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Initial Coin Offering in Hong Kong

Initial Coin Offering in Hong Kong

Bitcoin’s popularity has also inspired the rise of other cryptocurrencies, which in turn lead to the development of the initial coin offering in Hong Kong, or ICOs. This is essentially an online fundraising activity that is used to fund a specific blockchain project.

The ICO project may have various degrees of success, however, investors are advised to be informed and wary of potential scams. Our Hong Kong company formation agents describe the process of developing an ICO.

ICO, a fundraising mechanism

The initial coin offering takes place when an operator issued digital coins in order to fund a particular project, related to blockchain technology. The author of the funding proposal will describe the right of the individuals who purchase coins via the ICO in a document called the “white-paper” which is explicitly published online.

The white paper will include essential information, among which:

  1. the goal of the project: this is the outline of the problem that will be solved by the proposed blockchain or cryptocurrency solution;
  2. technical description: a breakdown of the project, which will help show how it will help solve the aforementioned problem;
  3. the market analysis: information on how the proposed solution will be received or will fit in the existing marketplace;
  4. budget: a well-received component, allowing investors to find out how the project will use the resources gained from the ICO.

Understandably, the initial coin offer white paper will also include a description of the token release, market issues, and how the investors, the ones participating in the ICO and essentially funding the project, will benefit from this investment.

The investor’s benefits often come in the form of a token redeeming. however, it is also useful to provide information as to the steps that will be taken should the ICO fail to reach its funding objective.

Despite the fact that the United States remain one of the leading markets for ICO launches, Hong Kong is also a location where investors will find it convenient to engage in this process.

Back in 2017, the Securities and Futures Commission issued a statement on ICOs, highlighting the fact that the number of initial coin offerings had grown, both in Hong Kong and in many other locations.

Investors can have several benefits from entering into an ICO, such as the right to access the new blockchain platform that will be developed as a result of the fund gathering. Moreover, the ICO can come up with different business propositions, not just access to platforms or software.

The ICO is accompanied by the so-called “white paper” for transparency reasons and so that investors may make a documented decision. A successful ICO project will depend on reach, credibility and the low-risk of the cryptocurrency trading platform.

ICO regulation in Hong Kong

The recent popularity of the initial coin offerings has brought this practice to the attention of the Securities and Futures Commission in Hong Kong. The digital coins are not usually perceived as “securities”, however, under certain circumstances, they may have this quality and thus they will be subject to the securities laws applicable in Hong Kong.

Those who engage in various ICO activities are advised to seek legal counseling in order to determine what regulatory requirements apply to a particular case.

Our agents who specialize in company registration in Hong Kong can give you further details on the provisions of the Securities and Futures Commission.

How to set up a company in Hong Kong that will launch an ICO

Company formation in Hong Kong is a straightforward process and it is the first stage, the one after which the company involved in the development of the token will be able to launch the ICO.

Investors will thus first incorporate the company and then use that company as the promoter of the coin launch. the newly incorporated legal entity will be the one involved in the development of the digital currency in most cases.

Opening a company in Hong Kong that will be used for the ICO is the natural step as foreign investors will enjoy the low taxation regime and other convenient business regulations that are available for companies across many different business fields.

Setting up a company in Hong Kong means following a set of mandatory steps:

  • – choose the type of company: the most common business form will be the limited liability company, suitable for the purpose of launching an ICO in Hong Kong;
  • – choose the name of the company: the name must be unique and we advise investors to prepare several options that will be verified for availability;
  • – prepare and submit the documents: these are the incorporation form, the articles of association, and a notice to the Business Registration Office;
  • – confirm the registration: when the company is successfully registered, the Companies Registry will issue the Certificate of Incorporation and the Business Registration Certificate.

When setting up a company in Hong Kong that is involved in dealing with digital currencies there is no specific cryptocurrency law, however, registrations with relevant authorities may be required.

The general taxes for companies in Hong Kong are the following:

  • – 8.25% corporate income tax on the first HKD 2 million in assessable profits;
  • – 16.5% corporate income tax over the HKD 2 million threshold of assessable profits;
  • – unincorporated businesses are subject to lower rates, of 7.5% and 15%.

New regulatory requirements may be implemented for companies dealing with digital currencies, as well as those operating digital currency exchanges.

As the relevant laws are updated, investors who have already opened a company and have started operating following the ICO launch can receive updated information from our company formation experts.

Our team is able to provide continuous assistance to those who wish to set up a company in Hong Kong, and later use this legal entity for an ICO launch.

Please contact our Hong Kong company formation experts for assistance in initial coin offerings or if you have other questions related to doing business in Hong Kong.