Initial Coin Offerings

The ICO Process

Initial Coin Offerings (ICOs) have risen to prominence in Malta as a method for international and local firms and individuals to raise capital from the public, institutions or venture capitalists by selling a percentage of cryptocurrency to investors in the form of tokens - though the use of smart contracts.

ICOs provide unprecedented liquidity and efficiency for capital formation while minimizing transaction cost. While ICOs have historically allowed primarily crypto start-ups, financial technology start-ups, and the crypto community to raise funds, since 2018, legacy businesses with established businesses and products increasingly used ICO fundraising to finance their business activities.

In essence an ICO is an informal IPO, that disintermediates banks and to a certain extent regulators, democratising venture capitalisation to retail investors and allowing start-up companies to raise funds at a much lower cost than traditional VC funding models.

ICOs enable borderless online sales with much fewer points of conflict. ICOs enable the promoters to bypass the traditional legal, jurisdictional, and business hurdles by directly marketing to a worldwide pool of investors.

ICO backers contribute funds (cryptocurrencies or fiat currencies) in exchange for tokens that the issuing company creates. The token in question is generally required to utilise the company's service. The initial coin offering (or token sale), is therefore in essence an advance sale of a service. The company running the token sale will typically use the funds generated to develop their concept into a full working product. Token holders on the other hand generally anticipate that once the product is released the demand for tokens will increase, causing an appreciation in their investment.

The initial coin offering in practice

The first step in launching a token sale is the publishing of a white paper - like a Prospectus for a normal IPO. An ICO white paper explains in detail the founder or firm's vision for the project, its target market, functionality and roadmap. It also covers in detail all aspects of the tokenisation model, ICO structure, token distribution ratios, lock up periods, funding options, and other related information that a potential investor would require to make an informed decision. Once the ICO goes live believers in the project contribute towards the project in exchange for tokens.

Given the more risky nature of ICOs, legal and taxation aspects need to be covered in detail to avoid potential exposure to founders down the line.
Our financial services advisors will ensure your ICO is reviewed thoroughly and runs in a fully compliant manner with Malta's ICO regulations.

Our ICO services

In collaboration with our industry partners, Grant Thornton can offer a full stack ICO Platform that covers all stages of your token generation event from a technical point of view, including token minting and configuration, smart contract creation, implementation of KYC and AML checks, multi signature wallets to secure funds raised, wire transfer management and affiliate/bounty tracking.

Providing technology insight

Our Financial Services advisory team can help delineate the technological challenges, opportunities, vendor products as well directional questions that can help your origination with blockchain and cryptocurrency decisioning processes.

Discovering and documenting the risk

As part of any ICO and related blockchain implementation, we can help assess and document your organisation's specific risk and complete risk assessments so that management can go into the DLT space with a full knowledge of what to expect and where the risks lie to your organization.

Providing regulatory Review

Grant Thornton will review the current regulatory environment and point out the regulatory requirements around:

• governance and awareness
• policies and policies
• processes
• best practices
• regulatory expectations
  
  

Our ICO services cover:

• ICO Platform, including security and asset backed ICOs under the EU prospectus directive
• legal review of your token model
• legal review of your white paper
• advice on legal and regulatory compliance
• company incorporation
• turn-key incorporation of efficient company structures and VAT registration
• delivering a full set of legal documentation (T&Cs, SAFT and the likes)
• implementing a robust KYC/AML protocol and whitelist
• review of financial models
• technical systems review
• opening of a bank account with an ICO friendly bank & OTC liquidation of collected funds
• beneficial ownership documentation

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