Sirwin
Sirwin

Global Crypto and Blockchain Jurisdictions Overview

By Teodor | Reitis Community Network | 31 May 2020


Back in 2019 when we started to search about a possible blockchain real estate project creation, I’ve made a comprehensive research on few important issues, including global crypto and blockchain jurisdictions, in order to find out which are the most crypto friendly. Below are the results of my research. It's a long article, so choose only the jurisdiction that might interest you. 

Europe

European Union

To launch a Security Token Offering, companies have to create a prospectus and meet local security law requirements, except if qualified for the regulations mentioned below:

  • The qualified investors’ exemption (private placement): Just like Regulation D in the US, companies can request qualified investors for the offerings.
  • The limited network exemption: Companies can trade their security to around 150 people per member state freely. 
  • The limited amount exemption: Just like Regulation A mentioned above, organizations can sell securities up to 5 million euro without creating a prospectus. 
  • The large investments exemption: Organizations can trade their securities freely if every investor buys at least 100,000 euro of issued securities. 
  • The nominal value exemption: Organizations can sell the securities without any hassles if each security’s value is equal to at least 100,000 euro.
     

Estonia

Estonia is a country that is adopting a crypto-friendly legal environment where STOs can thrive, being also a highly-developed country with some of the highest internet speeds in the world. This year, Comistar Estonia launched their own security token offering platform which potentially opens up the entire EU region to STOs. Another security token platform, B2BX, was granted full regulatory approval by the state in an unprecedented move. All of this bodes well for the future of tokenized securities in Estonia and investors along with issuers would be wise to keep a close eye on this small country’s developments.
 

Switzerland

Switzerland is home to the town of Zug which became world famous as the cradle of the crypto industry. Zug, also known as the “crypto valley,” has been a hub for blockchain developers since early 2017. It is hence no surprise that the Swiss industry noticed the potential of STOs. As a part of this development, it is now known that a digital exchange where Security Tokens can be listed is in the pipeline. The costs for regulatory permissions may however be high considering the strict regulation on securities in the country. FINMA examines each token sale on a case-by-case basis and is currently surveying blockchain startups to violate Swiss law potentially.
 

France

Performing a legal activity in France is usually prohibited until the specific person is exempt or licensed. Activities that involve “financial instruments” are regulated activities. AMF (Financial Markets Authority) had earlier identified the absence of ICO regulations as a risk inherent to ICOs. As a result, the French Treasury has come up with a new legislative framework.
 

Gibraltar 

Gibraltar, a British overseas territory at the southern tip of Spain, has recently launched itself into the blockchain revolution, also launching a blockchain summit, which will discuss the future of regulations for ICOs and blockchain technologies. Gibraltar was the first country to set up regulatory framework for blockchain technology, encouraging a safe environment for both developers and investors. The chief executive of the Gibraltar Financial Services Commission, Samantha Barrass said: “The proposed framework will facilitate a progressive, well-regulated and safe environment for firms using DLT [Distributed Ledger Technology] to grow, while also ensuring that this new regulatory environment protects both consumers and the good reputation of the jurisdiction.” Investors are already running to set up in Gibraltar, knowing that the government will always support blockchain-based ventures. 

Lithuania

Lithuania is well on its way of becoming a fintech hub in Europe, and one look at its security token regulations immediately shows that there was a lot of thought put into it. The country's Ministry of Finance has created a special task force that has made multi-institutional explanations regarding taxation, accounting, and issuance of security tokens. Best of all, it is all in compliance with the EU's financial market rules. As a result, people can now issue STOs in a state that is a member of the EU, which will open their way to all other EU countries. Lithuania even allows you to get a professional opinion from financial market supervisors regarding the nature of your STO, and whether or not it has the necessary features of a security token, for free. 

Slovenia

Money is nothing says Slovenia, tucked between Italy, Austria, and Croatia. What counts is commitment, and this Eastern European nation has literally baked blockchain into its bricks. The first monument to the blockchain technology that underpins cryptocurrencies took center stage on Tuesday on a roundabout in Slovenia, authorities in the country’s fourth largest city said. Slovenia has actually unveiled a physical monument to blockchain carved in the shape of the bitcoin symbol.
 

