Ethereum has been seeing a bullish trend in its adoption and applications ever since it was invented. Though the ETH coin isn’t the most valued of cryptocurrencies, Ethereum revolutionized the applications of blockchain technology by being the first open-source blockchain platform where developers could develop their decentralized applications (DApps) and introducing smart contracts.

However, despite its huge popularity, Ethereum’s full potential has been held down by being less scalable because it was developed to use the Proof-of-Work consensus mechanism just like its predecessor, Bitcoin. Though Ethereum’s program was slightly improved to make transactions faster compared to those of Bitcoin, Ethereum still lags behind some newer blockchain technologies like DASH, Ripple and the like, which use Proof-of-Stake consensus mechanism. Initially, Ethereum could only handle 15 transactions in 16 seconds.

Change of the consensus mechanism

Ethereum users are egaelry waiting for the mich anticipated ETH 2.0 update that is expected in the last quarter of 2020. However, things seem to be moving faster than expected after Ethereum’s founder tweeted about the success of the initial deployment of Ethereum’s layer 2 scaling strategy.

With the success of the initial deployment, what is remaining is only the refinement and complete deployment of the layer 2 scaling strategy.

What layer 2 scaling strategy means

After identifying that Ethereum blockchain has scalability issues, Vitalik Buterin identified strategies of improving the blockchain’s scalability. Those strategies included “sharding”, also referred to as the “layer 2 strategy” or HackMD or ETH2 shard chain simplification.

Initially, the Ethereum blockchain network was designed for every transaction to be processed by all the nodes before being declared successful. This ended up taking a huge amount of the networks activity that would be used for other things.

To free up the system, sharding will make it possible for transactions to go through without the need of being verified by all the nodes. Transactions involving token transfers will be done on the layer 2 protocol to free the rest of the system.

In the new strategy, the amount of shards is brought down to 64 from 1024 while the number of shards required per slot is increased to 64 from 16. Then for every beacon chain block, there shall be a published crosslink to allow for optimal workflow. Additionally, the EEs shall be simplified, smaller shard chain logic shall be needed and it will not be mandatory to pay transaction fees via decentralized exchanges.

 What the scalability overhaul means for users

Once the overhaul is complete, Ethereum users will enjoy transaction speeds of thousands of transactions per second. This will only make Ethereum better especially for DApp developers.

It will also be good news for Ethereum’s use cases which span across a wide range of fields ranging from supply chains, health, Initial Coin Offerings (ICOs), Initial Exchange Offering (IEOs), transportation, Structural health monitoring and finance among many more.

Coming up with an innovative blockchain project is just a tip of the ice bag when it comes to pulling through a successful project. You have to find a way of explaining the blockchain project to your potential investors and the whitepaper is your best shot in doing so.

What is a whitepaper?

Before going any further, let’s first look at what a whitepaper is.

A whitepaper is a document that gives a detailed architecture of your blockchain project, elaborating on the problem that your blockchain project intends to tackle, the proposed solution for the problem, and giving a detailed description of the products or services that the blockchain project will be offering. It can be closely paralleled to the business plan of your blockchain project.

The whitepaper is intended to help investors study your blockchain project in detail so that they can decide whether to invest in it or not. Therefore, it has to give investors enough reason as to why they should invest in the project.

Functions of a whitepaper

Let us elaborate more on the specific functions of the whitepaper so that you can hit each of them while coming up with your project’s whitepaper.

 

  1. Introducing the idea or concept

Any investor looking at your whitepaper will be looking to find out what your blockchain project intends to accomplish. Therefore, you should ensure that you let them have a clear picture of the problem you have identified and your solution to the problem. This should be done at the earliest point possible to capture the attention of the reader.

The best blockchain projects are those that address the challenges that the larger society faces while going about his day to day activities.

  1. Explaining this new idea or solution in details

The whitepaper should then take the reader/investor the extra mile of understanding how your idea should work. You have to breakdown the entire project into a simple form for investors to understand how it will function.

Here you have to strike a balance between getting too technical and putting things in the lay man’s language. Technicality shows some sense of sophistication but if you get too technical, you risk losing the attention of the investor, who is most likely than not just a layman looking for a chance to invest in the best investment opportunity that comes his/her way.

  1. Justifying your idea/concept, token and team

You are probably not the only person that has tried tackling the same problem you identified. Therefore, you have to carry out extensive research into any other existing projects related to the problem you are solving and show your reader/investor what your projects bring to the table.

You have to give him a reason to invest in your project and not in your competitors’ projects. Therefore, you have to identify what you intend to do different and how that is an advantage compared to the rest of the solutions.

When justifying your blockchain project, you also have to justify the benefits of your token/coin to those who will invest in your project. After all, the only way investors will invest into your project is by purchasing the project’s tokens/coins either through an Initial Coin Offering (ICO), Initial Exchange Offering (IEO) or Security Token Offering (STO). Therefore, you have to clearly explain your token/coin and also classify it accordingly; shall it be a utility or security token).

Another thing that the whitepaper should justify is why the team behind the project is the best. Remember, investors are looking at investing in a project that has the prospects of going all the way through to become a success. Therefore, they will have to scrutinize your team to see if they are capable of seeing the project through. A strong team will instil confidence in the hearts of investors to invest.

Questions that the whitepaper should address

To have a good whitepaper, you should ensure that it answers the following questions:

  • What prompted you to come up with the idea?
  • How will blockchain technology be incorporated into your idea?
  • What is the market analysis?
  • Who are your competitors?
  • What is the growth potential of your project?
  • How does your product work?
  • What are the technologies used in your project?
  • What is the commercial application of your project?
  • What kind of token do you intend to use? What platform shall it be based on?
  • How do you intend to raise funds? Do you intend to use an ICO, IEO or STO?
  • What are the conditions if any for investors to invest?
  • What has already been done on the project and what is the approximate time required to accomplish the rest?
  • How do you intend to use the funds raised through the crowdfunding?
  • Are there any bounty campaigns?
  • Who are in your development team?

Steps to writing a good blockchain whitepaper

To answer the above questions, you could follow the following steps:

 

  1. Identify your primary target

Before embarking on drafting or writing the whitepaper, you should first consult with the development team to identify the target of your blockchain project.

Some of the questions that you should seek to answer include:

  • Is it just the ordinary person?
  • Is it a professional e.g. a professional cryptocurrency investor?
  • Is it a blockchain developer who would use your solution to develop other networks?
  • Is it an executive in a business who might influence his/her company to buy your blockchain technology?

