Enacts the Anguilla Utility Token Offering Act (“the AUTO Act”)
On the 4th May 2018, the Anguilla House of Assembly enacted the Anguilla Utility Token Offering Act (“the AUTO Act”) which received assent and thus became effective on the 7th May 2018. The Act provides for the registration of issuers of utility token offerings in or from with Anguilla. In a press release from the government issued on the same day the Act was passed, the Permanent Secretary in the Ministry of Finance, which shepherded the legislation through Parliament, Mr Larry Franklin noted that the legislation provides for the first cryptocurrency regulatory regime for the registration of initial offerings of specified categories of cryptocurrency….the AUTO Act establishes the world’s first registration process for an offering of cryptocurrency…The Act will facilitate registration of clearly defined ” utility tokens” that do not have the features of a security, and that have one or more “utility” features within the issuer’s current or proposed blockchain platform. There is currently no country approved regulatory regime specifically for non-securities cryptocurrency offerings.
It appears that the legislation is geared towards filling or exploiting the lacuna that currently exists for products that aren’t securities as defined either in Anguilla or internationally which means that Anguilla has, potentially, tapped into a niche market for this product. In fact, it is this lacuna which was behind the thinking of the drafters of the legislation, specifically, Mr RaviA. Bahadursingh, LL.B, LL.M (International Economic Law) TEP, Barrister(Gray’s lnn), an Anguilla finance and tax lawyer with Chancery Lane Chambers, who admitted that: “In drafting this Act, we saw that tokens that were in effect “securities” in Anguilla are required to comply with the same Anguillian and international regulatory regime as all other securities offerings. However, there remained a large swathe of non-security tokens with no clear guidance as to how they should be offered to the public. Therefore, we focused our efforts on creating a safe and effective regulatory framework for non-security token offerings.”
Kudos must be extended to Mr Bahadursingh and Randal l W. Johnson, Esq., a U.S. finance and blockchain lawyer with Sinnott & Company, along with the Companies Registry, Financial Services Commission and Attorney General’s Chambers who were all involved in the drafting process.
In commenting on the Act, Anguilla’s Chief Minister and Minister of Finance, the Hon Victor Banks stated: “We believe this new AUTO Act will help Anguilla become the leader in establishing best practices for cryptocurrency offerings, to protect the people of Anguilla and the participating public.” He went on to state that Anguilla has a long history with cryptocurrency, beginning with the island nation serving as host for the firstInternational Conference on Financial Cryptography in the 1990s and leading to the first wave ofcryptocurrency developers living in, and working from, Anguilla during the early 2000s.”Mr. Banks added that: “We believe the AUTO Act is a significant step in the right direction…to provide clearly defined rules and increased safety for the blockchain community. With the enactment of the AUTO Act, we look forward to the registration of premier blockchain projects in Anguilla in undertaking their utility tokenofferings.”
Mr Franklin went on to state that:
“The Act permits specified Anguillian entities to apply to be registered to conduct a Utility Token Offering when following the disclosure review, approval and registration process for a proposed offering, which includes publication of the entity’s official disclosure documents related to the offering. The disclosure document requirements include certain elements that are standard for capital offerings but specifically tailored to these types of projects, including company structure and location, business status, detailed project description, management background, technical and legal description of offered tokens, current ownership, use of proceeds, plans for protecting offering proceeds, anti-money laundering program, and risk factors for purchasing tokens.
“The objective is a simple but effective standardized registration and disclosure protocol for blockchain projects wishing to issue utility tokens. The government’s goal is to strike a sound balance between meeting the information requirements of the purchasing public and creating an accelerated but prudent process to meet the needs of the fast-moving blockchain industry. Anguilla will conduct a regular review of the effectiveness of the new Act and will propose updates to keep up with the ever-evolving blockchain industry. In order to assist in these amendments, a Utility TokenOffering Advisory Committee will be formed consisting of private sector participants from the blockchain field.”