Anguilla Creates Register For New Utility Token Projects

Blockchain, Crime, FinTech, News, Regulation | November 14, 2017 By:

UK territory Anguilla has passed a new law that will set up a registration process for digital token offerings. The Utility Token Offering Act (called AUTO Act) permits specified Anguillian entities to apply to be registered to conduct a utility token offering to “standardize registration and disclosure protocol for blockchain projects,” according to the announcement.

The US State Department has flagged Anguilla as a prime location for money laundering activities, mostly in mutual funds, trusts, and international business companies. The country has the reputation as an offshore tax haven, and Prime Minister David Cameron was caught up in the Panama Papers incident, whereby a trove of leaked documents from a law firm exposed a network of offshore interests. Cameron admitted he had earned money through an offshore trust established by his late father, but release of his tax records indicated nothing illegal.

Tokens that do not have the features of a security and have one or more “utility” features with the issuer’s blockchain platform are eligible fro registration. There is currently no country promulgating a regulatory regime specifically for non-securities cryptocurrency offerings.

Victor Banks, Chief Minister of Anguilla, said the AUTO Act will help establish best practices for cryptocurrency offerings. “We believe the AUTO Act would be a significant step in the right direction to provide clearly defined rules and increased safety for the blockchain community.”

The Act permits specified Anguillian entities to apply to be registered to conduct a Utility Token Offering when following the disclosure review, approval, and registration process for a proposed offering, which includes a technical and legal review of the entity’s “white paper” and other disclosure documents related to the offering.

The white paper requirements include disclosure elements that are typical for registered capital offerings, but specifically tailored to apply to these types of projects, including company structure and location, business status, detailed project description, management background, technical and legal description of offered tokens, current ownership, use of proceeds, plans for protecting offering proceeds, anti-money laundering program, and risk factors for purchasing tokens.

Anguilla plans a regular review of the effectiveness of the new Act, and will propose updates to keep up with changes in the ever-evolving blockchain industry. In order to assist in these amendments, a Utility Token Offering Advisory Committee will be formed consisting of private sector participants from the blockchain field.

The law was conceived and authored by Ravi A. Bahadursingh, LL.B, LL.M (International Economic Law), TEP, Barrister (Gray’s Inn), an Anguilla finance and tax lawyer with Chancery Lane Chambers, and Randall W. Johnson, Esq., a U.S. securities and blockchain lawyer with Sinnott & Co., and a regulatory advisor to, one of the leading blockchain project incubators.

 “In drafting this Act, we saw that tokens that were in effect “securities” are required to comply with the same international regulatory regime as all other securities offerings,” said Bahadursingh. “However, there remained a large swath of non-security tokens with no clear guidance as to where they would fit in the emerging blockchain economy. Therefore, we focused our efforts on creating a safe and effective regulatory framework for non-security token offerings, which appear to represent a majority of the current capital raising activity within the blockchain community.”