Anguilla and Cryptocurrency

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Anguilla and Cryptocurrency

Anguilla Cryptocurrency Laws

Anguilla Utility Token Offering Act

The Anguillan government enacted the Anguilla Utility Token Offering Act of 2018.  The Act establishes the Distributed Ledger Advisory Committee and prohibits any person from undertaking an initial utility token offering or a secondary utility token offering in or from within Anguilla unless registered as an issuer specifically for the purpose of conducting the offering under the Act.

The government has noted that some types of tokens are considered to be securities, and thus are already regulated under the existing securities framework,[1] but that:

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. [2]

The AUTO Act effectively regulates utility tokens, while avoiding the burdens of securities regulations and the “higher levels of regulatory scrutiny that would have to take place were the tokens to fall under securities laws.”[82]  As such, utility tokens are categorized as those that may be redeemed for consumer goods or services, rather than a share in profits or an interest in technology connected to the offering.[3]

Securities Act

Section 1 of the Securities Act defines “securities” as “shares and stock in the share capital of a company; (b) any instrument creating or acknowledging indebtedness which is issued or proposed to be issued by a company including, in particular, debentures, debenture stock, loan stock, bonds and notes; (c) bonds and other instruments creating or acknowledging indebtedness issued by or on behalf of any Participating Government; (d) any right (whether conferred by warrant or otherwise) to subscribe for shares or debt securities (e) any option to acquire or dispose of any other security; (f) units in a collective investment scheme, including shares in or securities of an investment company; and (g) any other instruments prescribed to be securities for the purposes of this Act.”  Securities Act, cap. S13, Revised Statutes of Anguilla, at 3.

In order to become registered, the entity must draft a “white paper,” along with its disclosure documents, which must undergo a technical and legal review that must include information about the companies structure, location, business status, description of the project, a technical and legal description of the tokens that will be offered, how any proceeds made will be used, and anti-money laundering provisions along with any risk factors present for purchasing the tokens. The Anguillan government provides for a registration fee, along with a “1.5 percent levy on the total amount raised by a token offering.”

The government of Anguilla has stated as follows:

We believe this new AUTO Act will help Anguilla become the leader in establishing best practices for cryptocurrency offerings, to protect the people of Anguilla and the participating public. . . . 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.[4]

P.S. Insights on Cryptocurrency Legal Issues

Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.

Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.

However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.

Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency.  The globe below provides links to country-by-country summaries: