20 October 2017
How to run your ICO in Russia or “bring me your aubergines”
How did lavkalavka and RMC do this? How can you avoid spending $ 70k + dollars on incorporation in Gibraltar, the Isle of Man and how to stop being afraid of SEC, MAS and FINMA (at least a little)?
One St.Petersburg restaurant, not so long ago, launched promo: “Bring us one eggplant and get any branded dish for free.” I do not have confidence in the crowds that entered the expensive restaurant with aubergine at the ready, but this, far from being a single marketing maneuver, adds confidence that it is possible to conduct an ICO in Russia. It’s not a question of patriotism, although it is more (and safer) to say: not only. Russia is a unique legal field. A century of planned economy and selective copying of the German civil code (Bürgerliches Gesetzbuch) has led to the fact that our legislation leaves one of the widest fields, in comparison with other developing and developed countries, for maneuvering. To begin with, we immediately take off all possible exclamations including well known in Russia “Find me the man, and I’ll find you the crime”, because if you do not plan to create a “killer” of Gazprom on blockchain or attract funds from the Central Bank’s crypto reserve fund, you would present no threat to the national law enforcement system or elites.
Now back to the example with aubergines. The legal entity that accepted the batch of eggplants for accounting, spent money on their purchase and the working hours of cooks using these eggplants, and then gave this dish to the visitor who in return brought the raw eggplant. It should be taken into account that:
– the dish is more expensive than the vegetable itself;
– vegetable brought by a person from the street can not be used to prepare meals for other visitors, because of phytosanitary norms, it is likely to be thrown out (although I sincerely hope that the eggplant is waiting some more humane fate).
The main thing in this story is that the prosecutor is not sieging the restaurant with accusations of creating money surrogates, Elvira Nabiullina (head of the Central Bank of Russia) does not accuse restaurateurs in attempting to introduce private money into the Russian economy, and the ombudsmen do not create associations to support and popularize the use of eggplant in trading.
How does this happen? It seems that in this example the restaurant uses an economic model similar to ICO start-ups — the service provides not for cash, but on presentation and transfer of a specific object. I note that in this case the restaurant most likely justified such an action just like lavkalavka in its time, when the prosecutor’s office first came to it: dishes are paid at the expense of the seller’s marketing budget.
This model clearly indicates that for the ICO in the Russian Federation it is not necessary to expect the release of a special federal law or recommendations of regulators. While the heroes of the joke: “We can run your ICO — And why in a whisper? — I’m on math classes” tortured Google to translate the recommendations of the SEC, Boris Akimov and Dmitry Marinichev raised millions of dollars for their projects.
The question arises as to how their ICO is conducted from the point of view of law. Boris Akimov attracted the best, in my opinion, legal consultant in the legal regulation of the ICO in Russia, Doctor of Law, Associate Professor Elina Sidorenko. I took courses on the legal regulation of blockchain technologies at MGIMO and her position, supported by successful projects, is that running an ICO in Russia is not only possible, but that it is safer than in some more developed jurisdictions. Elina Sidorenko for the development of blockchain in Russia, from the point of view of law, did not less than Waves of Alexander Ivanov, for the blockchain, in general.
So, in order to legally conduct an ICO in Russia, you must follow simple rules:
Do not sell “tokens.”
More precisely, you should describe what exactly you are doing from the point of view of Russian legislation. Lavkalavka does not sell tokens, they sell and accept the “software digital asset of the BioCoin loyalty system” or in my formulations “eggplant”. Just remember that the concept of whitepaper is absent in civil law, you can not sell your tokens on its basis. Before any stages (pre-ICO, ICO) you should have a legal mechanism for selling tokens. The absence of a contract and a traceable link between the token, the public project and the ICO wallet creates a risk to be accused of fraud.
Do not sell instruments that are similar to shares or securities.
You can not promise to pay dividends or participate in the profit / management of any company. This can not be done, not because of the Howey Test or the recommendations of the SEC, but, it is trivial, because of Articles 15.17 of the Code of Administrative Offenses of the Russian Federation and 185 of the Criminal Code of the Russian Federation (Abuses during issue of securities). It is wrong to think that the US is the only jurisdiction where uncontrolled issuance of securities is a punishable act.
To comply with the requirements of national laws and implemented international AML treaties in Russia, you are obliged in any case. Customer identification (KYC) is mandatory, but it should not be feared. More and more often, founders say: “If I force my buyer to fill out forms for KYC, he will refuse to purchase tokens.” To identify the client “at the entrance” is necessary and it’s naive to think otherwise. Remember when you bought anything via online without filling out forms with your data (they are collected not only for the sake of detail of delivery). Again, you do not need to invent the KYC mechanism, you just have to choose one of the existing ones and correctly imply it into your ICO.
You must develop your token in such a way that its internal currency is used only internally and is not intended for anything else. Imagine calculations in games, like World of Warcraft, their gold, like any other objects are not allowed to sell for fiat (Blizzard, by the way, clearly established in its agreement that the company owns the entire in-game currency).
Thus, your token can be anything: a coupon for a discount (as did biglion and dozens of similar services), a means of admission to a closed club, an internal game currency, etc. Lack of a legal field for conducting ICO means not the prohibition of sales, but the need to work out the legal contour of the project by means of available legal tools. Legislation throughout history catches up with practice and business. While deciding whether to act or not in the absence of a law, one must remember one of the main principles of civil law — everything which is not forbidden is allowed.