There are little to no guarantees enforced by the government, depending on the country. However, by now most companies that have launched their TGE campaigns, impose restrictions on themselves to provide sufficient trust and transparency for the contributors.
The earliest TGE’s were very improvised by its nature, with little rules or restrictions. But soon Blockchain startup owners realised that without government regulations, it becomes their duty to establish the terms that will ensure sufficient trust from the community and, by extension, the sufficient inflow of contributions.
This has resulted in many self-imposed restrictions including:
a) Storing the contributions of the community members in escrow wallets. To access the funds stored in an escrow wallet, the owners need several private keys. One of the keys is usually owned by a trusted third party uninvolved in the project development.
b) Establishing a legal entity for the company and documenting a set of terms and conditions of the TGE.
c) Documenting the process for the returning of the funds to their contributors if the TGE fails to reach the targets and funds (ETH, or BTC).
Avoid being seen as a scam
There are several signs of a potentially fraudulent TGE: anonymous developers, the lack of an escrow wallet and unclear or unrealistic goals are among the most telling ones.
The cryptocurrency community has had to deal with a number of scam TGE campaigns over the past several years. There are some red flags which are common for most of these campaigns and by detecting which you can avoid potentially dangerous companies:
a) The developers of the project are either anonymous or unknown to anyone in the community. If the people behind a TGE don’t put their reputation on the line, they are more likely to feel safe while pulling a scam.
b) No escrow wallet for contributions. If all keys to the contributors’ donations are concentrated in the hands of the owners of a project, nothing is stopping them from running away with the money.
c) Unrealistic/unclear goals. When a project doesn’t have a clear-cut, realistic roadmap, it means that the people behind it don’t know what they’re doing, at best. At worst, they don’t really care because they aren’t actually going to do anything.
d) Lack of transparency. Today, showing work-in-progress stages of a project to the audience is considered an industry standard in crypto. If the developers don’t release code snippets, demo/beta versions of their product, behind the scenes videos or other kinds of reports on their progress, it is possible that they don’t have anything to show at all.
Generally, it is not advisable to launch a TGE for a company/project that does not utilise blockchain technology within the business going forward.
From a regulatory perspective, moving forward it will prove critical that the token carries an ongoing utility. This is because, if the token is merely a tradable asset, which also carries a royalty, it is unlikely to be seen as a ‘software pre-sale’, or utility tool, which is essential to its likely treatment by regulators going forward.
Most TGEs are currently launched out of Switzerland, or Singapore. As an alternative, the government of Gibraltar has announced a regulatory framework that would encompass ICOs and it looks as though it may be a leading player in the space going forward, especially with TGE specialists TokenMarket choosing the jurisdiction as they’re base.
However, the effects of Brexit must be considered and should Gibraltar continue to be used as a pawn with closing of the boarders looking a possibility, it will likely have a material effect of the efficiencies of businesses and the jurisdiction as a whole.
We do believe Gibraltar is an interesting option, but we need to wait as see how Brexit pans out and perhaps for others to lead the way, possibly highlighting any unforeseen issues.
If looking to further legitimise the ICO under regulatory supervision, the Isle of Man offers the only option. It means registering an Isle of Man Company and registering under the Designated Business Act. This entity would then conduct an AML/CFT complaint TGE.
The ability to offer a FSA supervised and AML/CFT compliant TGE will add weight and legitimacy to a TGE.
We carefully plan token sales being mindful of anti-money laundering (“AML”) legislation, which means taking a proportionate approach to AML.
Token Partners offer a unique mix of expertise, services and scalability.
White papers are the backbone of every ICO and the foundation of a crypto project. Ensure that yours is relatable and comprehensive.
One of the most exciting times in the lifecycle of any business is the pre-money, concept development stage. We get excited helping clients develop ideas from scribbles on napkins to operational, revenue generating businesses.
A Designated Business Act registration provides value for token purchases and issuers by ensuring compliance to international AML/CFT standards and protecting against future delisting.
Financial forecasts should not be a best guess, specially with the amount of data publicly available in modern times. Robust forecasts can be a true and accurate vision for the businesses.
Competitor analysis is an essential part of startup and ongoing strategy. Objectivity and skilled researchers are essential. This is where we excel and add real value to the process, ensuring conclusions can be upheld if challenged.
A pitch deck should be exciting. Our team creates pitch decks from an investor perspective; precise, engaging and covering all key criteria.
As a minimum, businesses need to identify risks and how to mitigate them as much as possible. Our business planning exerts are excellent at identifying and mitigating risks across a vast array of business sectors.
AML/CFT Compliance Programmes are essential for eGaming, Blockchain and FinTech businesses and assist legislators and policy makers develop practical, appropriate regulatory frameworks, in consultation with the sector.