The legal framework in Estonia
Island is in Estonia.
The BaseX OU is registered in Estonia, company number 14986163.
We would like to follow Estonian law — that would simply make sense.
At the same time — we are not married to any particular jurisdiction — we can always create a new shell entity or even do a “citizenship by investment” shenanigan after raising sufficient amounts of money.
(the physical island would still remain in Estonia, nothing changes here)
Token Economy and Assurance Contract
Check the Google Doc Token Economy
BaseX — owns the island — token name
$BSXBaseX Operations — runs the island — token name
$BSXO
$BSX— represents the ownership of the island, and yields$BSXO
For example, you invest $10k into BaseX (hodl $BSX) and you receive at least 20% APR that equals to $2k worth of $BSXO that can be used to pay various services offered on the island…
See our post about Assurance Contract:
Asking the source
I am planning an ICO and would like to contact the EFSA regarding this. Which preliminary information I should provide and what do I have to take into account in my analysis?
Here is the current state
Up to date as of Monday 27th July 2020
1. Name of the project for which funds are to be raised;
BaseX
2. Name and contact details of the project company/ICO organiser;
Mars Robertson
info@basexisland.com
3. Timeline of the project: timeline of fundraising, project implementation milestones;
See the negotiation update Google Doc.
Realistically speaking we can complete the purchase next couple of months.
We also have plan B1 option — link, PDF brochure, Google Maps.
4. Description of the developed/offered product/service (main characteristics);
Buying the entire island and selling individual plots of land — sounds like a real estate development business model.
5. Which investors does the ICO target?
Democratic. Inclusive.
Ideally Elon Musk and Jeff Bezos but most likely it will be regular people.
Professional investors would be nice, as explained in this post.
6. Will there be any restrictions for the investors?
Democratic. Inclusive.
Unless required by your law.
7. Which technological solutions will be used in the project/ICO?
Ethereum blockchain.
8. In which (virtual) currency and how is it possible to invest into the project?
Ethereum. EUR and USD accepted too, then manually processed.
9. What is the volume of the ICO?
$1m ideally. Let’s hope for the best.
10. How and where will the funds be allocated?
To purchase the island in Estonia. Horalaid: https://goo.gl/maps/ct9ASL8q3Pn3R4mF8
11. Will a new token be created within the ICO? How?
Yes. There will be$BSXand $BSXO
They will be created via a smart contract on Ethereum.
12. When and how is the token transferred to the investor?
Automatically upon the receipt of ETH.
Manually upon the receipt of EUR or USD.
13. What are the characteristics and functions of the token?
BaseX — owns the island — token name $BSX
BaseX Operations — runs the island — token name $BSXO
$BSX — represents the ownership of the island, and yields $BSXO
14. What rights does the token grant to the investor?
The $BSXO will be used to pay for upkeep, repair, maintenance, various other services offered on the island.
The $BSX represents the ownership of the island but the plan is for Mars (the founder) to remain executive control with some notable exceptions where 80% supermajority threshold vote can stop his decision.
TBD.
15. How will compliance with the provisions of the MLTFPA be ensured in terms of the ICO?
As minimally as humanely possible, while staying compliant to the relevant laws.
We do not want to hold any data, as that would trigger various GDPR regulations.
Relying on various 3rd party service providers — adding extra steps to the purchasing process, from the e-commerce perspective would reduce conversion rates.
Avoid unless absolutely necessary by the law.
16. How and where is it possible to sell or buy the token later?
Being able to sell token — the expectation of profit — different law applies.
Not being able to sell — cannot expect profit from something that is not possible to sell.
If there are legal benefits from removing the expectation of profit we may consider following that path.
17. Can the token be used to buy products/services or to make payments to third persons?
Yes. The $BSXO token can be used to pay for various services on the island.
18. Does the token issuer plan to repurchase the tokens?
No.
We are totally open to all sorts of legal hacks
Cannot offer to the public? Require €1 lifetime membership fee
Cannot offer to US citizens? Require them to create a shell entity in E-Estonia
EU consumer protection? Then cross the border and offer from a different jurisdiction.
Cannot accept a gift, cannot employ volunteers? Then establish a charity.
This? That? Something else? hhacking.com
Hacking with double “h” means exponential hacking.
The ability to accept money from someone who visits the website (a member of the public) is very important to us.
If we cannot do it, then we can always start selling ebooks titled “how to legally raise funds in 2020 and other legal hacks”.
Or maybe something different: offering advertising space in such an ebook, the advertising business is more scalable than publishing.
Even more legal hacks
Example of legal hacks on the nation-state level, US puts sanctions, EU circumvents them:
https://en.wikipedia.org/wiki/Instrument_in_Support_of_Trade_Exchanges
The Instrument in Support of Trade Exchanges (INSTEX) is a European special-purpose vehicle (SPV) established in January 2019. Its mission is to facilitate non-USD and non-SWIFT transactions with Iran to avoid breaking U.S. sanctions.
France, Germany and Britain have opened a new channel for non-dollar trade with Iran to avert U.S. sanctions, although diplomats say it is unlikely to allow for the big transactions that Tehran says it needs to keep a nuclear deal afloat.
Gut feeling
Prospectus required.
All listing prospectuses must be prepared in accordance with the Prospectus Regulation. The level of detail of the prospectus depends on the qualification of the securities to be offered.
However, the Prospectus Regulation grants some exceptions for start-up companies when preparing a prospectus. Such are companies that have existed for less than three years. The adaptions to the minimum information given are specified in Article 23 of the Prospectus Regulation.
It’s OK, we have blueprints for that!
KYC / AML / MLTFPA required?
MLTFPA = Money Laundering and Terrorist Financing Prevention Act
In case the tokens are intended to be exclusively used as a means of payment for acquiring goods or services or as a means of money or value transfer, they shall be considered as payment tokens.
Once again thank you for providing guidance — https://www.fi.ee/en/finantsinspektsioon/financial-innovation/virtual-currencies-and-ico/information-entities-engaging-virtual-currencies-and-icos — we will evaluate if your legal system is the one we want to follow.
3.2 The Securities Market Act (SMA)
3.3 Credit Institutions Act (CIA)
3.4 Investment Funds Act (IFA)
3.5 Securities Register Maintenance Act (SRMA)
3.6 Advertising Act (AA)
3.7 Law of Obligations Act (LOA)
3.8 Money Laundering and Terrorist Financing Prevention Act (MLTFPA)
SMA CIA IFA SRMA AA LOA MLTFPA KYC AML 😇
Whose law do we follow?
Points above apply assuming we want to be following Estonian law.
As explained at the beginning:
we can always create a new shell entity or even do a “citizenship by investment” shenanigan after raising sufficient amounts of money
