by offerings; and/or
• low cost of the process.

In recent months, there has been an increased regulatory focus on ICOs.

Just to recap in very basic terms – the regulations we are dealing with differ between the various jurisdictions, but all are directed at the same policy objectives, namely investor protection from abuses that were rampant around the world before regulation was introduced.

Cryptocurrency trading is a registered security or exempted from registration:

The Securities and Exchange Commission (SEC) has defined who can have liability in an unregistered offer of securities that is not exempted:

“Those who have a necessary role in the transaction are held liable as participants”. So, for example, it will be illegal for a broker, dealer, or exchange to effect any transaction in a token which is a security unless the offering and sale of the security and the relevant exchange it is traded on are either registered or exempted from registration.

The SEC’s final word:

“Those who offer and sell securities in the United States must comply with the federal securities laws, including the requirement to register with the Securities and Exchange Commission (SEC) or to qualify for an exemption from the registration requirements of the federal securities laws.”

”These requirements apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology [Note: blockchain is a particular type of distributed ledger technology (DLT)]. In addition, any entity or person engaging in the activities of an exchange, such as bringing together the orders for securities of multiple buyers and sellers using established nondiscretionary methods under which such orders interact with each other and buyers and sellers entering such orders agree upon the terms of the trade, must register as a national securities exchange or operate pursuant to an exemption from such registration.”

The registration requirements are designed to provide investors with procedural protections and material information necessary to make informed investment decisions. These requirements apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology

[Note: blockchain is a particular type of distributed ledger technology (DLT)].

In addition, any entity or person engaging in the activities of an exchange, such as bringing together the orders for securities of multiple buyers and sellers using established nondiscretionary methods under which such orders interact with each other and buyers and sellers entering such orders agree upon the terms of the trade, must register as a national securities exchange or operate pursuant to an exemption from such registration.”

The SEC position of interest to all proponents of a token sale:

“The touchstone of an investment contract [Note: an investment contract is a kind of security, and the SEC concluded that The Decentralized Autonomous Organization ( DAO)  was an example of an investment contract] is the presence of an investment in a common venture premised upon a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”

Lest we think that is an invitation to devise an Initial Coin Offering (ICO) that evades one or more of these descriptions so as to take it outside the definition, the SEC further goes on to quote the seminal case of SEC v. W.J. Howey Co. (328 U.S. 293 at 299) which calls the definition a “flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits”.

Conclusion: SEC Registration or operate pursuant to an exemption from registration. An overseas registered retirement plan, in a regulated and recognized jurisdiction with Intergovernmental Agreements, is recognized by the U.S. Treasury and IRS listed as exempt from reporting by statute of code in section 402(b). Exempt from IRS Form 3520/3520a is an ICO operational trading platform (offshore fund) exempt from SEC registration and globally tax compliant (by CRS), IRS Form 8957 Foreign Financial Institution Secrecy & Privacy Rules apply.

Photo credit: Jim Makos on Visualhunt.com / CC BY-ND