What is ІСО and how does it work?.
Application of ICO and its role in the context of MiCA
Initial Coin Offerings (ICOs) are a relatively new and straightforward method of acquiring financing for early-stage businesses by issuing crypto assets in exchange for crypto assets or fiat. ICOs can be used for a variety of objectives, including startup investment and business financing. Ordinary investors, on the other hand, may find it difficult to properly understand the specifics of ICO projects and distinguish between prospective profit opportunities and scammers aiming to collect as much money as possible before disappearing without a trace.
It is critical to realize that one of the objectives of implementing crypto assets regulation laws in the EU, such as MiCA (Markets in Crypto-assets), is to control the ICO mechanism, assuring its clarity and transparency inside the EU area. Many ICO issuers rarely consult lawyers before launching their projects to confirm their legality and compliance with legislative requirements. They typically seek legal assistance only when problems occur with regulators or partners refusing service transactions with the issued crypto-assets. Please keep in mind that, as legal professionals, we can assist you in analysis of all the details of ICOs, as well as resolving any gaps, discrepancies, as well as those with your partners prior to the actual issue.
ICO release requirements
So, what regulatory restrictions should ICO issuers be aware of? It is best to divide them into two stages: current local regulations for ICOs and upcoming future MiCA requirements. Many EU states currently have local standards that must be met, whereas others do not. Furthermore, certain crypto-assets may be subject to other regulations, such as those governing transferable securities and financial instruments. In such circumstances, MiFID requirements are applied in addition. This article, however, does not cover these specific crypto-assets.
If issuers are launching crypto-assets prior to the MiCA implementation, we recommend incorporating the points that will be required under MiCA in the White Paper to limit the need for significant revisions and processes upon MiCA takes effect.
Requirements for White Paper
ICO issuers subject to MiCA will be obliged to post a technical paper (White Paper) on the issuer’s website in English or one of the EU’s official languages. We would also want to draw your attention to the fact that the White Paper, according to MiCA, shall include:
- An accurate description of the project of the issuer, including its goal, objectives, tasks, and technical characteristics.
- Detailed information about the token issuance and distribution technology.
- Financial data, including planned money use and financial statements, including those prepared by an independent auditor.
It is also important to know that if the regulator has any queries or concerns, the issuing of the crypto asset may be suspended. They could need further documents or information. In such circumstances, it is critical to respond to requests and provide the relevant information, as well as to meet the regulator’s deadlines and to be prepared to submit documents, reports, or other requested information.
At least 20 days before its official publication, the White Paper should be submitted to the local regulatory body of the EU member state where the project’s entity is established.
MiCA requirements for the White Paper ensure that investors have enough information to make informed investment decisions, and that issuers of crypto assets have high transparency and accountability. Such an approach, without a doubt, contributes to the smooth growth of the crypto asset market.
SBSB Fintech Lawyers offers clients individual solutions for the successful launch of your token. If you need help in conducting an ISO, contact the lawyers of SBSB Fintech Lawyers. We specialize in supporting FinTech and Crypto projects since 2013, providing individual solutions for each client taking into account the business model of their company. Our lawyers will help analyze the nature of the token, help with its refinement and risk minimization before launching the project, providing full legal support.