Once you identify the target group, you should go ahead and create a detailed profile about them. the profile should point out the following:

  • Gender
  • Age
  • Occupation
  • Location (country, state, province or continent)
  • Interests/hobbies
  • Education level (to understand the language, either formal or informal, that you shall adopt in explaining your blockchain project)

With the above details, it will be easy for you to understand how best to explain your concept. If for example, you are dealing with a target audience who are experts in cryptocurrencies, the use of technical terms won’t hurt. However, if your target is the ordinary man, you will have to use a simple to understand language.

Also, since your blockchain project is something that you would want to be adopted around the world by people with different languages and cultures, you will have to do white paper localization.

Localizing the whitepaper means translating the original version of the whitepaper into different versions fit for the various parts around the world. It might include translating into various languages. The translation should go beyond the linguistics; it should include analogies, norms and examples that are local to the demographic localities you are translating for.

  1. Identify the goals that you want to achieve with the whitepaper

Your goals should be specific, measurable, achievable, relevant, and time-bound (SMART). An example of the goals include:

      i. Raising funds

Most blockchain whitepapers are intended to make investors gain confidence in the blockchain project to a point of purchasing the tokens offered wither in a Security Token Offering (STO), Initial Exchange Offering (IEO) or Initial Coin Offering (ICO). This way, the project developers can raise capital for the project.

If your whitepaper is intended for this goal, you should put in mind that at the end of reading the whitepaper, you want the investor to cash in on the project. Therefore, you have to include the projects potential to grow and how the investor shall make money out of the project. Every investor wants to invest in something that will bring returns and if possible in the near future.

You have to indicate how much you want to raise and by what date. You should also clearly indicate how those funds will be distributed into your project so that the investors can make informed decisions.

You should also include a clear roadmap indicating the various milestone. The roadmap should have realistic timeframes. Remember, if you fail to hit the milestones by the anticipated timelines, your investors will start losing faith in you and probably even want to opt-out.

     ii. Awareness creation

In any case, the whitepaper plays a great role in informing people/readers that there is a blockchain project that is about to be launched.

In some cases, this could be the sole goal, without the need to raise funds. An example of such a whitepaper is the Lightning Network Whitepaper whose main objective was to introduce a new scaling method for the blockchain network. After its launch, various blockchain networks among them, Bitcoin and Litecoin adopted the scaling method while others like ZCash and Ethereum were inspired by the technology to develop their versions of the solution.

    iii. Selling services and products

If your whitepapers goal is to sell a product or service, you should first identify and describe the problem that your audience has and then list the benefits of the solutions (products or services) that you are offering.

Such whitepapers are subjective. However, you should restrain from making in overly promotional.

An example of such a whitepaper is the Sirin Labs Whitepaper that was written to describe how its blockchain-enabled smartphone, Solarin, works and how its users were to benefit.

  1. Make a draft of the whitepaper

Your project’s development team (especially the designer, developer and engineer) should be actively involved in making the draft since it should give the main points that should be included in the whitepaper.

The team that creates the first draft should be keen to provide the necessary information on the:

i. Problem statement

ii. Market description

iii. Product description (how is shall solve the problem)

iv. Tokenomics (Token Economics)

v. Fund distribution

vi. The team

vii. The roadmap

viii. Partnerships

  1. Come up with a structure for the whitepaper

Before delving into writing the final copy of your whitepaper, it is important to come up with the structure. The right structure emphasizes the right points at the right juncture.

There are three most commonly used structures when it comes to writing whitepapers:

  • The Before (current world with the problem) — After (World without the problem) –Bridge (Your solution as the one eradicating the problem) structure
  • The Problem (identify and explain the problem) — Agitate (show the ugliest part of the problem) –Solve (introduce your solution to the problem) structure
  • The Features (Describe the features of your solution) — Advantages (outline what makes your solution to stand out) — Benefits (describe how the users shall benefit from using your solution) structure

The first structure is best for explaining a solution that is completely new in the market. The second structure is best for writing a whitepaper that is intended for marketing purpose. The third structure should be used if the problem you are tackling is obvious to the target audience and there are very many solutions out there.

  1. Hire an expert to write the final copy of the whitepaper

Since the members of the development team may be too busy on the project and lack time to write the whitepaper, it is advisable to hire an expert writer to write the final copy. The writer should be experienced in writing blockchain-related material; meaning he/she should have some knowledge of blockchain technology so that he/she can explain some technical issues well.

As the writer writes the whitepaper, the writing should be closely monitored by someone on the development team. The writer should be able to freely interact with the team to get assistance with concepts and things when the need arises.

If the writer is someone from the outside, the team should understand that the writer is too green on the project and shall require explanation on many things so that he/she can understand the concept and objective of the project. That way the writer shall be able to relay the information better on the whitepaper.

You can hire a freelance writer from one of the online working platforms or get a referral from your colleagues for the writing task.

What to include in your whitepaper

Let’s now look at what your whitepaper should look like. We shall first give a general template and then get to explain what should be included in each section of the template.

You could use the following template when writing your whitepaper. It has all the necessary sections that a good blockchain whitepaper should have.

The above headings should cater for everything that a good whitepaper should have.

Now let’s get into explaining what should go to each section.

Introduction

This introduces your blockchain project to the reader. It should be a summary of the entire project and it should be presented in a compelling manner that leaves the reader in thirst of knowing more about the project.

You could choose to use an executive summary or introduction as the title of this section.

In some cases, the summary is written as a letter from the CEO addressing future token holders or investors.

Disclaimer

In this section, you should place any legal notice or disclaimer about your project or the ICO, IEO or STO you intend to issue. The disclaimer or legal notice should contain information on any restrictions or notifications.

This is the section where you should explain any exceptions of countries if any. For instance, it would be an exception of residents from certain countries from buying the tokens. This could save you a great deal in future since you may not have registered with the regulatory authorities from those countries. It could save you from issues like the ones we witnessed with Telegram where investors from the USA bought the tokens without Telegram following the rules outlined by SEC for issuing ICO tokens to US citizens.

Table of content

The table of content gives a clear outline of all the heading and subheadings used throughout the whitepaper.

You could also include a table of the graphics that you have used.

These help the reader in navigating within the whitepaper, which is normally a large document.

Problem statement

In this section, you should outline the problem that your blockchain projects seek to solve. You may delve into why it is important to solve the problem or explain its effects on society.

You could also explain the consequences of not solving it.

You should capture the readers’ attention and give him/her enough reasons as to why they should read the document and even give an overview of what they expect to come across.

You could use graphics, photos or charts to expound more on the problem and its effects.

