An ICO, or initial coin offering, is a manner of raising capital when a form of crypto-currency is sold as a “token”. The capital is raised from third parties and the company that holds the digital currency, which can be a BVI offshore company, organizes the ICO.
The British Virgin Islands has a favorable regime for doing business and flexible regulations for cryptocurrency and blockchain companies as well as ICOs. Companies may expect to be able to establish a successful launch in this offshore location.
In this article, our team of BVI company formation agents answers some of the most important questions about initial coin offerings organized in this jurisdiction.
Investors who wish to know more about the relevant laws for cryptocurrency companies, as well as the regulations that apply for an ICO in BVI, can reach out to our agents.
What are the main laws governing ICO launches in BVI?
The British Virgin Islands are already recognized as a top offshore location and investors are also using the BVI business company for the purpose of establishing the type of transaction that is an ICO.
However, regardless of the overall flexibility of the regime, investors should be aware of the top laws that regulate the manner in which BVI companies can raise money through an initial coin offering:
- – The Securities and Investment Business Act 2010: it regulates the investment business in BVI and stipulates that all those involved in such activities must hold a license from the Financial Services Commission.
- – The Financing and Money Services Act 2009: will only be relevant for investors who are interested in BVI company formation if, apart from digital tokens and cryptocurrencies that will also engage in currency exchange and other services.
- – The Anti-Money Laundering and Terrorist Financing Code of Practice 2008: should be taken into consideration in order to include due diligence practice relevant to the cryptocurrencies field.
- – The Electronic Transactions Act: this is relevant when an ICO is launched and conducted through an electronic platform.
Please remember that these are not all of the laws that are relevant to structuring an ICO in BVI and that investors can reach out to our agents for more information.
Some of these laws, such as the Anti-Money Laundering and Terrorist Financing Code and the Foreign Account Tax Compliance Act (FATCA) do not include express provisions for cryptocurrency businesses.
Nevertheless, investors who open a business in BVI and run it as per the local rules and regulations should be well aware of their provisions.
Crypto exchanges are regulated in the BVI when the trading is considered an investment under the Securities and Investment Business Act (SIBA).
While it is expected that BVI will introduce a legislation to address initial coin offerings and the digital assets filed in general, it has yet to take steps in this direction.
One of our BVI company incorporation agents can provide interested investors with complete details about the regulations in force that may influence their activities.
Structuring an ICO in BVI
An initial coin offering can be an efficient method of accessing capital for start-ups.
In BVI, investors will proceed much in the same way was they would when structuring a special purpose vehicle for raising capital.
The first step for an initial coin offering in BVI is to structure the capital, usually a newly formed company.
The ICO issuer can be set up in the form of an offshore company in BVI, the International Business Company (IBC).
Once the BVI company is established, entrepreneurs can work in the ICO business plan. This is also known as the white paper, and it includes information concerning:
- – the proposed solution to a problem; included here is also a detailed market analysis;
- – the description of the token release; included here is data on how the product will be commercialized, as well as technical aspects concerning its commercialization;
- – information about the team.
The white paper is both a comprehensive presentation of the solution to a problem, as well as a description of the product or token, without relying too heavily on complex technical details. This is because not all investors are tech savvy, and the white paper addresses all categories of possible investors.
The business plan for an ICO in BVI will provide investors with information about the release of the token, as well as its updated or enhanced versions, as applicable.
Information on risk mitigation and compliance with the applicable laws is also required. The fundraising target is stated as part of the white paper and transparency is advisable.
The credibility of the initial coin offering lies heavily not only on the product itself, but also on its presentation.
Investors are interested in the operating model and the organization structure before they decide to fund a certain project. They remain cautious as they may be concerned about fraudulent ICO launches.
Entrepreneurs who structure their ICO in BVI can benefit from all of the location’s advantages. In addition to this, a well-formulated white paper will allow them to benefit from an important advantage in a market in which competition has become more pronounced.
Reasons to launch an ICO in BVI
The British Virgin Islands is a favorable location for an initial coin offering and some of these are the same as in the case of BVI company formation. We list these below:
- flexibility: the corporate flexibility for which BVI is well known is also an advantage for structuring an ICO.
- tax neutrality: BVI is one of the jurisdictions that impose no income tax, no corporate income tax, no capital gains tax; an advantage for the transactions in an ICO launch.
- quality transactions: ICO launches in BVI are handled in a professional manner and are fluent as the region enjoys the presence of specialized corporate services providers.
- low maintenance requirements: a company that is structured for an ICO launch will enjoy low maintenance costs and founders interested in BVI company set up will not pay a minimum capital upon incorporation.
Some of the issues investors may wish to take into account regarding ICOs and cryptocurrency regulation, in addition to the laws listed above, include the following:
- Taxation: the taxation of the BVI entity that launches the ICO should be taken into account as the company starts to trade;
- Approved financial manager: there is a special regime in the BVI for those acting as an investment manager or investment advisor in the BVI;
- Restrictions: there are no border restrictions as far as cryptocurrencies are concerned;
- Reporting: no reporting requirements apply in terms of payments made by cryptocurrencies; however, BVI companies are required to record information about the beneficial ownership of the company (the data is kept in a confidential database);
- Mining: there is no special regulation cryptocurrency mining activities in the BVI.
Another advantage that makes the BVI attractive for ICO launches is the Electronic Transactions Act.
Electronic transactions and communications are facilitated in the BVI through the e-legislation regulations and electronic communications are legally recognized in this jurisdiction.
The Electronic Transactions Act can make it easier for entrepreneurs to conduct an ICO and use an electronic platform, as well as electronic contracts.
The British Virgin Islands are developing as a jurisdiction that is fit for an ICO launch. According to the Coin Shares H1 2018 Crypto Asset Report, the British Virgin Islands is the second-largest market by trading volume:
- – the United States had a trading volume of 35.7 billion USD.
- – the BVI had a trading volume of 16.2 billion USD.
- – Luxembourg had the third-largest trade volume, at 11.6 billion USD.
- – they were followed by Japan (8.6 billion USD).
Investors who wish to set up an ICO in BVI can contact our British Virgin Islands company formation specialists for more information about the steps and regulations.
Entrepreneurs can also reach out to us for any questions regarding the incorporation of a cryptocurrency or blockchain business, including but not limited to a crypto exchange.