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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
The Central Bank issued a public notice in 2019 and this notice made ICOs/token sales illegal. To-date, the only legal tender recognised is Tanzania Shillings. Other foreign currencies are traded by licensed institutions in the country in line with foreign exchange regulations where the currencies could be issued and redeemed in the country of issuance as a legal tender.
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
They are not regulated.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins
Yes, the Public Notice issued in 2019 clearly cautioned anyone to refrain from trading, marketing, or using virtual currency as they were not legally authorised in Tanzania.
Obligations and requirements to issue token/coins
Not regulated.
Classification of token/coins in the jurisdiction
They are unregulated, thus under no circumstance is anyone supposed to use them.
Presence of a duty to publish a prospectus bevor offering token/coins to investors
N/A.
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
N/A.
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
N/A.
Additional comments regarding the economic situation for ICOs/token sales or what companies must be aware of in this business area
N/A.