Choosing a Jurisdiction for your Digital Currency Business

Several readers have been in touch with me after reading Launching an ICO that is ready to bridge the old and new worlds from the outset asking about the best jurisdiction for launching a digital currency business.

Every decision is contextual. In scouring the world, the Holo team first described our needs, and analysed each jurisdiction in the context of our needs.

But here is a framework for people who are beginning their enquiry:

1. Build your organisation context.
2. Build a set of criteria.
3. Build a long list of options.
4. Reduce your long list by changing your criteria through a feedback loop as you learn.
5. Narrowed down to a shortlist.
6. Choose 2–3 legal partners in each of your shortlist countries and meet them, either continue refining your shortlist or move to making a decision.
7. Make a decision.

Organization Context

Things to consider include:

• Where is your team located?
• Who owns your business, IP?
• Where are your customers?
• How are your customers going to be buying your product or your service?
• What regulatory and tax environment are you comfortable with?
• What risk are you comfortable in taking in the running or administration of your business?
• What banking, privacy or liability requirements do you have?
• For you, what is acceptable business conduct requirements (e.g. limited bribing, or politicking)?

Criteria

From these questions you can build your criteria. For us at Holo, these were:

• Operates clearly inside an existing regulatory framework which can manage ICOs and is interested in working with crypto organisations.
• Measures taken to ensure long-term security, through strong asset and liability protections.
• Provides options for secure banking operations: bank accounts not severely limited for transfer in or out and workable for operations not just assets.
• Demonstrates acceptable business conduct with a strong reputation.
• And, ideally, demonstrates a strong community of developers, social organisations, service providers all in service of building new economies.

Long List

The source data for any long list should be incorporations.io. It is a fantastic resource.

The team at incorporations.io cover a large amount of ground, and we only needed to cover a small amount of additional factors in moving from our long to short list.

We ended up playing with this data in a google sheet so we can filter and manipulate.

Evolving Criteria

Each jurisdiction we considered based on entity type, offshore tax, local tax, specialism, Crypto-Reg, Legal Basis, Tax Treaties and general notes.

Short-List

That gave us a short-list of:

• HONG KONG
• SINGAPORE
• BRITISH VIRGIN ISLANDS
• ISLE OF MAN
• UNITED KINGDOM
• GIBRALTAR
• BELIZE
• SWITZERLAND
• JERSEY

Narrowing Down the Short-List, Incorporating Feedback Loops

This is where things become dependent. There is no point selecting a jurisdiction unless there is a great and available legal team in that jurisdiction.

We took a three prong approach for the Holo ICO:

1. We spoke to people who had successfully run ICOs to ask for their recommendations.
2. We spoke with contacts in the UK startup space with experience advising startups (non-crypto) and connections into the legal world to get technical advice free and fast.
3. We cold contacted, either through phone or linkedin, legal teams around the world.

The approach worked brilliantly because without different inputs and advice from different contexts it’s so easy to get lost. Also, here it is so important to allow the right lawyers to influence the jurisdiction search to some extent.

Below is a sample list of firms we spoke to, or emailed by country:

• Isle of Mann CoinCorner
• Isle of Mann Adelphoi
• Isle of Mann NeuCoin
• Isle of Mann Brian Donegan
• Isle of Mann Quinn Legal
• Jersey Ogier
• Hong Kong Diacle
• UK General Standards
• UK Blake Morgan
• UK Addleshaw Goddard
• Switzerland Axon Partners LLC
• Switzerland MME
• Switzerland BDO
• Singapore Allen & Gledhill
• Gibraltar Gibraltar Lawyers
• Gibraltar Token Market
• Gibraltar Itiriv
• Gibraltar ISOLAS

The Short-List

The summary of our research on jurisdiction narrowed our choices, and after talking with lawyers, our recommended four jurisdictions are:

• Singapore: Changing regulatory environment, 17% tax, and its legal system is political in its enforcement.
• Switzerland: Long timescales, requires authorization, slow moving, foundations are expensive.
• Gibraltar: Has a regulatory framework, excellent tax, lawyers did Gnosis and Stox, works with EU and UK but not as established as Switzerland.
• Liechtenstein: Strong regulatory environment, excellent banking and support infrastructure.

Note that running an ICO in your local market is a possibility, but requires a special relationship with a regulatory or bank to make it work without large obstacles in place in the future.

Summary

If you have any further questions about jurisdictions please let me know. The best assessment on where to incorporate your digital business is to understand deeply the context you and your team are working in. Once you are clear on your context hopefully this guide can help you quickly fill in any remaining blanks and get you up and running in no time.

Good luck with starting and building your crypto business.