Lithuania announces guidelines for cases when ICOs qualify as securities

The Lithuanian Ministry of Finance has announced the issuance of guidelines regarding initial coin offerings (ICOs) as well as outlining when cryptographic tokens could be considered as securities and how each token sale can be regulated by various laws within the country.

In a document published on Friday, a definition was outlined that would “grant profits or governance rights” to any investor that obtains the tokens via means of ICOs.

Whilst the existing civil code, in theory, should apply to all of the projects with tokens that can be used as a payment tool, a variety of financial regulations should apply if a token grants profits or governance rights.

Guidance on tokens

The ministry of finance drills down further into ICOs and provides guidance on tokens that are issued, the entity that organises the sale, and whether it participates in a secondary market exchange. It will also consider whether the ICO is a crowdfunding activity.

The framework states that these aspects should be regulated by laws that are already in place in Lithuania, such as those that govern crowdfunding, securities, and financial instruments markets. Whilst the ministry has said that the framework is not a formal bit of legislation, it does aim to use it to bring transparency to the industry so that ICOs can grow in a more regulated environment.

“ICO market has not been regulated yet. It has huge potential but there are risks that we must manage. We should make our efforts for Lithuania to become the main headquarters for those ICO project promoters who are willing to operate in a transparent and orderly legal environment”, Vilius Šapoka, Minister of Finance said in a statement.

In addition to these financial regulations, the announced guidelines will also offer forth thoughts from the country’s taxation, auditing and financial crime investigation agencies in terms of how tax and (AML) Anti Money Laundering rules should be applied. For example, the guidelines put forward a suggestion that investors’ income that is received from an individual purchase and sales of cryptocurrencies should be taxed at the standard 15% income tax rate.

 

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