ICO/STO Legal Structure and Support in Georgia
Initial Coin Offerings (ICOs) and Security Token Offerings (STOs) represent innovative capital-raising methods utilizing blockchain technology. Georgia, with its liberal business environment and developed crypto-infrastructure, is an attractive jurisdiction for such projects. However, the legal structuring of an ICO or STO is a complex process requiring strict compliance with both local legislation and international standards. The main challenge lies in correctly determining the legal nature of the token—whether it is a "Utility" token or a "Security." Incorrect qualification can lead to severe legal consequences, including regulatory sanctions and criminal liability. Therefore, qualified legal support is essential from the very inception of the project.
Our platform specialists offer comprehensive legal services for ICO/STO projects, which include:
- Token Legal Classification: Analysis based on criteria similar to the "Howey Test" and Georgian legislation to determine whether the token is subject to securities regulations.
- Corporate Structuring: Establishing the optimal legal entity (LLC, JSC) and preparing corporate documentation that accounts for the specifics of token issuance.
- Whitepaper Legal Audit: Reviewing the project's main document to ensure that promises made do not violate the law and do not contain misleading information.
- SAFT (Simple Agreement for Future Tokens) Agreements: Drafting preliminary agreements with investors to protect the interests of both parties before tokens are issued.
- Regulatory Interaction: Communicating with the National Bank of Georgia and other agencies if necessary, especially regarding Virtual Asset Service Provider (VASP) status.
- AML/CFT Compliance: Developing and implementing internal policies for the prevention of money laundering and terrorism financing.
Complex situations often arise during project implementation. For example, a startup might issue a token it considers "utility," but promise investors dividends or a share of profits, automatically converting it into an unregistered security. Such action is a violation of the law. In another scenario, a company may fail bank compliance checks and be unable to open an account because it lacks a robust AML policy for funds raised via ICO. Disputes with investors are also common when a project fails to meet timelines outlined in the Whitepaper, necessitating clear liability limitations. A correctly drafted "Terms of Token Sale" document is critical for hedging such risks.
In Georgia, this field is regulated by several legislative acts. Primarily, the Law of Georgia on Securities Market defines the rules for public offerings if a token is deemed a security. The Organic Law on the National Bank of Georgia and accompanying regulations on virtual assets establish registration and supervision rules for VASPs. For the corporate aspect, the Law on Entrepreneurs applies. Special attention is paid to the Law on Facilitating the Prevention of Money Laundering and Terrorism Financing, which obliges ICO/STO issuers to identify investors (KYC).
The process of working with a lawyer involves several stages. First, a detailed analysis of the business model and an assessment of tokenomics from a legal perspective take place. Then, the lawyer proposes a jurisdiction and corporate structure scheme. In the third stage, the entire contractual base is prepared: Whitepaper disclaimers, Token Sale Terms, and Privacy Policy. Parallel to this, AML/KYC mechanisms are integrated into the website. The final stage is the project Launch and post-ICO legal support.
Legal.ge gives you access to the best FinTech and crypto lawyers operating in Georgia. ICO and STO projects require deep knowledge not only of law but also of technology. Specialists on our platform have experience working with both local and international projects, ensuring the legitimacy and security of your capital-raising campaign. Trust the professionals on Legal.ge to turn your innovative idea into a successful and compliant business.
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