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Initial coin offering (ICO) or token sale

The term "initial coin offering" (ICO) is based on the English term "initial public offering" (IPO). This is understood as a flotation on the stock market with which shares are offered on a capital market from existing shareholders' holdings or from a capital increase. While company shares are sold with such an initial placement, an ICO concerns a sale of so-called "tokens".

Definition:

Tokens are essentially digital coupons, the function of which may vary depending on the ICO. In probably the most cases, they serve as the currency for the project being financed with them. Thus, in this case, investors are given the opportunity to, at an early stage, invest in a cryptocurrency that is actually not yet available. The idea: if the project is successful, the value of the token should rise above the original issue price.

What different tokens exist?

FINMA (the Swiss Financial Market Supervisory Authority) distinguishes among the following tokens:

Payment tokens: equivalent to pure "cryptocurrencies" without being linked to other functionalities or projects. In some cases, it is only over time that tokens can develop the necessary functionality and acceptance as a means of payment.

Utility tokens: tokens intended to provide access to a digital application or service.

Asset tokens: represent assets such as shares in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. Thus, in terms of their economic function, tokens are to be valued as equities, bonds or derivatives.

How are such tokens currently being handled in relation to ICOs?

In its instructions for questions regarding legal requirements with respect to initial coin offerings (ICOs), FINMA stated the following:

Payment ICOs: for ICOs whose tokens have the economic function of being a means of payment and can already be transferred, FINMA takes the view that they are covered by anti-money laundering regulations. FINMA will not, however, treat such tokens as securities.

Utility ICOs: utility tokens do not qualify as securities if the token solely provides a claim to access to a digital utility or service and if the utility token can already be used in this way at the point of issue.

In all cases in which a token functions solely or partially as an investment in economic terms, FINMA will treat such tokens as securities (in the same way as asset tokens).

Asset ICOs: FINMA regards investment tokens as securities with corresponding consequences for trading under financial markets laws. For ICOs, this approach typically includes corresponding requirements under the Swiss Code of Obligations (such as prospectus requirements).

Important note: ICOs can also exist in hybrid forms of such categories. For example, the Swiss Money Laundering Act may also apply if a utility token is also widely used as a means of payment or is intended to be used as such.

Can STARTUPS.CH assist me with an ICO?

Financing models through token sales are still relatively new, are minimally regulated and therefore are subject to a certain degree of legal uncertainty. We are happy to advise new startup founders who wish to finance their businesses through token sales in a basic initial meeting.

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At this initial meeting, we can only address regulations in Switzerland and the Principality of Liechtenstein. Given our network, we provide you with more comprehensive consultation and support where required. Under our sub-page www.smart-ico.ch, you can find further information regarding our services and prices.

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BitNautic is a decentralized platform, based on the Ethereum Blockchain, for matching demand and supply of shipping services, for all the industry stakeholders: producers of goods, ship owners, charterers, brokers, importers and exporters.

More Information: bitnautic.io

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