Years ago, the words cryptocurrency, digital wallet and blockchains were completely foreign to us. Now there exist over 6,000 digital currencies such as bitcoin and we can pay for an item by a single wave or tap of our cellular phones at a point-of-sale machine. As the global economy is ever changing the emergence of what we now know as cryptocurrency has resulted in a digital means of payment and trade without the reliance of a centralized third party, that being governments or financial institutions.
Similar to initial public offers and additional public offerings, issuers of cryptocurrencies offer interested personnels an initial coin offering (ICO) or secondary utility token in an effort to raise funds. These funds are then used to develop a platform for the public with each unit of cryptocurrencies representing a certain value. The rapid growth of the digital currency market over the years has resulted in many governing bodies grappling with the issue of the regulation of those offering these services. Anguilla, in a rather progressive move decided to go ahead of their counterparts by enacting the Auto Utility Token Offering [AUTO] Act 2018 and the Anguilla Utility Token Exchange Act 2020 becoming one of very few Caribbean countries to enact regulatory guidelines within the cryptocurrency domain.
A utility token is any real-world medium of exchange created for a specific ecosystem. The AUTO Act to differentiate between securities and utility tokens states that a utility token is any token that does not:
- Have ownership or equity interest in the issuer
- Provide entitlement to share of profits of the issuer
- Have legal status as a creditor
- Have the right to the distribution of profits from the issuer
Section 4 of the AUTO Act states only registered issuers may offer initial and secondary utility token offering. The act considers a qualified company as being able to apply for registration of a utility token or secondary utility token with the Anguilla Financial Services Commission.
A qualified entity for all intents and purposes must be incorporated under the Anguilla International Business Companies Act or Limited Liability Company Act or as specified by the regulators. Full disclosure must be given as to the qualified company’s:
- Structure and location
- Detailed project description
- History and background of the management team
- Technical and legal description of projects tokens
- How proceeds would be used and protected
- Beneficial ownership
- Anti-Money Laundering program
- Risk issues for buying these tokens
It must be noted that the Anguilla Financial Services Commission (AFSC) will not register an issuer whose initial coin offering enables access to trading services, foreign exchange contracts, gambling or any business prohibited by the laws of Anguilla. The AFSC requires an application, whether in hard or electronic copy, to register an issuer which should outline directors having a shareholding of more than 10% submitted with all specified attachments in accordance with the AUTO Act. This application is submitted to the AFSC along the fees payable to the Commission.
Once registration takes place the Utility Tokens Exchange Act 2020 requires an issuer to obtain a license from the AFSC to operate a utility token exchange in or from within Anguilla. An application for a license involves a screening process of the business plan, principals of the exchange etc. following same a license may be granted.
The island of Anguilla benefits from a stable legal system entrenched in English Common Law as a result of being an overseas British Territory. It is one of few Caribbean islands with a zero-tax jurisdiction which is ideal for not only incorporating an entity geared at providing utility tokens. The AFSC provides oversight of utility tokens registered within Anguilla which allows not only peace of mind to interested developers of utility tokens but traders of utility tokens.