Name
Global FinTech Guide
Country _ Name
Portugal
SectionTitle
ICO/token sale
Body
Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms. While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.

Introduction

Attitude of the country towards ICOs/token sales

ICOs have been successfully used for financing projects and companies, having been – considering that unless the tokens qualify as security or e-money, they are not regulated –a popular tool for these new players. Although, as has been the case in most jurisdictions, ICOs have been less popular, there is still some receptiveness towards them.

Legal affairs

Presence of any explicit regulation on ICOs and the issuance of token/coins

No, there is not. ICOs will only be deemed regulated if the tokens relate to security tokens which qualify as securities under the Portuguese Securities Code. Tokens that qualify as securities or financial instruments that have been issued or are being marketed in Portugal, are subject to a set of rules, which include, in particular and notwithstanding others: (i) the rules regarding the issue, representation and transmission of securities; (ii) the rules relating to the trading of financial instruments; (iii) requirements on the quality of information; (iv) and the market abuse regime.

The issuance of tokens/coins will only be deemed regulated if the token qualifies as electronic money, defined under the Payment Services and E-money Law as electronically, including magnetically, stored monetary value, represented by a claim on the issuer which is issued on receipt of banknotes and coins, scriptural money or virtual currency for the purpose of making payment transactions and which is accepted by a natural or legal person other than the electronic money issuer. In case of qualification as E-money, a license as a E-money institution will be required.

The adaptation of national law to the MiCA Regulation is expected to bring forward the applicable framework to ICOs in Portugal.

Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins

No, however the regulator position has been of caution, recommending to the entities involved in the launch of ICO to clarify before the CMVM, prior to any issue, the legal nature of tokens in order to confirm regulatory framework.

Obligations and requirements to issue token/coins
The issuance of tokens/coins will only be deemed regulated if the token qualifies as electronic money, defined under the Payment Services and E-money Law as electronically, including magnetically, stored monetary value, represented by a claim on the issuer which is issued on receipt of banknotes and coins, scriptural money or virtual currency for the purpose of making payment transactions and which is accepted by a natural or legal person other than the electronic money issuer. In case of qualification as E-money a license as a E-money institution will be required. The authorisation must be granted by the Bank of Portugal and the minimum share capital is EUR 350,000. Further prudential requirements apply.

Moreover, any activity over virtual assets pursued on behalf of a client is subject to a prior registration with the Bank of Portugal for AML purposes. Virtual assets are defined as “a digital representation of value that is not necessarily connected to a currency with legal course and does not qualify as a fiduciary currency, security or other financial instrument, but that is accepted by natural or legal persons as an exchange mean or investment and that may be transferred, stored and traded electronically”. Activities covered include exchange, transfer and custody/management.

As far as we are aware, neither authorisation nor prior registration is subject to fees from the regulator.

Classification of token/coins in the jurisdiction

Tokens and coins will qualify as virtual assets for the purposes of AML prior registration. Besides this reference token/coins are not classified in Portugal, being regulated where they qualify as E-money and issuance/payment services are being provided over it or securities and financial brokerage services are being provided over it.

Tokens are not covered by the list of typical financial instruments. In order to qualify as a financial instrument, the cryptoasset should qualify as an atypical security, as this definition comprises any document (which may be electronic) representing similar legal situation provided that they are tradeable. The current position of the Portuguese regulator (CMVM) is that not all cryptoassets qualify as securities as their classification depends on a case-by-case analysis. In particular, a cryptoasset is a security whenever the following requirements are cumulatively met (which require case-by-case assessment):
  • it is a document representing one or more legal situations of a private and asset nature (that is, rights and duties);
  • it is comparable with typical securities, taking into account the legal situation(s) represented.


For a token to trigger the payment services legislation, it must qualify as E-money, which will occur where it is electronically stored; has monetary value; represents a claim on the issuer; is issued on receipt of funds; is issued for the purpose of making payment transactions; is accepted by persons other than the issuer.

Presence of a duty to publish a prospectus bevor offering token/coins to investors

If the tokens qualify as security, their issue will be subject to the regime of the public offers and a prospectus will be required unless exempted (i.e., offers within the EU below EUR 8,000,000 for a period of 12 months).

Presence of AML/KYC requirements that are needed to be fulfilled regarding (i) the initial issuance of token/coins and (ii) any following transfer of token/coins to third parties

If the activities over the virtual assets are covered by the VASP activities on behalf of a client, AML duties will apply, including identification and diligence.

Additional comments regarding (i) the legal situation for ICOs/token/coins and (ii) any following transfer of token/coins to third parties

As said above, the adaptation of local law to incorporate MiCAR provisions is expected to considerably change the legal framework. This will include the authorization procedure, prudential requirements, relevant supervisory authorities, etc.

Economic conditions

Market size for ICOs/token sales and existence of any previous regulated ICO/token sales in the jurisdiction

We were not able to find relevant data, however these are growing in the market practice.

Additional comments regarding the economic situation for ICOs/token sales or what companies must be aware of in this business area

In January 2021, new rules applicable to public offers amending the Portuguese Securities Code which envisaged to simplify the capital markets (e.g., there is no mandatory brokerage for assistance and placement) entered into force, which may be relevant for ICOs that amount to public offer of securities.

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