Founders

1/ We are experiencing a surge in crypto-related inquiries, ranging from mundane corporate setup to esoteric securities law issues related to memecoins. While we are cooking a more comprehensive legal crypto guide, let me share some legal rules of thumb for crypto founders.

2/ A typical seed round deal in crypto is structured via Simple Agreement for Future Equity (SAFE) and Token Warrant. Simple Agreement for Future Tokens (SAFT) are less common nowadays but still exist.

Partner at buzko.legal, founder at degoverned.com

3/ The issuance of tokens is still a risky business due to the lack of clarity in the U.S. If you want to take this route, at least (a) exclude U.S. residents by technical means (i.e., geo-fencing) and legal terms; and (b) do a free airdrop (do not take any money or other forms of value).

4/ If you still want to sell your tokens to retail, follow the above and (c) engage a very good crypto lawyer; and (d) consider doing this via a reputable launchpad, such as Coinlist. By the way, a BVI company is the most common choice for a token issuing entity due to permissive regulations.

5/ Token issuance documents are fairly standard. You can generate your Token Warrants, SAFTs and Public Token Sale Terms at Degoverned.com.

6/ Crypto jurisdictions:

🇺🇲 US C-corps – for so-called development companies that do not engage in regulated activities
🇺🇲 US LLCs and Unincorporated Nonprofit Association (UNAs) – for U.S.-connected DAOs
🇻🇬 British Virgin Islands – for token issuing entities and crypto funds

7/ Crypto jurisdictions (cont’d):

🇰🇾 Cayman Island – for large DAOs with tokens already in circulation (no sale) and crypto funds
🇮🇪 Ireland – European hub for large crypto brands to comply with MiCA

8/ Crypto jurisdictions (cont’d):

🇵🇦 Panama – lack of crypto regulations (and no expected)
🇸🇨 Seychelles – lack of crypto regulations (but coming soon)

9/ How to select a jurisdiction for your project?

(A) Team. Where are the founders based? Where is the majority of the team based? Most likely, you would still need a legal entity in the jurisdiction where your team is based.

10/ How to select a jurisdiction for your project? (cont’d)

(B) Market. What is your target geographical market? If the answer is “the entire world,” be prepared to budget for an extensive legal analysis. If you start with a specific geographical market in mind, consider establishing a company there.

11/ How to select a jurisdiction for your project? (cont’d)

(C) Product. Is your product subject to regulations or licensing in a given market? Are you willing to pursue a license for that market? If so, consider establishing a company in that jurisdiction.

12/ How to select a jurisdiction for your project? (cont’d)

(D) Infrastructure. Does your business model require any financial or technical infrastructure, such as exchanges or custody providers? Make sure your provider of choice works with companies from your jurisdiction of choice.

13/ How to select a jurisdiction for your project? (cont’d)

Disregard the above and go full $DEGEN mode with an anonymous setup. Not something any lawyer will recommend but it does exist in practice.

14/ Taxes in crypto are a nightmare. Thanks to @cryptotaxguy.eth for bringing clarity 🙌:

U.S. Taxation of DeFi (PDF): https://shorturl.at/rGORV
U.S. Taxes for DAOs (PDF): https://shorturl.at/agB37
U.S. Tax Aspects for NFT Collectors (PDF): https://shorturl.at/sxCH3

15/ Taxes (cont’d):

Personal crypto taxes in Europe: https://www.politico.eu/article/eu-commission-brussels-bitcoin-currency-eyes-eu-crypto-tax/
PWC Global Crypto Tax Report 2024 (PDF): https://www.pwc.com/ee/en/publications/pwc-global-crypto-tax-report-2024.pdf

16/ Decentralization

No one knows what it is but many dream of it. Stating on your website that your project is “sufficiently decentralized” or making a press release about that does not bring you any closer to holy grail.

17/ What were the major crypto law events last year?

17/ What were the major crypto law events last year?

https://slideframe.replit.app/QmdDBaKKLHJpoZCBekKmX4fgoiqAhG6jsR8yS9X3MnBV6z

18/ What to expect this year?

MiCA is coming into force this year in Europe. Other countries will take notice of the EU and adopt the best practices. Be aware of MiCA’s whitepaper requirements if you want your tokens ever to be listed on CEXs.

18/ What to expect this year?

MiCA is coming into force this year in Europe. Other countries will take notice of the EU and adopt the best practices. Be aware of MiCA’s whitepaper requirements if you want your tokens ever to be listed on CEXs.

https://www.degoverned.com/mica

19/ What to expect this year? (cont’d)

No clarity is expected in the U.S. until after the elections. Two events, however, will generate a lot of market volatility: (a) ETH ETF approval or rejection (by late May); and (b) outcome in SEC vs Coinbase (may drag to 2025).

legal

Legal tips for crypto founders. Follow /legal for latest regulatory news for tech founders, legal tips and templates.

Legal tips for crypto founders. Follow /legal for latest regulatory news for tech founders, legal tips and templates.

https://warpcast.com/buzko/0x1768f3b8

Thank you so much for this! Exactly what I was looking for