Market description

This section is especially important for ICO, STO or IEO whitepapers. Investors would like to see how your project shall perform in the market.

You should, therefore, explain to the investors where your project fits in the market. Though numbers are sometimes convincing, if you choose to include them, they must be backed by facts, research or analysis.

You should give a clear picture to investors of how your project shall be adopted and its growth projection.

Product description (how it shall solve the problem)

This is the key part of the whitepaper. You should start by explaining the technology behind your solution. How it is unique from any of the currently available solutions if any.

Secondly, you should explain how the users shall benefit from the project.

You should use diagrams, graphics and photos to explain hard concepts so that the investors can get a clear picture.

Tokenomics (Token Economics)

Since your solution is blockchain-based, you have to explain the token that you intend to use for your project. You should clearly state the type of token it is; is it a utility or security token? Is it an ERC-20 token?

This is the section where you also state how and when you intend to distribute the tokens. You should state the date when the token issuance shall start and state the price of each token.

If possible, you should draw a graph showing what percentage will go to who.

Fund distribution

In this section, you should outline how you intend to use the raised funds. Investors need to know where their money is going. They also need to see how much is needed to accomplish certain tasks.

It is not a must for you to go into the details of the expenditures. Just group them generally. Like product development, marketing, team and so forth. However, it is important to allocate more funds for product development. You should avoid using terms like miscellaneous.

The team

This is an integral part of any blockchain project. Besides the whitepaper, you should also indicate the team on your project’s website.

You ought to include photos and short biographies of all the members of your team.  You should also include their contacts. The biographies help in instilling confidence to investors that the team behind the project is qualified and that they shall deliver. The contacts make it easy for investors to verify that the team members are real and not just a scam.

It is also important to state any past projects or positions that the team members have held in other institutions or projects.

A good number of investors will invest in your project because they are confident in the development team. That is why it is important to use qualified individuals for various positions.

The roadmap

In this section, you should include a detailed development roadmap of your project. The roadmap should clearly outline the milestones of the project while clearly outlining the timelines.

The roadmap should be for the next 12 to 24 months.

If some milestones are already accomplished, it is important to state that too. That will go a long way in convincing the investors that the team is serious about the project. Majority of investors will only cash in on projects that already have something to show. Nobody wants to invest in something that only appears on paper with no hopes of it ever starting; some have turned out to be mere scams!

The roadmap should also state when investors can start getting returns from their investments. This could include things like when the token shall be listed on crypto exchanges for trading.

You could have a graphic of the roadmap and also explain each of the milestones outlines on the graphic.

Partnerships

In this section, you should list any company that you have partnered with. Also, you should list any venture capitals that may have invested with you already.

Partnerships go a long way in promoting your blockchain project since they show that companies are confident that your project shall become a success.

When Initial Coin Offering (ICO) was unveiled, blockchain startups and fintech companies were rushing to make use of the new crowdsourcing technique due to its simplicity in raising capital for projects. 2017 specifically was a very successful year for ICOs and the world witnessed some of the best ICOs to date. The total amount of funds that were raised in 2017 was close to $6 billion up from about $200 million raised in 2016.

However, not all the projects that used ICOs turned out to be successful and some also turned to be scams since ICOs are not regulated in most parts of the world. At the moment, only a couple of countries like Singapore, France, and Germany have come up with ICOs regulations to make them safe for investors.

Having said that, ICOs are still a viable option for raising capital for your blockchain project. In this article, we shall review some of the successful blockchain projects that started by raising capital through ICOs. You can still leverage ICOs and pull out such successful projects amidst the regulatory issues facing ICOs.

However, you will have to put more effort into the project development by putting together the best team for the job. Again you will want to ensure that you comply with any regulatory laws in the region where you investors come from to avoid court cases like those that hit BLOCK.ONE and Telegram ICOs.

The list below was developed taking into account the Returns on Investment (ROI) for each of the projects and also by how much the blockchain project has been adopted across the globe.

10 most successful ICOs

  1. Ethereum

Ethereum ICO was conducted in August 2014, making it the second blockchain project to leverage ICO to raise capital, after Mastercoin ICO conducted in July 2013. At the end of the ICO, Ethereum raised a staggering $16,000,000.

Today, Ethereum is a force to reckon with in the cryptocurrency and blockchain world. The blockchain network completely revolutionized the world of cryptocurrency by enabling blockchain networks to do more than just offering payment services. Ethereum introduced smart contracts which have been the cornerstone of every other blockchain use case.

Ethereum was developed as an open-source distributed ledger platform that enabled its users to create and deploy decentralized applications (Dapps) and also apply and use smart contracts. It introduced the ERC-20 token standard that offered other blockchain developers a basis for creating their crypto coins; most altcoins use the ERC-20 standard to create their tokens.

Ethereum is by far one of the most successive blockchain network second to Bitcoin. Currently, the ETH, which is Ethereum crypto coin, trades at $207.75 USD. Towards the end of 2017 and beginning of 2018, ETH was trading at over $1200 USD.

  1. IOTA

IOTA ICO was conducted towards the end of 2015 and was one of the first blockchain projects to use ICO to raise capital. A single IOTA token was going for 0.00000133 BTC, which translated to less than $0.001 at the time. The ICO was able to raise $590,000.

IOTA blockchain holds lots of prospective use cases since it merged Internet of things (IoT) technology and blockchain technology. The project developers envisioned a future where different ‘things’ using the internet would be able to communicate with each other using blockchain technology.

IOTA stands out as the only blockchain technology that doesn’t rely on blockchain fully for its transactions. It uses another system known as The Tangle to verify transactions as they are being made. This way IOTA has been able to dodge the scalability problem affecting most blockchain networks.

IOTA has been adopted across various industries across the world. For example, Taipei signed an agreement with IOTA Foundation for its Taipei smart city project. Also, a Netherlands company called Elaadnl dealing with smart charging has succeeded in developing the first working prototype using IOTA. The list keeps on growing as more and more industries fall to IOTA’s technology.

At the moment, one IOTA token is trading at 0.00002073 BTC.

  1. DigixDAO

The DigixDAO ICO was the first crowd sale to be conducted on Ethereum. It was conducted in March 2016 and it raised $5.5 million.

DigixDAO is one of the main Decentralized Autonomous Organizations (DAOs) developed on the Ethereum network.  DAOs are normally new business structures that have no bosses but rather all decision affecting the networks are made through proposals and voting.

One of the main features of the DigixDAO blockchain is that it has two crypto coins; the DGD and DGX.

The DGD tokens were the ones that were issued during the ICO. During the ICO, a single DGD token was going for $4.2000 USD.

