FKTK publishes an explanatory paper on ICOs and virtual financial assets
On 23 January 2019, the Financial and Capital Market Commission of Latvia (FKTK) released an explanatory paper about virtual financial assets and ICO usage options and the applicable laws.
In this paper, the digital tokens are divided into two categories. The first category is investment type virtual assets, that allow profit sharing, financial gain and management rights. The second category is payment and utility virtual assets, that allow the holder to pre-purchase a future product or service, but do not allow profit sharing, financial gain and management rights. It can be safely assumed, that the first category can be regarded to as a security token and the second category – utility token.
The utility tokens have one of the four functions: payment, exchange, consumption, or donation.
Further in the paper, it is explained that an ICO campaign that emits a utility token is not required to be registered with the FKTK and, also, no specific permission is needed in order to raise funds. However, in most of the cases, such laws as the Civil Law, AML/CTF regulation, consumer rights protection law, to name a few, still need to be taken into account.
When it comes to investment-type virtual assets (essentially STO or security token offerings), with profit sharing and financial gain, the existing legal framework for securities (shares, debt, derivatives) is applied. Moreover, the campaigns that are looking to raise more than EUR 1,000,000 are required to submit a prospectus, according to the Market in Financial Instruments Law (FITL).
Overall, the FKTK is open for enquiries and encourages ICO/STO campaign organisers and token issuers to seek clarification on the applicable regulations.
This is a positive signal for crypto adoption on a governmental level, let us hope we see some further developments in crypto-fundraising area in Latvia in the near future.
Learn more (in Latvian) : http://www.fktk.lv/attachments/article/7435/ICO_skaidrojums_23012019.pdf https://likumi.lv/doc.php?id=81995