Guide: Key Regulatory considerations for ICO projects


Complying with financial, tax and legal regulations can be costly and time consuming, so it is often tempting for teams considering an ICO or Token Generation Event (TGE) to save costs by reducing their level of compliance with regulations. However, the benefits of this approach may be short lived as regulators are increasingly active in the ICO/TGE space…

ICOs can be a great way to fund the development of promising new blockchain and distributed technologies. However, the regulatory requirements of running an ICO can be complex and varied, and complying with regulations can consume a great deal of founders and developers’ time and resources.

For this reason, it can be tempting for a project considering an ICO to attempt an ICO without due regard to the regulatory requirements. This is particularly true where project resources are limited and expensive advisors may need to be engaged. However, ICOs, and the crypto-currency market more broadly, have gained somewhat of a reputation as being home to ‘cowboy’ operators, and have started to attract the attention of regulators around the world.


Minimising and managing regulatory risk to a project is an important aspect of successfully running an ICO and developing a cryptocurrency project. There are typically a broad range of regulatory issues that any ICO project may need to consider. Unfortunately though, many jurisdictions do a poor job of explaining these requirements, and access to the necessary information can be inaccessible and expensive. This is particularly so in a new field like cryptocurrency and distributed technologies, where the application of existing law can be unclear. Ignorance is not a defence though; it is only a matter of time before regulators may come knocking.


Many jurisdictions to a poor job making regulatory requirements for crypto start-ups easily understandable and accessible.

The exact regulatory requirements will vary depending on the nature of the project and jurisdiction, but some key considerations may include:


Key Regulatory Areas to Consider:


1. Finance/corporations law obligations

Many jurisdictions have extensive and complex regulations governing the issue of securities (which some crypto-currencies may be in certain jurisdictions). Determining whether these rules apply is particularly important as it may have a significant impact on the project’s obligations when running an ICO.


2. ICO contracts

Preparing appropriate contractual documentation is critical to a successful ICO project. ICO agreements should be clear and precise as the terms of the issue can be a key part of avoiding potential complex, expensive and protracted litigation at a later date.


3. Anti-terror/anti-money laundering

Many jurisdictions often impose an obligation on the receivers of money or equivalents (including other crypto-currencies) to ‘know your customer’ (KYC) as part of complying with anti-terror and anti-money laundering rules.


4. Representations and consumer protection obligations

The application of consumer law and the representations made by the ICO project can be important to determining what rights and recourse purchasers may have if they are dissatisfied with a project. ICO projects should look to precisely define and communicate upfront the nature of any tokens issued.


5. Tax implications

The tax obligations of an ICO can be unclear, and may vary significantly depending on the jurisdiction of the ICO and the nature of the tokens. ICO project should consult appropriately qualified tax advisors to ensure that there are no unpleasant surprises post-ICO.


6. Corporate structure

The corporate and business structure adopted for an ICO can have a significant impact on risk, tax outcomes, and the potential liability of ICO project management.


7. Focus jurisdictions and jurisdictional exclusions

As some jurisdictions (e.g. the United States) impose onerous securities and financial regulations, it may be desirable to sell ICO tokens only in certain locations to ensure that the ICO issuer does not unknowingly breach a particular jurisdiction’s laws. ICO projects should take note that some some jurisdictions have limited or banned ICOs, or have moved to restrict the issue of tokens with particular characteristics.


8. Availability of regulatory concessions

Fintech is an exciting space, and many jurisdictions have altered their regulatory regime to encourage the growth of Fintech and other entities in their jurisdiction. Many jurisdictions have taken steps towards the creation of a ‘regulatory sandbox’ to encourage the growth and development of Fintech and crypto-currency start-ups. In some cases these rules may exempt start-ups from complying with certain aspects of complex financial regulations, or offer significant tax rebates for any research and development activities.


Lupercal Capital have advised on major ICOs and cryptocurrency projects. If you would like to learn more about the key regulatory and business issues facing your crypto-currency business, we’d love to help — please contact us at

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