Legal Brief 2: is my cryptocurrency business exempt from SEC/CFTC registration if I organize offshore?

The Securities and Exchange Commission and the Commodities Futures Trading Commission are the two main federal agencies you will have to deal with if you are involved in issuing, trading or facilitating trading, exchanging, selling, or originating cryptocurrencies (ICOs) or promoting any of the above.

You may have heard that places like Malta, the Isle of Man, and other places are "crypto-friendly" jurisdictions and that, merely by organizing your business there, you are permanently safe from the rules of the SEC and the CFTC.

Unfortunately, this is not the case. If your securities or commodities (virtually all cryptocurrencies are either or both) are available to any American, you must comply with the rules of the SEC and CFTC. Even if you have tools in place to screen out Americans, you are not immune to these regulations. If an American (or someone living in the United States) is able to access your token even through deception, for example by submitting a fake non-American identity document that tricks your verification system, your entire offering is subject to SEC and CFTC regulation.

It is cheaper to comply with the law than it is to try to avoid it.

Legal Briefs are short, plain interpretations of law. They are written by a licensed attorney. They are not intended as legal advice and do not form an attorney-client relationship with any person.