Malta

Malta is a small nation with a big love for blockchain. Not only is it the place with one of the few existing laws specifically for tokenized securities, but it also has an ample pool of talent and investors who are eager to enter this new market. Many STOs are flocking to Malta to issue and hold their token offerings with Maltese exchanges like LXDX planning to compliantly launch their own STO. There’s a reason Malta has been known as a global leader when it comes to not just security token regulation, but the blockchain space more generally. This year, for example, it became the world’s first country to establish official regulations for cryptocurrencies.
 

Middle East

United Arab Emirates

The UAE Securities and Commodities Regulator has planned to regulate the Initial Coin Offerings in the country. The planning to introduce regulations was to recognize tokens as securities. Securities in the Dubai International Financial Centre are governed by the Dubai International Financial Services Authority (DFSA); while the Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA) governs securities in Abu Dhabi. The largest and most populous city in the United Arab Emirates (UAE) and playground for the elite, Dubai, is no stranger to blockchain technology. In the real estate market, 30 BTC, can buy a luxury apartment in the Aston Plaza Development. DUBAI has plans to be the first blockchain-powered government by 2020. While not the strongest performer out there, the DubaiCoin (DBIX) has been around since February 2016 and is now trading around USD $3. More important than the coin performance is the recognition that the UAE was a willing blockchain technology adopter earlier than other regional players.

Israel

The Israel Securities Authority (ISA) established a committee in August 2017 to examine the applicability of existing Israeli securities laws to the sales of tokens. ISA has planned to evaluate the token sales on a case-by-case basis. ISA stated a security token as a cryptocurrency, entitling the token holder to the future cash flow or ownership rights in a specific venture. Israel has grown to be known as one of few ICO havens around the world, mostly because this country has a lot of respect and support for blockchain technology. The country's regulator is a body specially created for regulating cryptocurrencies. So far, this committee was not very restrictive. In addition, the country's Securities Authority issued a new report recently, in which they made a clear difference between security tokens and utility tokens. One potential issue is a lack of clarity on several issues, such as STO taxation, accounting, and alike. 

 

North America

USA

The United States has a relatively free market and is generally conducive to business expansion and general market innovation.

Howey Test
 To be a security token, it needs to qualify the Howey test. The US Supreme Court established the Howey test to determine whether the arrangement includes an investment contract (security) or not. In the context of crypto tokens, Howey test can be represented as 3 independent elements which must be met to create a security token: 

1) An investment of money 

2) in the same enterprise 

3) with the belief of profits from the efforts of others.

Otherwise, the token is considered as a utility token. A crypto asset which passes the Howey test is classified as a security token. It should be subjected to federal securities and regulations. Let’s discuss the security token offering list of countries and their regulations to launch a security token.

USA Regulations:

  • Regulation D
  • Regulation A
  • Regulation S

Regulation D
Regulation D enables a specific offering to avoid being registered by the Security and Exchange Commission (SEC) if the creators fill the “Form D” after the securities are sold. Individuals who offer such security may request offerings from the investors in compliance with Section 506C, which says that the investors are accredited and verified and therefore, their information is free from misleading or false statements. 

Regulation A
It will allow the creator to provide SEC-approved security to non-accredited investors with a general solicitation for maximum $50 million in investment. The issuance of Regulation A can comparatively take more time than other options to register the security. That is the reason why it is expensive than all other regulations.

Regulation S
Regulation S applies when a security offering has to take place in a country apart from the US. Therefore, it is not subjected to any registration requirement under section 5 of the 1993 Act. 
However, creators have to follow the security regulations of the country where they are executed. 

Canada

Securities laws in Canada are similar to laws in the USA. Even, the test to determine a security in Canada is identical to the Howey test followed under US law. The token sale which is under Canadian law, then it should be registered and complied with a securities regulatory authority and should have a prospectus. Though all of the regulations discussed above are valid to launch a security token, it is crucial to consult a legal person before proceeding further. 

