Six steps to legally compliant ICOs

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Switzerland continues to experience an upward trend in terms of values raised through Initial Coin Offerings (ICOs). In the last two months since Baker McKenzie released Initial Coin Offering: A Legal Work Plan, the south-central European nation has held on to its position of world’s third largest market for ICOs with values raised increasing by almost 5% since June 2018 (Source: icowatchlist.com/statistics).

Mifid II leads the way

Despite skeptics’ view that ICOs are unregulated securities, Switzerland’s fintech-friendly legal environment¬†continues to be bolstered by EU regulations in the form of Mifid II, or the Markets in Financial Instruments Directive.¬† Geared towards protecting investors and increasing transparency across asset classes, it was originally rolled out in 2008 and was subsequently replaced by Mifid II last January.

ICO founders, issuers, operators, and banks offering ICO-related services would be well-advised to ensure their compliance with financial market and securities regulations while making themselves aware of resulting tax implications.

Twelve months and six steps to compliance

Based on Baker Mc Kenzie’s legal work plan, ICO players should allot a nine to 12-month period to ensure legal and regulatory compliance. This recommended period takes into account an ICO’s tendency to regularly challenge different legal disciplines that range from corporate and contractual law, fund flow, and the legal establishment of the token itself, and regulatory and tax law with regard to the issuance and trading of tokens.

ICO Legal Work Plan

Initial Coin Offering: A Legal Work Plan describes in chronological order the legal work typically required in connection with ICOs.

Baker Mc Kenzie’s prescribed work plan for ICOs identifies six distinct phases which begins with information-gathering and outlines subsequent regulatory and legal steps that lead up to the launch of the ICO and, ultimately, capital-raising. It breaks down the nine-month period and highlights legal work products or deliverables that are relevant at every stage.

For a more in-depth look at these steps, you can refer to Initial Coin Offering: A Legal Work Plan. Alternatively, you can also reach out to Baker McKenzie’s cryptofinance team in Zurich composed of myself, Dr. Matthias Courvoisier, Dr. Ansgar Schott, and Dr. Yves Mauchle.

Dr. Manuel Meyer is a partner of Baker McKenzie's Zurich office. He is a member of the Firm's global Innovation Committee and his practice focus is on Reorganizations and M&A.