Contrary to most other ICOs, buyers of DAO tokens hold the rights to vote in the proposals submitted to the DAO.

The main objective of DigixDAO is to create a stable cryptocurrency that is backed by real gold bars. According to the DigixDAO, the token that is backed by the gold bars is the DGX. The gold is stored in a custodian vault in Singapore that can hold up to 30 tons of gold. The gold goes through a Proof of Asset protocol, where its existence is verified through the Ethereum blockchain.

Currently, the DGD token is going for $39.98 USD.

  1. NXT

The official announcement of NXT ICO was made in Sep 2013 on BitcoinTalk forum.

The NXT blockchain is viewed as a descendant of the Bitcoin blockchain and it was developed to solve some of the issues affecting Bitcoin. Some of the issues that NXT promised to fix was shifting the mining algorithm to proof-of-stake and also resolve the issue of bloated blockchain.

The ICO which was conducted on the BitcoinTalk forum platform raised $16,800 in Bitcoin. At the time of the ICO, the value of NXT token was $0.0000168. However, at the moment the token’s value is above $0.01.

Besides the fact that the NXT is tradable on most crypto exchanges, the NXT blockchain is now fully operational and blockchain developers use it to develop decentralized applications. It also has an asset exchange platform, the Nxt Asset Exchange, and a messaging system.

  1. NEO

NEO ICO was conducted in September 2016 and it raised $5,050,000. During the ICO, a single NEO token was going for $0.032.

NEO blockchain is often referred to as the Chinese version of Ethereum. It offers smart contracts and on top of that provides digitized assets, identification decentralized commerce. The developers saw a future where blockchain would be used to represent legal proof-of-ownership for the broader society rather than the cryptocurrency community alone.

Today, NEO is traded on most crypto exchanges and currently trades at over $9.87. Towards the end of 2017 and early 2018, NEO was trading at over $120.

  1. Stratis

The Stratis ICO was conducted from August 2016 to January 2018. It was raised $610,000 by selling a single STRAT token for $0.007.

Stratis blockchain is a project that was developed to offer end-to-end solutions for the development, testing and deployment of Blockchain-based applications for the businesses worldwide. Its main aim was to make it easy for blockchain developers to develop blockchain networks that address whatever problem that is faced in the business sector.

The project has become quite a success since it ended up with a platform that is fully compatible with the C# and .NET programming languages, which are common among coders. One of its best use cases was when Microsoft added it as a Blockchain-as-a-service (BaaS) to its Azure cloud service. Stratis has become a darling for enterprises that use Microsoft products and looking to incorporate blockchain technology.

Currently, the Stratis (STRAT) goes for over $0.30. It reached its all-time high at the start of 2018 when it was going for $21.21.

  1. Ark

Ark ICO was conducted from November to December 2016 raising $22,000,000 USD. During the ICO, a single ARK was valued at $0.1 USD.

The Ark blockchain project was developed to create a platform that could link different blockchain into one network of use cases. In so doing, users of different blockchains could transact. Besides, Ark provides an open-source code and blockchain creation tools to enable users to leverage blockchain technology.

Ark has won a number of partnerships with different firms including Ledger, Atomic Wallet, Exodus, Changelly, and Spend among others.

Currently, the Ark token is trading at over $0.21.

  1. Lisk

Lisk ICO was conducted in March 2016 raising $6,472,497 USD. During the ICO, a single Lisk (LSK) was going for $ 0.07647059.

Lisk was the first modular blockchain that has the main chain that hosts the LSK coin with other side chains, which are personal blockchain networks attached to the main chain. The side chains are built and tailored using Lisk tools.

Most importantly, the developers of the side chains are allowed to hold their own ICOs. And most importantly Lisk allows developers to use JAVA programming language to develop the side chains.

Besides, several Ethereum players have also invested in this blockchain project.

Currently, the Lisk (LSK) is trading at above $1.11.

  1. QTUM

QTUM ICO was conducted in March 2017 and raised $15.6 million. During the ICO, a single QTUM was going for $0.3.

QTUM is a blockchain network that aimed at bridging Bitcoin with Ethereum’s smart contracts. By this, QTUM hoped to open up more use cases for smart contracts, especially for businesses.

Different business can leverage the tools, templates and smart contracts provided by the QTUM blockchain to enable them to build and deploy the smart contract.

Currently, the QTUM token is trading at above $1.5 USD.

  1. Spectrecoin

Spectrecoin ICO was conducted from November 2016 to January 2017 and raised $15,427. During the ICO, one Spectrecoin (XSPEC) was going for $0.00081.

Spectrecoin platform combines blockchain and tokenized ring signature scheme to add a layer of privacy and anonymity in transactions. By using the ring signature mechanism, any member of the network can append a signature on any transaction and it, therefore, becomes hard to trace the specific person that signed a transaction.

Besides the ring signature, Spectrecoin uses the Tor network to increase privacy within the network. All the nodes in the Spectrecoin blockchain communicate with each other through the Tor network. Therefore, contrary to most blockchains, the transactions carried out within the Spectrecoin go through a number of “middlemen” to make the transactions untraceable.

Currently, the Spectrecoin (XSPEC) is going for over $0.12, which is quite an appreciation from its ICO price.

Conclusion

The above blockchain networks are just examples of the best performing ICOs. There are other blockchain projects like Brave, OmiseGo, Ox, waves, Cardano, ChainLink, and Golem among many others that have used ICO to raise capital for the projects.

Although investors are currently shying away from ICOs due to lack of proper regulations, some countries have already come up with laws governing the ICOs or means of making the ICOs safer, like in the case of the German’s rICO.

If you are in countries where there are rules that have been put in place, you should ensure that you comply with all of them. For instance, if you are from France, you could apply for a VISA from the AMF to have your ICO whitelisted, which would certainly attract investors since they would be sure it is not a scam.

In the USA, the SEC requires you to disclose information about your project to ensure that investors make informed decisions. You may also be required to disclose how the collected funds were distributed, which would certainly instil confidence in your investors.

Failure to comply with regulations may land you into trouble hampering the success of your blockchain project like what was witnessed in the case of Telegram’s TON or the court cases that BLOCK.ONE is facing.

 

France became the first European Union country to craft bespoke regulations for digital asset/token offerings that are not based on past security laws. However, from the time the ICO regulations were enforced in 2019, the AMF has only approved and white-listed two Initial Coin Offerings (ICOs), with the WPO’s GreenToken ICO being the second.

