The initial coin offering (ICO) is a manner of acquiring funds from the public by using distributed ledger technology.
An ICO in Jersey is not subject to stringent regulation by the Financial Services Commission and most of these offerings are likely to remain unregulated.
Nonetheless, the Financial Services Commission places several conditions on the company acting as the ICO issuer.
Our agents specializing in company formation in Jersey discuss the main conditions for an ICO in this jurisdiction.
We also assist investors who wish to open a cryptocurrency company, as well as with many other company formation related matters.
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ICO classification in Jersey
The Jersey Financial Services Commission (JFSC) reviews ICO on a case-by-case basis.
An ICO in Jersey is classified by the Commission in the following manner:
- Security token: this token usually shares characteristics associated with equity or debt security;
- Non-security token: this can either be an utility token or a cryptocurrency token and it is not deemed to be a security.
- Utility token: this offers the holder the right to access a certain product or service; it does not offer economic rights;
- Cryptocurrency token: this offers the holder the ability to treat it as a currency, by storing or exchanging it.
A company launching an ICO in Jersey will need to be mindful of the general requirements set forth by the JFSC irrespective of whether the token launched is considered a security for regulatory purposes or not.
While each application is treated separately, the JFSC may treat non-security tokens differently.
Our company formation specialists in Jersey can provide more details as needed, on a case-by-case basis.
General requirements for an ICO in Jersey
The Jersey Financial Services Commission has issued a set of general requirements for companies that wish to become ICO issuers:
- The company issuing the ICO needs to be incorporated as Jersey company;
- Receive the consent of the FJSC, under the applicable COBO law, before commending the offering;
- Comply with the Sound Business Practice Policy and the relevant Anti-Money Laundering requirements;
- Appoint and maintain a trust company service provider, licensed by the JFSC;
- Comply with the ongoing audit requirements;
- Implement procedures to mitigate the risk of inappropriate investments in the ICO; the investors need to understand the risks.
The purpose of the guidelines listed above is to ensure a streamlined application process, under the applicable Control of Borrowing (Jersey) Order 1958 (COBO).
The issuer of the ICO in Jersey can only be incorporated as a Jersey company. Other business forms are no accepted.
In addition to the regulatory requirements above, the issuer will need to properly prepare and present the white paper for the initial coin offering.
The white paper is a document detailing the important aspects of the project, essentially a business plan.
In Jersey, the ICO white paper needs to comply with a set of content requirements that resemble the ones for a company prospectus, under the Companies Law 1991.
According to a paper on the performance analysis of 2019’s initial coin offerings by specialists at the TUM School of Management in Munich, Germany, more than $ 3,3 billion USD have been raised in ICOs.
Other data from the paper shows that:
- investors had a 17% chance of trading their tokens above their ICO issue price after 6 months;
- this change increased from 8% in 2018;
- approximately 9 in 10 tokens trade below their ICO price.
Contact us for more information about the requirements for an ICO in Jersey.
Our team assists investors who wish to open a company or a branch in Jersey, irrespective of the industry.
Our team also provides incorporation solutions in Guernsey, which is the second island that, together with Jersey, makes up the Channel Islands. Particular requirements apply for company incorporation in Guernsey, as the registration of a company needs to take place with the assistance of a licensed fiduciary agent. Our team can give you more information as needed in your case.
Jersey is a suitable location for basing many types of companies, not only those that are ready to launch an ICO. Some of the most common uses include asset holding, trading, as well as trust purposes. Chief among the uses of the Jersey company, however, are investments. If you would like to know more about the requirements to open a company in Jersey, please reach out to our local team.
We also assist clients interested in other matters, such as asset protection in Jersey. A common way to approach this issue is to set up a trust in Jersey, a vehicle that will grant anonymity and confidentiality and will be suitable for the protection of assets from future or contingent creditors (subject to conditions). This vehicle can also be used for estate and succession planning.