Friendly Exotic Jurisdictions

Cayman Islands

The Cayman Islands may also be chosen for conducting a STO if you only plan to offer the securities to ‘sophisticated persons’ as defined in the Securities Investment Business Law of the Cayman Islands. In case a STO is planned for such sophisticated persons (high value and selected investors only as specified in the definition), a STO through the Cayman Islands would only require a filing with the regulators. It must however be ensured that the general public are not solicited in the process. 

Vanuatu

Vanuatu may emerge as a prominent destination for conducting a STO owing to its business friendly environment. Potential issuers may seek a securities dealer license from the Vanuatu Financial Services Commission before proceeding to issue a Security Token. You may work together with a cryptocurrency exchange licensed in the country or may seek a license on your own account for dealing with the securities. It may however be ensured that you have the necessary technological expertise for completing the entire process of Tokenization and issuance of the Tokens. Vanuatu with its well developed financial services industry must be on the radar if you are considering a STO. 

Bermuda

Bermuda has emerged as a leader in the field of crypto based businesses with the innovative Digital Business Act, 2018 which defined ‘digital assets’ to also include a representation of debt or equity. This effectively opened the path for issuance of Security Tokens from an enterprise which has obtained a Digital asset business license from Bermuda. It must however be noted that for an enterprise seeking a license, maintaining a head office in Bermuda has been made mandatory. However, with a favourable regulatory environment and access to world class financial services, Bermuda may emerge as a prominent location for STOs. Bermuda is hoping to attract more businesses to the island by providing legislation that would allow initial coin offerings under certain conditions. It has also set up a task force with the remit of boosting cryptocurrency commerce. 

Panama

It might be too soon after the infamous shell company bust but Panama is an emerging player on the blockchain stage. The Blockchain Embassy Panama has recently opened its doors and intends to serve the general public, connoisseurs, enthusiasts, developers and entrepreneurs in the blockchain ecosystem. Although not a Panamanian, Cryptobuyer, a Venezuelan digital asset company, set up shop in the form of the first two Bitcoin ATMs (BTMs in Spanish) at two commercial banks in Panama City. With the foot traffic of high net worth expats, it makes sense for Panama to be blockchain friendly. 

Mauritius

This small island deep in the Indian Ocean has big plans to become “Ethereum Island.” Founders of ConsenSys are forming a partnership with the country to establish blockchain principles throughout the island’s ecosystem. They would implement digital identity and decentralized information. Free wifi would also be accessible throughout the whole island. ConsenSys believes this experiment will boost the nation’s revenue and economy, as well as launch Mauritius as a leader in the blockchain industry. 

San Juan, Puerto Rico

The government of this small island has high hopes that blockchain will help set the island’s financial fortunes back on track. Battered first by high debt and then by natural disaster, Puerto Rico could use a major new industry, and its offshore vibe appeals to both the professional and the cultural aspects of blockchain entrepreneurs. As a capitol in the Caribbean, one rebuilding almost from the ground up, San Juan affords startup firms the chance to put their own stamp on the city. They can build almost from scratch, asking for much and probably getting it. With long beaches and Caribbean rooftops, Puerto Rico would like its blockchain community to feel like they’re disrupters during and after working hours. From a fiscal point of view, the island brings a lot to the table as well. It has the low taxes and generous local government of an offshore corporate haven, while also offering access to the stability and enforcement mechanisms of the U.S. justice system. Puerto Rico may not be an inexpensive place to live, but from a recruitment standpoint, having an office 15 feet from the beach isn’t a bad pitch.
 

Asia

Singapore

The Monetary Authority of Singapore (MAS) had come up with a guidance series for token sales. According to the Singapore Government, organizations must register and submit their prospectus to MAS before launching STOs and unless qualified for one of the exemptions mentioned in “A Guide to Digital Token Offerings”, by MAS.