France ICOs regulations

The French regulatory authority, the Autorite des Marches Financieres (AMF), started by conducting consultations on the risk, structure, volatility and applicability of coin offering in crowdfunding between mid-2017 and December 2017. This was after recognizing that digital coin offerings were becoming a global phenomenon and it did not want to be left behind as other countries around the world embarked on coming up with rules to regulate security tokens.

By fall 2018, a bill was tabled in parliament and it went on to be signed to law in early 2019, making France first EU country to have an ICO law in place.  The law which is referred to as the Pacte Law (or Loi Pacte), regulates defines digital tokens and lays out regulations for ICOs and intermediaries providing services related to crypto-assets.

Under the Pacte Law (or Loi Pacte), ICO issuers can legally raise funds by conducting an online ICO. Then after issuing the digital tokens, the tokens can be listed on a crypto exchange to be traded. The ICO issuers are given the liberty to choose to register for a VISA with the AMF to be ‘white-listed’ or to simply proceed with their ICO without the VISA but after submitting a document of disclosure to the AMF to enable token buyers to make an informed decision regarding the ICO.

However, the AMF emphasized that:

Although this approval is optional and ICOs without AMF approval will, therefore, continue to be legal, only those public offerings that have received the AMF approval may be marketed directly to the public in France.

It is also important to note that the new rules only apply for utility tokens. Digital securities are regulated under the old/existing securities regulations

The role of the AMF in the ICO regulations

Under the Pacte Law, the AMF:

  • Examines the disclosure document plus any advertising or promotional material that is circulated or published by the ICO issuer. The issuer should ensure that the disclosure document contains accurate, clear, non-misleading and detailed (outlining the risks that investors would face by purchasing the tokens) information.
  • Verifies that the ICO issuer has adopted enough procedures to protect and track the funds raised in the ICO.
  • Ensures that the issuer conducts themselves per the submitted disclosure document while complying with the regulations. If the issuer violates any of these, the AMF can compel the issuer to stop selling or offering the tokens, stop any advertising campaign and also remove its approval.
  • Verifies that the issuer is a legal entity registered under the French law in France. The AMF can only issue Visas to French-based issuers. Foreign corporations and entities seeking ICO market in the French market are free to do so but without the approval of the AMF.

Once the AMF approves an issuer to conduct an ICO, the issuer gets a VISA and is added to the whitelist of the approved ICOs.

However, it is important to note that the AMF approval is not advisability of the project behind the ICO. The AMF does not verify the technical and financial elements of the project. It also does not verify the computer programs behind the blockchain project. Therefore, it is up to the investor to research these before investing in the ICO.

The first ICO approved by the AMF

The AMF approved the first ICO in December 2019. The ICO was a company called French-ICO that has a platform for funding projects through cryptocurrencies. The ICO was scheduled to start in March 2020.

The AMF Visa that the French-ICO was issued with expires on June 1, 2020.

The ICO targets a minimum of €100,000 and a maximum of €1 million. Once the offering is finished the tokens will be tradable on Zebitex, which is a partner exchange to the French-ICO.

The second ICO approved by the AMF

On May 12, 2020, AMF approved the second ICO, which was for a firm called WPO.

WPO is a renewable energy company that services over 600 solar parks and wind firms across Europe and outside Europe.

In the ICO, WPO is offering its GreenToken (GTK) with a minimum target of €1.5 million and a maximum target of €10 million. According to the firm, one token will be going for €95 and the minimum amount that an investor can invest is €100.

The ICO is scheduled to start on September 8, 2020.

In the future, the GreenToken could be used to acquire goods and services from the GreenToken Network, which taps into the renewable energy industries serviced by WPO.

The tokens are expected to start trading on the SAVITAR exchange, which is a French crypto exchange.

After conducting a successful IEO of its stablecoin, JST, on Poloniex on 5th May, the TRON-based stablecoin lending platform succeeded in getting the JST coin listed on MXC Exchange only two days after. The JUST (JST) IEO sold out in just 4 minutes 26 seconds according to TRON’s CEO, Justin Sun.

JST token sale price was $0.00202 during the IEO. Upon its listing on MXC Exchange, its price spiked to $0.04, which was 18.8 times its token sale price, breaking the record of IEOs Return of Investment (RoI) in such a short time. This also thrust the JUST project into the league of the best performing IEO funded projects.

Let’s take a look at what this MXC Exchange means to investors. If an investor had purchased 1000 tokens, it probably cost him/her $2.02. If the investor decided to register on the MXC Exchange and trade the stable coin, he/she would sell it at $40 making a profit of $37.98 in just two days.

Although JST price then lowered from $0.04 in the following minutes, the stablecoin is currently trading at $0.0088, which is 3.36 times the price at which the coin was sold at.

Ideally, if an investor decided to trade in the purchased JST tokens, he would make substantial profits.

The TRON-based stablecoin lending platform, JUST

JUST is a decentralized lending platform that is built on the TRON blockchain. Users in JUST can stake TRX, the TRON cryptocurrency, to generate the JST stablecoin that can be used to pay for a number of things.

The platform uses a decentralized finance (DeFi) lending and governance protocol.

Poloniex’s Tron-powered IEO launching platform

Interestingly, the CEO of TRON, Justin Sun also holds a substantial share at Poloniex Exchange. Sun was among a number of Asian investors who bought Poloniex towards the end of 2019.

By volume, Poloniex is considered the 15th largest cryptocurrency platform. It launched its IEO launching platform, the Poloniex’s LaunchBase, which carries a lot of resemblance to Binance Launchpad.

Projects looking forward to conducting IEOs on Poloniex’s LaunchBase will issue tokens in exchange of TRON’s TRX token. In exchange, the project behind the IEOs will receive professional advice and guidance.

By launching its IEO launching platform, Poloniex joins the growing list of crypto exchanges providing blockchain startups with a lifeline by providing a platform for them to conduct IEOs.

JST was the first IEO to be conducted on Poloniex’s LaunchBase, barely a month after the platform was launched, proving that the platform is up to the task.

As the novel coronavirus ravages the world, killing thousands, almost everything tangible including paper cash has been classified as a medium of conducting the COVI-19. Physical money isn’t safe anymore. You cannot know who touched it; did they have the virus!

And as a result, governments have resulted in the use of electronic payment methods with countries like Kenya upping its use of mobile money transfers. Other countries like South Korea had temporarily removed cash from circulating while China had recalled its paper cash for sanitization using ultraviolet rays.

However, mobile money and some of the other electronic payment methods that are currently in use are dimmed to be slow and could not possibly be efficiently used to deliver government stimulus to households or businesses.

