YouToken's Legal Trajectory
The future success of cryptocurrency is entirely intertwined with that of regulatory authorities. Any project that attempts to ignore these pressing, legal issues is on a straight and narrow path to failure. Thankfully, that's not the case for YouToken. We're well aware of the legal evolution going on right now with digital assets and we have every intention to cooperate with authorities on the matter. So here's a little introduction of our legal structure and it's plan for the future.
THE YOUTOKEN CONCEPT
The YouToken concept is based on the idea of establishing connections between entrepreneurs and investors. A key element of this connection is the funding of an entrepreneurs' initiatives with "ROI" expectations from the investors. Hence, both types of tokens on the YouToken marketplace (YTN and YTN_creatorname) may be considered "security tokens."
WHAT IS A SECURITY TOKEN?
Security Tokens represent shares of a business. In addition to that fact, the SEC recently announced that any token that cannot pass the Howey test should be considered as a security and fall under the 1934 Security Exchange Act.
The Howey test consists of the following:
- Is it an investment of money or assets?
- Is the investment of money or assets in a common enterprise?
- Is there an expectation of profits from the investment?
- Does any profit come from the efforts of a promoter or third party?
- The final factor of the Howey Test concerns whether any profit that comes from the investment is largely or wholly outside of the investor’s control. *
* If the profit is largely or wholly outside of the investor’s control, then the investment might be considered a security. If, however, the investor's own actions largely dictate whether an investment will be profitable, then that investment is probably not considered a security.
YOUTOKEN'S HYBRID LEGAL STRUCTURE
After the completion of the "Proof-of-Concept" stage and before the YouToken Marketplace reaches over $10 million in assets (whose securities are held by more than 500 owners to comply with regulation requirements) the YouToken team plans to establish a hybrid legal structure that includes:
- U.S. Legal Entity to comply with U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulations. (1934 and 1933 Security Exchange Acts and Regulation Crowdfunding)
- E.U. Legal Entity to comply with European Union regulations (We consider the registration under The Estonian Financial Supervision Authority)
- We are also considering registration under Asian jurisdictions such as Singapore, Hong Kong, etc.
Until the establishment of a hybrid legal structure, YouToken will follow the best crypto-industry practices of utility tokens crowdsale regulations.
* Citizens from USA, China, Canada, Singapore, Hong Kong, and Korea should review certain regulations from their countries governments before joining the YouToken platform.