  • MAS can regulate digital token offers or issuance if the tokens are capital market products under SFA (Securities and Futures Act).
  • MAS would examine the characteristics and structure of a digital token (including the rights attached to it) to know if it is a capital market product under SFA.
  • A digital token may constitute a share, a debenture and a unit.
  • The small offer of an entity in a CIS (Collective Investment Scheme) should not exceed S$5million within any 1 year, subject to certain conditions.
  • A private placement offer should not be made to more than 50 individuals within a period of any 1 year, subject to specific conditions.
     

Hong Kong

Rather than what approached has been followed by its mainland China, Hong Kong declared that they may include the sale and offer of securities. Launching tokens under the category of “securities” and hence, defined as a regulated activity. Therefore, parties engaged in a regulated activity need to be licensed or registered with the SFC (Securities and Futures Commission) no matter whether the parties are based in Hong Kong or not. Parties that are involved in the secondary trading of such tokens may also subject to the SFC’s conduct and licensing requirements. 

China – Shenzen and Hangzhou

While difficult to narrow down because the Chinese government has begun pouring money into this project nationwide, Shenzen and Hangzhou are two good examples of this race to provide funding. In Hangzhou, a pot of combined government and private money has exceeded this investment. The Xiong’An Global Blockchain Innovation Fund has more than $1.6 billion US to spend on startups it deems worthy. A third of that is backed directly by the city government. In addition, in 2017 beginning, the People’s Bank of China together with other regulators of China announced token sales to be illegal.  

Japan

Although it is only recently that Japan has become crypto-crazy, Japan has already caught up to most other countries, introducing blockchain to many governmental sectors. This includes tracking some governmental tenders through March 2018. Another big move will be their plan to unify all land and property registries throughout the country under one blockchain ledger. Private sectors of Japan seem to be down with blockchain as well: Yoshikawa, Ripple’s director of joint ventures, says that she expects 40% of Japanese banks to be among the many worldwide to begin cross-border payments using Google-backed Ripple’s blockchain platform. 

South Korea

One Friday in late August 2017, South Korea contributed to 70% of Ripple’s price jump, bringing in a whopping 7% of the entire Bitcoin volume traded that day. South Korea is waking up to Bitcoin in a big way recently, introducing FinTech roadmaps for regulations and investing in research projects from the Central Bank to Bitcoin. South Korea regularly hosts bitcoin conferences and is set to make Bitcoin a real part of their economy.

 

AUSTRALIA & AFRICA

Australia & New Zeeland

Although Australia has been known to have some harsher rules on regulating crypto, this doesn’t stop its citizens from becoming obsessed. In 2016, Australia removed its “double taxation” on Bitcoin and other altcoins, officially considering it all as currencies. Parliament is beginning to understand the implications of blockchain and Bitcoin and has recently formed the “Parliamentary Friends of Blockchain” group. This allows senators and governmental members to interact and ask about all things blockchain and cryptocurrency, to keep Australia’s government up to date on movements. Australia has recently planned to regulate digital currencies, but this regulation is happening globally and means that crypto is being acknowledged as an important player in the economy. 

South Africa

South Africa has shown initiative in opening up their economy to welcome blockchain by hosting the Blockchain Africa Conference 2018 in Johannesburg next March. Additionally, their second largest national grocery retailer, Pick n Pay, piloted  and now accepts Bitcoin payments. The most popular exchange in South Africa is Luno, and while national policy remains informal and unclear, it is the responsibility of citizens to report all transactions to the South African Revenue Service.

 

References:   

https   //www.imf.org/external/pubs/ft/scr/2004/cr04271.pdf

 "National Futures Association/About Us". NFA.org. Retrieved 5 April 2016.

 "List of United State Banking Authorities". USA.gov. Retrieved 21 June 2013.
 South Africa: https://www.luno.com/en/za

How do you rate this article?

4


Teodor
Teodor

Strong Family man and Christian believer, entrepreneur involved in AI, Web3.0 apps development, and in crypto investment.


Reitis Community Network
Reitis Community Network

Join the rEvolution! By fully tokenising our business and creating Reitis Community Network, people around the world have easy access to properties and affordable housing. Anyone can partner for further development of sustainable projects in their area of residence. You'll be surprised by what you'll learn!

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.