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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
ICOs are being increasingly used for financing new projects and companies, which – considering that unless the tokens qualify as security or e-money, they are not regulated – has been a popular tool for these new players.
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
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) rules regarding the issue, representation, and transmission of securities; (ii) rules relating to the trading of financial instruments; (iii) requirements on the quality of information; and (iv) 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.
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