Security and asset backed ICOs

Launching a Security ICO in Malta

As ICOs and the tokenisation of assets and existing businesses and revenue streams gradually gains mainstream acceptance and becomes the norm, we have witnessed an increase in clients approaching ICO Malta for the development and issuance of asset backed and security ICOs. These types of ICOs add two layers of complexity to the process of launching an ICO, the first of which is legal and regulatory, the second of which is technological.

The process of launching a security ICO in Malta requires the issuer to follow all the steps defined by the prospectus directive in that they would be required to submit a prospectus document to the Malta Financial Services Authority for approval. The prospectus document for an security ICO would describe:

  • The projects primary line of business, its current/forecasted finances and ownership and token structure
  • The token mechanism and a description of any rights, obligations, claims to profit etc that arise from ownership thereof

Security and asset backed tokens

A basic specification for an asset backed ERC20 token would be one with robust KYC and AML implementation at the time of offering. Our ICO Platform features a fully integrated KYC and AML functionality suite with a configurable ‘risk appetite’ level, which can be scaled in accordance with the client’s risk appetite.

Our ICO KYC and AML solution offers data validation, proof of identity, money laundering checks, sanction lists, watch lists, PEP checks as well as adverse media coverage lookups.

The direct integration of our ICO platform with the Ethereum blockchain provides end users with a seamless user flow following their approval, with their wallet address being instantly added to the smart contract’s whitelist where they will be prompted to execute the transaction to fulfil their order.

Hedge fund ICO Token

A second ‘nuclear’ structure was requested by a prominent hedge fund. The client in question requested a security ICO, whereby the token’s holders could be restricted and controlled by the issuer even after the ICO has run its course. This structure would only permit registered clients of the issuing hedge fund to buy or trade in its token, and eliminate the possibility of its acquisition by unwanted parties on the secondary markets.

To satisfy this brief, the ICO Malta development team has developed a proprietary token protocol which would allow hedge fund ICOs to manage their register of approved token holders on the fly from within a simple GUI. Should any holder attempt to transfer the token to a non-approved recipient, the transaction would initiate but fail, resulting in a futile consumption of ETH in gas fees which will act as a disincentive to repeated attempts at unauthorised transactions.