Besides, most of the traditional electronic money transfer methods like mobile money, PayPal, Neteller, and the like are still centralized and depend on traditional banking systems.

As the majority of the world’s population currently works from home, the world could be preparing for the next phase of a technological boom, and blockchain technology could be it.

Central Bank digital currencies

At the beginning of April this year, the Bank of International Settlements (BIS) researchers suggested that the current pandemic would accelerate the adoption of digital currencies and fuel the debate of central banks issuing digital currencies.

And as a matter of fact, several central banks have started looking at the possibility of issuing digital currencies to reduce the use of paper cash which they are being forced to recall back for cleaning or destroying.

China became the first country to announce that it is going to launch a central bank digital currency, with the four largest commercial banks there starting a test of the digital currency this month. The city of Suzhou even suggested it is going to give some of the digital Yuans to government employees in the coming month for use for transport.

In the US, the House democrats suggested a digital dollar in a draft bill for the recently signed stimuli package. According to the members of the congress, the digital dollar would be rolled out by the central bank and distribute money directly to businesses and households. In this way, the process of distributing the stimuli package would be faster and more efficient.

In Europe, the German government is proposing the use of Euro-tokens that could be used in providing consumption vouchers that are based on blockchain. France also launched the atrial phase for testing the integration of the digital euro in settlement procedures.

Cashless economy

Currently, the cashless economy does not necessarily mean a blockchain or cryptocurrency-based economy. Companies like Visa and Mastercard have long been in the market and they have helped promote the cashless economy for a while. Nevertheless, these companies are centralized, and cross border transactions are still expensive and time-consuming thus the need for better infrastructure and blockchain is the best shot at filling the gap.

Though governments have viewed cryptocurrencies as rivals to their centralized financial systems, it is just a matter of time before we witness a complete adoption of digital currencies in government institutions starting with the central banks.

The adoption of digital currencies will mean that government institutions like central banks will have to use blockchain technology to launch digital currencies.

Every business has a business model, which is the overall architecture of how the business orchestrates its day to day operations to create, deliver and capture value. For a business to become a success, the business model they are using must address certain elements, which include:

  • Value proposition – refers to the services and products that the company/business produces.
  • Value capture – describes how the business makes money by showing cost and revenue structures
  • Value creation – describes how processes and activities are carried out, and how resources are used in the business
  • Value delivery – refers to the process of identifying the target customers

Business models, however, differ depending on the industry, which can either be traditional based or internet-based. Traditional based businesses are primarily concerned with producing tangible products and improving their supply chains. On the other hand, internet-based businesses focus on operating digital services/products and do all they can to find value for the digital services/products

However, both traditional based and internet-based models thrive well when business transactions are fast and secure and fully transparent. And the only technology that can offer these features is the blockchain technology.

Blockchain technology

Blockchain is a decentralized digital ledger that supports fast, secure and fully transparent transactions. Though it has mainly been recognized through cryptocurrencies, which are the digital currencies used in transacting within the blockchain networks, it also has other real-life applications.

Blockchain technology applications span from Agriculture, healthcare, cloud storage, logistics, real estate, education, public transport, and food and beverages among many others. Different blockchain startups have come up with different blockchain-based solutions and business models for almost every sector around the globe.

As a result, blockchain technology has become appealing to economies around the world since it offers immutability, security and also eliminates the need for third-party intermediaries/middlemen. This is prompting governments across the globe to work against the clock to ensure that there are proper regulations set in place to govern the blockchain industry to allow it to flourish in this digital age.

Basic blockchain working principle

Blockchain networks are purely decentralized. Therefore, they work on a Person-to-person (P2P) governance model. As such, the effect of external pressures is greatly reduced.

Furthermore, blockchain networks use Distributed Ledger Technology (DLT) to facilitate and record transactions and thus ensuring that the transactions are secure.

Lastly, blockchain networks require the creation of a token for use as a mode of payment during transactions within the network. These tokens are then assigned real-life value by linking them to fiat currencies.

For instance, a company could create a blockchain network called ‘Busses’ and create a token called ‘BUSS’ that will be used for transactions within the blockchain system. One ‘BUSS’ token could be equal to $0.5 at the start (when it is first introduced to users). As the adoption of this token rises and the ‘Busses blockchain’ network continues becoming popular, the value of ‘BUSS’ could increase.

Blockchain governance framework

Blockchain technology is rapidly revamping the traditional regulation models to make them more cost-effective, relevant and accessible to businesses. Most importantly blockchain has fostered the creation of consensus algorithms which makes decision making in DTL more efficient.

Blockchain governance promotes the use of a decentralized governance framework across different business sectors. As a result, this makes it easy for businesses to access the Interconnected Trusted Network of Loyal Customers.

Nevertheless, the decentralized blockchain applications must look for ways in which they can complement the roles that the central authorities were playing in governing the different industry sectors.

Application of blockchain technology in businesses

Blockchain technology has greatly transformed the way businesses carry on with their day to day activities. There are four predominant domains/fields where blockchain has found lots of applications.

Financial sector

The first is the financial services sector, especially touching on bank transfers, accounting, and auditing. Traditionally, these sectors involved the use of so many intermediaries. However, several blockchain solutions that eliminate the need for intermediaries and thus reduced transaction costs have been invented.  Furthermore, there are blockchain solutions that allow for cross-border transactions without having to account for currency exchange fees as would be the norm with using the traditional models that depend on the fiat currencies.

Supply chain sector

Second is the supply chain sector. This has thrived to become the most successful non-financial blockchain application across the globe. The architecture of blockchain networks allows users/members to identify and track the possession of a certain item throughout the supply chain. Since the data fed into the blockchain network is immutable, cases of fraud are eliminated. It also reduces redundancy where every stakeholder would be required to update their database. The integration of IoT and blockchain has also allowed industries to be able to track various aspects of products on transit to ensure that the standards are not compromised. For example, a company dealing with the distribution of meat can install thermometers into the refrigerators being used to ferry the meat and integrate the feedback from those thermometers into a blockchain network for real-time tracking of the temperatures to ensure that the meat remains well refrigerated.

Market sector

Companies or businesses depend on trusted third parties such as Google, Amazon, Uber, Alibaba, among others to provide the platforms where transactions can be done. Blockchain networks eliminate the need of these third parties by introducing nodes throughout their systems that make it possible for individual members to transact directly without the need for an intermediary.

Social welfare

Through the use of smart contracts, blockchain users/members can manage the outcomes and also automate the process of concluding contracts. If a blockchain user enters into a smart contract, the funds can be held in an escrow account and released once the contract is marked as complete. This ensures that the customer feels safe and it also eliminates scams.

