If a company wants to raise money, generally equity is sold to an investor. Nowadays, companies can also create tokens that investors can buy, effectively creating a new pathway to investment. Companies that sell tokens in order to raise funds have become a staple in today’s capital markets. An initial coin offering, or a token generation event, is when a company launches a token with the intention to sell the tokens in order to raise funds efficiently. This can be done privately or publicly.
There are several advantages to performing token generation events. Token generation events provide unparalleled liquidity for all of their constituents. Global cryptocurrency exchanges provide significant continuous access to tokens, which allows for high liquidity at the earliest possible time in the lifecycle of the designated business. This is all on a global market, that operates 24/7. Therefore, it can raise capital directly from anyone who owns a crypto wallet.
There are a few steps to consider when you want to raise money through a cryptocurrency project using TGE.
How will you structure it?
Here are some examples:
- Static supply and static price
Every token sold in the TGE has a fixed price, and so is the total token supply.
- Static supply and dynamic price
The amount of funds, that you get in the TGE, determines the total price per token.
- Dynamic supply and static price
The amount of funding you receive influences the supply.
When launching a crypto project, it should contain a white paper. This document explains the goal of the project, how much money is requested/required, the type of payment, and the length of the run.
Anyone can set up a TGE if they know how to create one. However, the question should be asked whether your business is performing the token generation event efficiently from a financial law point of view and also from a tax point of view.
Choosing the right jurisdiction
DBi can assist you in performing a tax-efficient Token Generation Event/ICO. We have a broad network of professionals that can advise on the optimal structure.
A few examples are:
Cayman Islands and the British Virgin Islands
Businesses and individual investors do not have to pay any taxes on proceeds from token sales. If you want to receive more information on setting up an offshore token generation event or ICO structure, feel free to reach out to us.
Crypto profits generated from selling cryptocurrency are tax-free, and so is all the income generated from crypto trading. As long as all of the conditions are fulfilled for this structure. Reach out to us today and find out more.
Other popular jurisdictions are Switzerland, countries in the Adriatic region, and the Netherlands. The most optimal structure is always a case-by-case consideration.
Our company can assist you in setting up a structure for a tax-optimal TGE/ICO. DBi can also provide assistance from a regulatory point of view.
DBI can provide consultation regarding the ideal jurisdiction to set up the ICO and provide tailored advice specific to your company and situation. Feel free to give us a call, send an e-mail (firstname.lastname@example.org), or fill in our web form on the website.