ICO / token sale
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.
Attitude of the country towards ICOs/token sales
From a social perspective, the Dominican Republic has an avid crypto community. While some scams that have posed as ICOs or appeared similar to ICOs may have eroded the credibility of local projects, the local crypto community does follow and participate in the market.
From a political and regulatory perspective, however, there are reservations. The Central Bank of the Dominican Republic has issued two separate statements regarding crypto currencies essentially saying that crypto assets are not government-backed and are not fiat currency; and that those that chose to deal or invest on such assets do so at their own risk. In the same statements, the Dominican Central Bank also warned banks and other regulated financial institutions that dealing with crypto assets may generate fines or sanctions towards them.
The Superintendence for the Securities Market has not issued statements or set a precedent regarding crypto currencies.
Presence of any explicit regulation on ICOs and the issuance of token/coins
There isn’t a specific ICO regulation. However, an ICO would technically fit the definition of a public securities offering and therefore be subject to registration in the Registry of the Securities Market.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins
There are no specific restrictions or bans.
Obligations and requirements to issue token/coins
There isn’t any specific regulation requiring a licence or registration. However, if the token was registered as a security in the Registry of the Securities Market, the brokerage of such token would require a licence as a broker or broker-dealer. So far, there is no precedent for such a case.
Classification of token/coins in the jurisdiction
There isn’t a specific regulatory classification. However, a token issued under an ICO that conveys economic rights to its owner such as a stake in a company (behaving like a stock) or a portion of a future cash flow (behaving like a bond) would technically fit the definition of a security.
Presence of a duty to publish a prospectus bevor offering token/coins to investors
The publication of a prospectus is mandatory if the token is considered a security and subject to registry in the Registry of the Securities Market.
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
No AML/KYC requirements exist expressly under local regulation. However, best practice would be to perform AML/KYC on all transfers to third parties.
If the token is considered a security and subject to registry in the Registry of the Securities Market, regulated broker dealers would be required to perform AML/KYC on their customers (which would acquire the securities).
Additional comments regarding (i) the legal situation for ICOs/token/coins and (ii) any following transfer of token/coins to third parties
The Dominican Central Bank’s posture on crypto currencies in general would make it unlikely for institutional investors to be involved in an ICO, especially as token purchasers.
Market size for ICOs/token sales and existence of any previous regulated ICO/token sales in the jurisdiction
Information is not readily available.
Additional comments regarding the economic situation for ICOs/token sales or what companies must be aware of in this business area