If the contract is not carried out according to the laid out specifications, the customer has all the rights of terminating the contract and he/she is guaranteed of getting his/her money back.

Impact of blockchain technology on business models

Business models have a lot to benefit from the blockchain technology. The most significant advantages of employing blockchain-based business models include:

  1. Reduced costs, which is attained by eliminating intermediaries.
  2. Increased transaction rates.
  3. Reduced redundancy and need for record-keeping since blockchain automatically stores immutable data.
  4. Enhanced traceability and verification of information.
  5. Blockchain also offers alternative approaches to how assets are authenticated.
  6. The transactions performed through a blockchain network are secure since they are protected by a layer of cryptographic encryption.
  7. Blockchain supports distributed autonomous organizations (DAOs), which makes it possible to eliminate the need for intermediaries since DAOs don’t rely on not central governments and they are operated by members through the use of smart contracts.
  8. Blockchain-based models make it possible to use cryptography and asset tokenization, which is the current trend. This further makes it easy to conduct fundraising. Contrary to using the traditional shares markets to raise capital, a business can easily raise funds through methods such as Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs) and Security Token Offerings (STOs).

Access to capital is essential for Fintech companies looking to embark on rapid growth. However, the available traditional fundraising methods have lots of drawbacks that hinder Fintech companies from realizing their full potential.

Most of the traditional fundraising methods rely on middlemen, who end up making the process too expensive. Also, the process involves a lot of paperwork, which ends up slowing down the whole process.

The rapid evolution being witnessed in the cryptocurrency and blockchain arena has stepped up the efforts of removing intermediaries from most business transactions. The invention of blockchain-based fundraising methods like Security Token Offerings (STOs) has completely revolutionized the way fintech startups and companies engage their customers in raising funds.

Security Token Offerings have stood out among the blockchain-based fundraising methods and offered great competition to methods such as the Initial public offerings which are quite expensive due to reliance on middlemen.

Security Token Offerings within the Fintech industry

Security Token Offerings (STOs) issue security tokens, which are digital financial products that experts and analysts believe could replace the way everything is conducted in the future. Despite being secure and highly liquid (making them easier to buy and sell), they have also provided a better opportunity for transparency and oversight among investors, businesses and regulators.

Security tokens have provided an avenue for digitizing almost anything in the world. A host of industries, among them the real estate industry, and the capital markets, among many others, have seized the opportunity by tokenizing their assets and offering them as security tokens.

Security tokens can easily be offered through smart contracts or STOs.

While STOs allow the Fintech startups and companies to net serious investors, the investors also benefit since the STOs makes it easier for them to monitor the performance of their portfolios. STOs are also easily regulated since the security tokens have an added layer that makes them able to comply with regulations.

Investors who purchase security tokens through STOs are entitled to a given stake, voting entitlements or dividends in the company.

Some of the STOs that have stolen the show recently include that of AssetBlock, a real estate investment firm that has embarked on tokenizing about $60 million worth of exclusive hotels in partnership with a luxury hotel asset manager, for investors to cash in.

There is also another case in Manchester, UK, where a luxury residential development it tokenizing about $25 million worth of assets on Tezos blockchain, with a plan to tokenize over $600 million real estate within the United Kingdom.

Comparing STOs to other blockchain-based fundraising methods

STOs are among several other models for fundraising blockchain projects, among them Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs). Among the three, STOs have stood out after gaining prominence following the regulatory issues facing ICOs.

Initially, ICOs were the go-to fundraising option since they were very simple to orchestrate and required no regulations at all. However, scammers noticed the loophole and started issuing fake ICOs to milk vulnerable investors, thus making investors keep off from them or at least be very careful when participating in one.

The fall away of ICOs saw the invention of the IEOs, which are safer compared to the ICOs. However, most IEOs do not offer security tokens due to the strict restriction that goes with offering security tokens. In the US for example, if an IEO offers security tokens, the IEO should be issued through a registered/regulated securities exchange and the company behind the IEO should disclose adequate information about its business, the token sale as well as the terms of the token sale.

Therefore, though IEOs solved the issue of safety with ICOs, it hasn’t been able to attend to the need of the evolving trend among most Fintech companies to use security tokens instead of using utility tokens. Security tokens are best issued through STOs.

As a result, Fintech companies and startups are opting to run STOs even though they are more involving compared to the ICOs and IEOs. And since the STO landscape is persistently evolving, companies are forced to constantly conduct in-depth market research to thoroughly understand the anticipations of their target audience.

 

With blockchain security tokens garnering interest throughout the world, Autorité des Marchés Financiers (AMF), the French regulator has seen an opportunity that the rest of the European nations should not miss. The AMF recommends that the European nations should create a European digital lab or sandbox that should enable the nations to ease the legal regulations governing security tokens.

Security tokens are known to be the most regulated digital products in the cryptocurrency and blockchain industry. The reason being that the security tokens fall under securities, although they are digital tokens. Therefore, they are subject to the regulations that govern both the cryptocurrencies or digital assets and those that govern securities.

Other countries like China have also suggested allowing security token offerings under a sandbox mechanism.

AMF’s legal review on security tokens

The French regulator recognizes that security tokens have gained a lot of interest across the world. Both incumbents and blockchain ecosystems seem to gracefully embrace security tokens. The IMF looks at tokenization as an accepted step towards the automation of most financial/trade processes.

The French regulator explored two legal facets in its report on security tokens. The first facet deals with the issue and sale of the security tokens. The second deals with the inclusion of security tokens in investment funds.

Normally, there are no regulatory impediments when it comes to including security tokens as investment funds, either in France or any other European nation. The only thing that asset managers that deal with security tokens should do is to apply for a license with the AMF.

The main issue lies with the issue and sale of the security tokens, especially through Security Token Offerings (STOs). For the case of centralized Distributed Ledger Technology (DLT) platforms there are no challenges since the involved parties can comply with the already set licensing requirements.

However, when it comes to decentralized blockchain projects it is quite challenging for the token issuers and sellers since it is difficult to identify a manager. Concerning this, the AMF suggested an outlined a proposal where parties can list buy and sell orders without requiring the endorsement under the Markets in Financial Instruments Directive (2004/39/EC) (MiFID 2 Directive), which has been in effect since November 2007 among European Union nations.

AMF’s suggestion on the issue and sale of security tokens

Currently, the legislation of a security token issue and sale requires a central securities depository.

AMF suggests that the creation of a sandbox or digital lab would allow regulators in the various counties in the European Union to wave certain regulatory requirements. However, it suggests that this should be done as a trade-off.

