Is Token Creation Legal? A Jurisdiction-Specific Guide for the US, EU, and UK

1. United States

• Securities Law Compliance (Howey Test)：
  • Security Tokens: Must register with the SEC or qualify for exemptions (Regulation D for accredited investors, Regulation A+ for public offerings up to $75M).
  • Utility Tokens: Avoid promising profits or centralized control (e.g., Filecoin’s SAFT framework survived SEC scrutiny).
  • Case Law:
    • SEC v. Ripple (2023): XRP sales to institutions deemed securities offerings, while retail sales exempted.
    • Telegram’s TON (2020): $1.7B ICO halted for unregistered securities offering.
• State-Level Regulations:
  • New York BitLicense: Required for any token-related business targeting NY residents (application fee $5,000,compliancecost$100,000).
  • Wyoming DAO Law: Allows decentralized autonomous organizations (DAOs) to issue tokens with limited liability.

2. European Union

• MiCA Regulation (Effective 2024):
  • Asset-Referenced Tokens (ARTs): Issuers must hold EU banking licenses and maintain 1:1 reserves (e.g., stablecoins).
  • Utility Tokens: Exempt from MiCA if non-transferable and used solely within a closed ecosystem.
  • Transition Period: Existing projects must comply by June 2026 or face fines up to €15M.
• National Variations:
  • Germany: BaFin requires a Crypto Custody License (§64y KWG) for wallets holding user tokens.
  • France: Optional AMF certification for utility tokens enhances investor trust.

3. United Kingdom

• FCA Regulatory Framework:
  • Financial Promotion Rules (2023): All token marketing must include risk warnings and avoid “misleading claims.”
  • Cryptoasset Register: Mandatory for firms offering custody or exchange services (application fee £2,000).
• Tax Implications:
  • Token creation may trigger Corporate Tax if deemed trading income; VAT exempt if classified as “investment.”

Compliance Checklist:

1. Legal Token Design:
   • Avoid profit-sharing mechanisms or centralized governance (to prevent security classification).
   • Use vesting schedules for team tokens (e.g., 4-year linear release).
2. KYC/AML Integration:
   • Implement Chainalysis or Elliptic for transaction monitoring.
   • Collect user ID for transactions over €1,000 (EU) or $3,000 (US).
3. Transparency Measures:
   • Publish audited smart contract code (e.g., CertiK or OpenZeppelin).
   • Disclose team identities and token allocation (≥20% held by founders may raise red flags).

Future Trends:

• US: Expected bipartisan stablecoin bill in 2024 may preempt state laws.
• EU: MiCA’s “travel rule” will mandate cross-border transaction data sharing.
• UK: Proposed “Digital Securities Sandbox” to test tokenized stocks and bonds.