On 16 April 2024, Memery Crystal and Rosenblatt held the latest roundtable in our breakfast briefing series on structuring for token issuance.
Organised and moderated by Laura Clatworthy (Head of Digital Assets and Web3, Rosenblatt & Memery Crystal), the panel comprised Chrissy Hill (interim COO and Chief Legal Officer, Parity Technologies), Zoe Wyatt (Head of Crypto & Digital Assets, Andersen Global), Glenn Kennedy (Founder and Managing Director, Leeward Management) and Daniel Tunkel (Head of Funds and Financial Regulation, Memery Crystal).
Key takeaways from the discussion were:
- Tokenisation of assets is a space with is evolving quickly. UK businesses can and are establishing token issuance businesses.
- Founders must have a clear idea of their intentions when seeking advice – e.g. who do they want to own the business; how do they plan on making money; do they wish to keep their intellectual property rights; is the value in the intellectual property or in the token? Where are they planning to reside over the next 5 years?
- The optimal offshore structure for a token issuance business depends on the nature of the business and on the founders' intention for it which should be kept under review as the industry law and regulation evolve.
- Panel member Zoe Wyatt discussed the benefits of a BVI offshore entity held by a UK Company for a UK based founder of a token issuance business that does not have decentralisation plans.
- Various popular jurisdictions were discussed and it was agreed that the current trend for decentralised token issuance businesses is the Cayman Foundation structure due to the country's advanced professional services infrastructure and global confidence in the jurisdiction.
- Panel member Chrissy Hill shared her experiences both in relation to the Polkadot protocol but also in relation to the hundreds of founders utilising the grant functions in the Polkadot/substrate ecosystem. She echoed the trend towards using the Cayman Foundation structure citing the pull of a familiar legal system (in a British overseas territory) and that it is a well understood structure in the market.
- Day to day logistics under a Cayman structure were discussed. Panel member Glenn Kennedy explained that to comply, day-to-day control of the entity must be in the hands of a beneficial owner, namely him and his colleagues at Leeward acting as registrar. Founders are in regular contact with the registrars in Cayman with regular planning calls for recommendations on running of the business.
- Panel member Daniel Tunkel discussed Collective Investment Scheme ("CIS") rules and the Financial Promotion Regulations. Advice is needed on a case by case basis to assess whether the CIS rules apply and whether the tokens being issued are being "promoted", both of which are regulated.
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