Cryptocurrency Funds and Initial Coin Offerings

Open up any newspaper or online news source, and you’re bound to see articles and information about cryptocurrencies such as Bitcoin, Ethereum, and Ripple, just to name a few. Government agencies wonder how to effectively regulate buying, selling, and trading of cryptocurrencies, while exchanges struggle with the challenge of cybersecurity where cryptocurrencies are concerned. Still, crypto has gained a foothold over the past several years that means it’s not going anywhere anytime soon. 

What is Cryptocurrency?

Cryptocurrency, or crypto, is simply a digital form of currency. The creation of crypto, or generation of units of currency, are regulated via encryption techniques, as is the transfer of funds. What’s different about crypto, though, is that it is not federally- or central bank-backed, so it doesn’t have the inherent value that we see in traditional currency or commodities such as gold and silver.

This lack of inherent value makes crypto seem like a rather uncertain and risky investment. Despite these risks, we’ve seen the growth and acceptance of cryptocurrencies such as Bitcoin and Ethereum in several markets. With this acceptance comes the increasing perception of value, and an increasing interest from investors. 

What is Blockchain Technology?

Blockchain technology is an incorruptible digital register of economic transactions. Blockchain was originally created to record Bitcoin transactions, but can digitally register virtually anything of value. Because of this, the technological community is now seeing many other potential uses for it.

If you have a hard time wrapping your head around blockchain technology, think about a common spreadsheet, duplicated hundreds or thousands of times across a vast network of single computers. Now imagine that this network will regularly update the spreadsheet in real time as transactions occur. That is blockchain technology. And the advantages are many:

• Continual reconciliation in real time;
• Database isn’t stored in one single location, meaning records are completely transparent and easily verifiable;
• With no central location for data, there is much less risk of corruption or hacking;
• Data is accessible to anyone at any time.

Who Uses Cryptocurrency?

Younger tech-savvy individuals are currently the largest population interested in Bitcoin and other cryptocurrencies, largely because they understand the complexities that come with owning, using, and trading these currencies. As cryptocurrencies grow and new coins or tokens are offered, we are also seeing a growing opportunity for programmers to create applications to assist in making cryptos easier to purchase, sell, trade, and use.

The use of cryptocurrencies is complex, and it is this complexity that scares away many potential users. Still, the growth is solid and we’ll continue to see increasing value as more and more individuals and businesses integrate crypto into their financial lives. 

Cryptocurrency Applications

In the realm of global finance, possible crypto applications are truly endless. There are astonishing amounts of financial tech startups being created on a daily basis, and many large banks are also starting to become interested in how digital currency works and what they might be able to do with it. One of the largest benefits to crypto is the ability to trade between two parties without the need for a third party to get involved. With the globalization of business today, crypto fills the need for an easily-exchangeable currency. 

What is a Cryptocurrency ICO?

When a cryptocurrency is created and launched, it generally happens through an ICO or initial coin offering. The new cryptocurrency offers the investor units of the new crypto or crypto-token in exchange for Bitcoin, Ethereum, or another already-established cryptocurrency. In essence, the investor trades already-established crypto for “new” crypto in the hopes that it will grow and increase in value. It’s common today for the development of new cryptocurrencies to be funded through the use of an ICO. 

What’s Involved in Launching a New Cryptocurrency?

Frankly speaking, launching a new cryptocurrency is risky and complicated. Having said that, if you do things correctly from the beginning, you can expect a successful outcome. There are many private funds now investing in cryptocurrencies and their derivatives with new funds appearing on a weekly basis. And while the legalities and regulations surrounding crypto and blockchain-based financial products are evolving, they’re being outpaced by the growth of the crypto itself. Consider that launching a new cryptocurrency ICO involves banking, trade, privacy, security, investment management, and tax considerations. These often-overlapping segments are all equally important, as is a rock-solid direction and management of your ICO project. 

How Gouchev Law Can Help You

The team at Gouchev Law can assist you in launching funds in the digital currency field. We know that each manager’s cryptocurrency strategy is, of course, unique, and we’ll strive to create a customized plan that will make the most of your ICO. We will assist you through all aspects of fund formation, paying special attention to newly-evolving regulations and legalities. We can help you:

• Create tech-savvy documentation including private placement memoranda, limited partnership agreements, and subscription agreements;
• Review your marketing materials to ensure compliance with securities regulations;
• Build effective crypto and blockchain-dependent investment strategies;
• Assist with capital-raising arrangements such as third-party fundraising and crowdfunding;
• Ensure that all legal AML and FCPA compliance regulations are met when creating a cryptocurrency fund;
• Assist with proper fund structure including manager compensation, liquidity terms, risk disclosures, side letters, and other concerns unique to cryptocurrency offerings’
• Provide constant updates and support for regulatory developments from the SEC and CFTC regarding existing cryptocurrencies, new ICOs, and cryptocurrency derivatives;
• Provide continuous support in addressing regulatory challenges including whether ICOs are considered securities under U.S. federal and state law;
• Assist fund managers with building their key team in preparation for the ICO;
• Assist fund managers in finding crypto-savvy administrative, brokerage, and audit service providers;
• Guide fund managers when their crypto derivatives or other blockchain-based products come under federal commodities futures, and when coin trades may be regulated as securities exchanges.

Gouchev Law is one-stop shopping for the cryptocurrency-savvy professional seeking to increase their market share while protecting themselves legally. We’ll guide you through each step of the way to help you gain long-term success whether you’re an investor or seek to start up new cryptocurrency funds. We’ll assemble a team – your team – tailored to your cryptocurrency goals.