Managing End-to-End Token Compliance with iComply
What can you expect from iComply’s automated token compliance platform? I’ll share some highlights about our smart contracts and offering.
No Funny Money
There are only two tokens that matter to your ICO — ETH and your own. Unlike many token launch studios, we don’t have our own token that we force you to use. We also understand that smart contracts for tokens can usually be templated. Token development is the easy part — getting compliance right, well…that’s what we’re here for. Being compliant with financial regulations enhances your ICO offering and allows you to use any major crypto exchange to convert your funds to your currency of choice — fiat or otherwise.
Simple Pricing Model
You probably use at least one subscription service already in your daily life — why? Because it’s simple. iComply offers the same pricing model: software as a service (SaaS) — with fees that are low and straightforward. We don’t charge you a percentage of your ICO tokens or take a proportional cut of what you raise, whether your offering is $1 million or $100 million. iComply users pay a low monthly subscription fee and a flat per-investor KYC/AML screening fee.
Compliance Doesn’t Stop After Issuance
iComply offers ongoing compliance management of secondary trades, there is flat transfer fee charged whenever someone sells or sends their token. This costs you nothing except your monthly SaaS fee which gives you access to secondary trade monitoring and reporting dashboards. This makes it simple to produce a Source of Funds Report, which will make it much easier to open a fiat corporate bank account or respond to a regulatory audit.
Simple, Custom or Standard Smart Contracts
iComply’s solidity code is simple and easy to understand. It takes minimal time to audit and understand exactly what’s going on. We provide you with a lightweight expansion of the standard ERC20 templates that can be used immediately or expanded to suit your needs.
Did we mention that you can access a library of audited smart contract templates as part of registering your offering on the iComply platform? Click here to register your offering.
Custom smart contracts — while our initial offering focuses on ERC20 tokens, we are working toward the ability to serve other token formats, such as ERC721. Our code is easily extendable and can be tailored to your needs. Source code audits are also available through our industry-leading partners.
Ethereum and Beyond
Ethereum and beyond — iComply has been designed to be platform-agnostic, meant that its KYC/AML solution can be used with any platform. Our smart contracts and secondary trade compliance technology (Prefacto™) are currently tailored for the Ethereum network. We are planning to expand our offering to other blockchain platforms as clients require. Our robust KYC/AML tool can be used by issuers on any blockchain.
Compliance with International Securities Legislation
iComply enables your offering to comply with international securities rules. The complexity of handling the ever-changing body of work is done on an external system, meaning you don’t have to pay the Ethereum Virtual Machine to perform a legal analysis of every transaction that happens on the blockchain. Every transaction is validated off-chain before being executed on-chain to both minimize the costs and ensure the highest standard of compliance with the up-to-date regulations.
No Vendor Lock-In
We decided pretty early against locking customers into our code. As such, although we would hate to see you go, you will be able to terminate your relationship with iComply as you please and easily take your smart contracts to any on-chain compliance validation service of your choice. You can use the iComply platform to manage your end-to-end compliance on tZero, Templum, Harbor, or Polymath. iComply is equipped to offer the validation service your ICO needs with a little custom smart contract development.
Smart Contract Overview
iComply is built around three core smart contracts the Whitelist, the Crowdsale, and the Token. The latter two are basic extensions of your standard ERC20 token crowd sales, while the first is a simple whitelist of addresses. We did say our solution is simple and straightforward after all!
Whitelist
The Whitelist contract is the first filter for compliance. Every address on the Whitelist has been verified and can be used by any smart contract. This functionality has benefits that far exceed the avoidance of sanctions, money-laundering, and securities law violations — it also helps to prevent and alert you of on-chain fraud, targeted pump and dump scams, and even reselling KYC (one of the most common ways bad actors can use your offering to violate securities regulations today).
Crowdsale
iComply’s Crowdsale contracts allow anyone to start an ICO and raise capital while still remaining compliant with securities regulation. The platform supports a number of traditional and new models of raising money — Reg A, Reg A+, Reg D, SAFT, SAFET, Private Placements, etc. Every investment is verified externally against the required regulations and parameters, and only the transactions that pass those restrictions are allowed to actually purchase the tokens.