According to the AMF’s suggestion, the applicant can only be given a waiver or exemption if they are compliant with key regulatory ethics giving the regulators a higher oversight role.

Earlier on, the AMF had released a working document that sought to inspire the European Commission to create a European digital lab that can deal with the financial services around security tokens.

The French regulator is set to release several other papers in support of its security token research in the coming days or months. Most importantly, the regulator recommends that the use of intermediaries in an age where blockchain technology is available is outdated. The AMF would, therefore, like to see the use of more technologically oriented approaches which gives public adoption of blockchain technology a green light.

On 28th January 2020, Singapore enacted the Singapore Payment Service Act (PSA), creating a legal framework to govern payment systems and Payment service providers. Payment Service providers, including exchanges and platforms dealing with cryptocurrencies or digital payment token providers, must obtain licenses from the Monetary Authority of Singapore (MAS) to operate in Singapore.

The PSA will ensure that the FinTech industry, which is already well established in Singapore due to the favorable conditions, is streamlined.

Businesses categorized as payment services according to the PSA

According to the PSA, the following services are categorized as payment services:

  1. Account issuance services – These include businesses that offer services like issuance of payment accounts, or related to operations that required operating a payment account. This could include an e-wallet or a non-bank issued credit card.
  2. Domestic money transfer services – These include businesses that offer services that provide fund transfer services in Singapore. This could include payment kiosk or payment gateway services.
  3. Cross‑border money transfer services – These include businesses that offer services that provide for inbound and outbound fund transfer remittance services in Singapore.
  4. Merchant acquisition services – This applies where a service provider accepts and processes payment transactions for a merchant. This could include the operation of online payment gateways or the provision of point-of-sale terminals.
  5. E-money issuance services – These include businesses that offer services that allow for the issuance of e-money in Singapore so that users can pay merchants or transfer e-money to other individuals. Examples of e-money include money stored in e-wallets.
  6. Digital payment token services – These include businesses that offer services that provide for the buying or selling of digital payment tokens (e.g. cryptocurrencies), or provide a platform which facilitates the exchange of such digital payment tokens in Singapore.
  7. Money‑changing service – This applies to businesses that deal with the buying or selling of foreign currency notes in Singapore. This would include money changers that profit from the exchange of physical currency notes.

Licenses to apply for

To start a business that offers any of the above seven services, one must apply for one of the following licenses with the Monetary Authority of Singapore (MAS) depending on the scope of the business:

  1. Money-changing license – if the business intends to carry out money changing services only.
  2. Standard payment institution (SPI) license – if the business intends to offer payment services specified in the following thresholds (as stipulated under section 6 (5) of the Act):
      • Average monthly transactions of S$6m for two or more activity types
      • Average monthly transactions of S$3m for any activity type
      • Daily outstanding E-money float of S$5m
  1. Major payment institution license – if the business intends to offer payment services without being subject to the above-specified thresholds.

It is worth noting that even the already running businesses had to apply for new licenses or else be considered as operating illegally without any license and they can be charged with an offense.

Requirements for applying for a license

To apply for a PSI license, one must:

  1. Have a company registered in Singapore or overseas and have a permanent business place or registered office in Singapore.
  2. Have at least one executive director who is a permanent resident of Singapore or at least a Singapore citizen.
  3. Have at least one executive director who holds a Singapore Employment Pass.
  4. Have at least one non-executive director who is a permanent resident of Singapore or at least a Singapore citizen.
  5. Fulfill the prescribed operational and financial criteria.
  6. Have a minimum base capital of at least S$100,000.

In addition to the above-mentioned requirements, the MAS also takes into account other factors like the track record of the applicant, experience, qualifications, the ability to comply with the regulations under the PAS and also the financial condition of the applicant.

License application fee

All license applicants are required to pay a nonrefundable license application fee corresponding to the type of license they are applying for.

  1. Applying for a Money-Changing License costs S$500
  2. Applying for a Standard Payment Institution License costs S$1000 to S$5500 depending on the threshold.
  3. Applying for a Major Payment Institution License costs S$1500 to S$8000.

In addition to the application fee, the applicant must also be ready to pay an annual license fee plus other applicable fees depending on the chosen license.

Issues that can result in the cancelation of the license

License holders can lose their license if:

  • They do not start the stated business within 6 months upon receipt of the license.
  • They stop offering payment services for 6 months.
  • They do not make any payments within 6 months.
  • If the business no longer offers services related to the categories stated in the PSA.

PSA regulations governing controllers and directors of payment service providers

In addition to setting a new presence in Licensing of Payment services, the Payment Service Act (PSA) also sets some restrictions for the directors and controllers who intend to control at least 20% of the service provider businesses.

According to the PSA, a 20% controller in a service provider business is a single person or a person together with other associates that:

  • Owns at least 20% in shares of the company/businesses.
  • Can control at least 20% of the votes of the company/business.

However, to become a 20% controller of the company, the said individual must first apply with the MAS. Then, according to the guidelines of MAS, the authority can approve or reject the applications. Upon approval to become a 20% controller, the MAS may also impose other restrictions on the individual.

Reasons why MAS could refuse an application to become a 20% controller

  1. If the person has been earlier convicted of dishonesty and fraudulent offense in Singapore or elsewhere.
  2. If the person is declared bankrupt in Singapore or elsewhere.
  3. If there are complaints about the individual about unsettled debts.
  4. If the person has been a previous director of a financial institution that has been accused in court in Singapore or elsewhere and its license revoked.

Penalties for contravening the rules and restrictions on control over companies

PSA has set harsh penalties for individuals found contravening the rules set aside for the 20% controllers.

The penalties could include fines of between S$250 000 and S$25 000 per day or imprisonment for a term of up to 3 years for unlawful control of a payment service provider.

Need help with registering for a PSA license?

Gravitas International sister company, MT Chambers LLC, which is a leading Singaporean law firm with an international reach can assist you in the following:

  • Preparing and submitting a PSA license application to MAS to obtain the appropriate license to be allowed to operate in Singapore.
  • Drafting and/or updating current compliance policies and procedures, including AML/KYC procedures to meet new regulatory requirements.
  • Conducting ongoing compliance support that includes assisting with regulatory filings, conducting periodic monitoring and reviewing and amending internal controls.
  • Conducting an internal audit to review the Company’s preparedness to adhere to new PSA regulations.

The MT Chambers LLC is one of the 65 law firms that have been handpicked for a pilot phase program for the new Payment Services Act (PSA) known as the Singapore Academy of Law’s of Payment Regulatory Evaluation Program (PREP).