Open an ICO Business in Liechtenstein
Open an ICO Business in LiechtensteinUpdated on Friday 15th February 2019
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The ICO, short for the “initial coin offering” is a limited amount of time during which a company offers a number of crypto coins to the public. This is done in order to fund a project and in exchange for the financing, the investor receives a token, usually a type of cryptocurrency that is tradable on exchanges and will allow the holder other rights.
Investors who open an ICO business in Liechtenstein will have made all of the other needed steps, including incorporating a legal entity and creating a product, as well as preparing the white paper that describes the product and is essential for the offering. As a crowdfunding method, the ICO can be a successful one, however, entrepreneurs will need to be aware that regulating agencies are observing the development of the market. Liechtenstein is a hub for cryptocurrency and blockchain businesses particularly because it offers advantageous conditions for growing such a business.
Our team of lawyers in Liechtenstein can help entrepreneurs launch an ICO and can provide investors with complete legal advice on the treatment of cryptocurrencies in this jurisdiction. At the moment, an initial coin offering in Liechtenstein can be regulated in those cases in which security tokens are issued. However, in light of a future EU law harmonization with the Liechtenstein laws, this could change. Our team can provide you with updated information.
What are the main issues to consider when launching an ICO?
The tokens issued during the initial coin offering influence the manner in which they are treated from a regulatory point of view. As such, they can take the following form:
- - Security tokens: these can be treated as debt, equity or derivatives, they can generate income and offer potential rights to the holder.
- - Digital currency: this is a virtual coin that has an attributed value and can be used to purchase goods and services (their value fluctuates according to market specifics).
- - Asset-backed: this token has an underlying exposure to tangible assets such as gold, precious stones, securities, cash, real estate or others/
- - Utility: this token offers access to a blockchain platform, a blockchain product or service.
When engaging in an ICO launch, companies are required to publish a white paper. This document describes the project and the funding will take place via the ICO. From a certain point of view, the ICO launch combines the blockchain technology with crowdfunding principles. Investors who are interested in opening an ICO business in Liechtenstein can take advantage of the fact that individuals can get involved easily with the launch and the process is, in general, a secure and trusted one. This crowdfunding model allows for worldwide participation so the company making the ICO can pool funds from a large investor market. Successful ICOs have the potential to raise significant amounts.
How is the ICO taxed?
Liechtenstein is one of the EU jurisdictions with a favorable tax regime and this also applies to ICO businesses. When the coin offering is treated as an equity token, it can be subject to stamp tax as well as VAT and corporate income tax (when it is treated as a utility token). The corporate income tax in Liechtenstein is 12.5% and the stamp tax is 1% (the Swiss rate applies because Liechtenstein is considered part of Switzerland for the purpose of levying this tax). The standard value-added tax is 7.7%.
Companies in Liechtenstein that engage in ICO launches will need to observe the general taxation, accounting and reporting principles applicable according to business type. One of our tax attorneys in Liechtenstein can give you more information about taxation.
How is the ICO treated from a legal point of view?
The Financial Market Authority is the one to publish the regulations on ICOs and their treatment. In some cases, depending on their specifications, tokens offered as initial coin offerings can be treated as financial instruments and in this case, they are subject to the financial market law. As stated above, this clearly refers to tokens that share the characteristics of equity securities but it can also apply to others that can be treated as different investments. Because the regulatory regime is one that depends on the function and the design of the tokens, we recommend reaching out to one of our financial lawyers in Liechtenstein who can give you more information about the regulatory regime set forth by the Financial Market Authority.
Investors who wish to launch an initial coin offering, those who are interested in investments in blockchain and cryptocurrency businesses can contact our law firm in Liechtenstein.