Tokens Supported by iComply
Fully-Compliant Token
Every transaction is checked against iComply’s internal compliance checks or is manually approved before it is allowed to execute. This token is ideal for securities such as shares, stocks, etc. Not only is the primary issuance of the token is compliant with securities regulations but the token also remains compliant with regulations on an ongoing basis. This helps to protect issuers who would face severe liability if, for example, someone were to use your tokens to fund an attack on the U.S. election, pay for child pornography, or other equally troubling cases that have unfortunately already been witnessed in the cryptocurrency space.
Standard, ERC20 Token
This token is ideal or issuers that need or want to create a compliant presale, but feel that they don’t need ongoing compliance support for their token, an example of something like this is Tierien which aims for its token to be a utility — it pays for storage. They might not need ongoing compliance. As such, this lightweight, third-party audited token code is ready to deploy. While this is the standard that most ICOs use today it is not one we currently recommend as the risk of sanctions, breaches, money laundering, and terrorist financing all still fall on you as the issuer — even if the tokens were acquired in a secondary peer-to-peer transaction or off an exchange.
Hybrid Token
This type of token allows issuers to launch as a compliant token and later switch the compliance portion off or vice versa. This can be useful if the Issuer is not certain whether they will require ongoing compliance or to what extent and would rather be on the safe side as they get guidance from their government. This function is also useful for managing lockup periods — especially if certain token holders, or token holders from a certain jurisdiction, are subject to a lock-up period that may not apply to your entire offering.
Managing Compliant Crowdsales
In the first issuance model, the token can only ever have one Crowdsale. This is for issuing standard tokens. When the Crowdsale has ended, the minting functionality of the token is turned off forever and can never be turned on again, ensuring that the maximum token supply remains fixed forever. This model is great for propagating a decentralized network with a permanently fixed supply.
The second issuance model allows for the tokens to be re-minted. It is more suitable for stock-like tokens — the ones that you can issue in set series. The minting functionality is merely disabled between the different Crowdsales. To ensure that the Token Issuer cannot just print the tokens on a whim, the process of re-enabling the minting functionality requires input from both them and us as their service provider; they need to re-assign the token to a crowdsale (change of ownership), and then turn the minting back on.
iComply Use Cases
Fiat IOUs
The simplest model of a token that is not a security — a token backed on a 1-to-1 ratio by a fiat currency. The issuer could opt to only use our Whitelist of verified addresses to comply with KYC and CTF regulation, or they could use a fully compliant token model to control which nations can use their tokens and comply with securities acts, exchange acts, and AML regulations and reporting.
Share Certificates
A token that represents an ownership of a company. This is a full securities token model that would take full advantage of the system we offer. The issuers could raise money, comply with the securities regulation, and be able to file regular reporting on the secondary trading activity. As needed, they could also raise more than a single round of financing on the same token.
Custom tokens
Sometimes a token has very specific needs that aren’t just tied to securities — tokens that specify how many coins each person (not address!) can hold, that impose limits on the number of times the token is transferred, or that can be used only by a select group of people — all fall under this category. Our system can handle these rules, however, custom tokens still require end-to-end third-party audits. We have a number of world-leading smart contract auditing firms who are familiar with our smart contract requirements, talk to us if you would like an introduction.
How to get started
To learn more, visit our website at iComplyICO.com .
Are you considering issuing a security token? Start your registration process. iComply is the leading global RegTech platform focused on digital finance and cryptocurrencies. We provide turnkey compliance automation to simplify any multi-jurisdictional requirements for non-face-to-face financial transactions. iComplyICO is the leading token launch compliance solution offering free audited smart contracts, best in class KYC/AML for 160 countries, and source of funds reports to help issuers open bank accounts after completing a crowdsale. Register today.
Any opinions or recommendations expressed herein do not necessarily reflect those of iComply Investor Service Inc. iComplyICO and its affiliates do not offer accounting, tax, legal, or compliance advice, services, or opinions. This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice and has been provided for informational purposes only. You should consult your own tax, legal, compliance, and accounting advisors before engaging in any transaction.
‘iComply’, ‘iComplyID’, ‘iComplyICO’, ‘iComplyKYC’, ‘Prefacto’, ‘Compliance Ledger’ and ‘Compliance Rehabilitation’ are Copyright and Trademark of iComply Investor Services Inc., 2018.
