Cryptocurrency communities always face a problem moving funds from traditional fiat currencies into cryptocurrencies (Bitcoin, Ethereum, Dash, etc.) and from cryptocurrency back into the fiat currencies. This creates a barrier for retail clients and especially for institutional investors to enter the cryptocurrency market. Most of the retail merchants still do not accept cryptocurrency as a means of payment.
Licensing of Initial Coin Offerings (ICO) and Token offerings
Legalisation of ICO and Token offerings licensing is the major problem for ICO organisers in most of the jurisdictions. ECOVIS ProventusLaw provides ICO and Token offering licensing solutions without registering them as securities. Modern Lithuanian Law on Crowdfunding allows licensed crowdfunding platform operators raise the capital through crowdfunding platforms using modern ICO and Token offering instruments. Crowdfunding licensing allows legally distribute utilities and securities Tokens in all over the European Union and rest of the world.
Fund transfers fiat currencies/cryptocurrencies
As most European financial regulators, the Bank of Lithuania coherently follows the position that cryptocurrency transactions are not licensed financial activity. On the other hand, the regulator does not restrict cryptocurrency transactions and does not restrict companies engaged in it. The key regulatory requirement is to separate cryptocurrency activity from licensed financial activity into separate companies. One company holding a Payment Institution (PI) or Electronic Money Institution (EMI) license can open fiat currency accounts for the clients, issue payment cards and process traditional payments. This company may also hold client fiat money.
Another company processes cryptocurrency exchange or other cryptocurrency transactions. The cryptocurrency company may not necessarily be in the European (EU/EEA) jurisdiction.
The double company scheme described above creates an effective vehicle meeting modern client requirements and allowing transfer of funds form fiat currencies into the cryptocurrencies or cryptocurrency instruments (digital coins, tokens, etc.).
Preparation of ICO documentation
Regulators in most jurisdictions, including the US, UK and Singapore often consider digital coins and tokens as securities and require registering them in accordance to the laws regulating Securities Issue Process.
European regulators follow the opinion of European Central Bank and European Banking Authority indicating that all the cryptocurrency-based instruments having features of securities are subject to the laws regulating the public Securities Issue
ICO organizers frequently has no intention to enter the securities market and would like to consider digital coins and tokens issued as non-securities. ECOVIS ProventusLaw advices on the ICO documentation (White Paper, etc.) preparation according to client needs.
Securitization of cryptocurrency based investment instruments
Cryptocurrency communities often face difficulties offering cryptocurrency-based
investment instruments to traditional investors because of licensing barriers.
Traditional investors in many jurisdictions are not allowed to purchase cryptocurrency-based investment instruments. ECOVIS ProventusLaw offers licensing solutions allowing “securitization” of cryptocurrency-based instruments (digital coins, tokens, etc.). “Securitization” allows the issue of traditional securities based on cryptocurrency instruments, distribute them in traditional financial markets and trade in the secondary market (stock exchange). Cryptocurrency-based investment instruments become available for big institutional investors and wide range of non-professional retail investors.