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ICO / token sale
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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
Egypt’s Dar al-Ifta, the primary Islamic legislator in Egypt, issued a religious decree classifying commercial transactions in bitcoin as haram (prohibited under Islamic law).
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
Yes, the Central Bank of Egypt (CBE) emphasised the importance of adhering to Article 206 of the Central Bank and Banking System Law promulgated by Law No. 194 of 2020 prohibiting the issuance of crypto currencies, trading in them, promoting them, establishing or operating platforms for their trading or implementing activities related to them.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins
Yes, the Central Bank of Egypt (CBE) emphasised the importance of adhering to Article 206 of the Central Bank and Banking System Law promulgated by Law No. 194 of 2020 prohibiting the issuance of crypto currencies, trading in them, promoting them, establishing or operating platforms for their trading or implementing activities related to them.
Obligations and requirements to issue token/coins
According to the CBE, it is illegal, and according to Egypt’s Dar al-Ifta, it is haram.
Classification of token/coins in the jurisdiction
Prohibited in Egypt.
Presence of a duty to publish a prospectus bevor offering token/coins to investors
You can’t trade in token/coins to investors because it is prohibited by law. However, people still can buy and sell this kind of token/coin outside Egyptian borders.
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
Pursuant to article 1 of the implementing regulations of the Anti-Money Laundering Act promulgated by Decision No. 951 of 2003 of the President of the Council of Ministers, the negotiable bearer tools are: Cash instruments in the form of a bearer document, and other negotiable instruments, such as Cheques of any kind, promissory notes, and payment orders that are either for the bearer or without restriction, or issued to a photographer, or in some other form to whom property is transferred by handling, as well as previously signed tools. So, the token/coins intangible or virtual currency are non-admitted and illegal in Egypt
Additional comments regarding (i) the legal situation for ICOs/token/coins and (ii) any following transfer of token/coins to third parties
N/A.
Economic conditions
Market size for ICOs/token sales and existence of any previous regulated ICO/token sales in the jurisdiction
Prohibited in Egypt.
Additional comments regarding the economic situation for ICOs/token sales or what companies must be aware of in this business area
Prohibited in Egypt.