Understanding Initial Coin Offering

An Initial Coin Offering (ICO) is the cryptocurrency industry’s equivalent to an Initial Public Offering (IPO). ICOs act as a way to raise funds, where a company seeking to raise money to create a new coin, app, or service launches an ICO. Interested investors can purchase into the offering and receive a new Cryptocurrency Token issued by the company. This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project.

Benefits of ICO

  1. Liquidity

A common deterrent for people looking for new investment options is lack of liquidity. In many opportunities, capital is inaccessible for several years. With ICOs, not only do investors have high liquidity, the secondary market means that real-time pricing is based around the current value of the project.

  1. Decentralisation

ICOs can be available to everyone, particularly when the ICO accepts cryptocurrencies. The only requirement for most ICOs is that the contributor is able to transfer funds in time to buy.

  1. Openness

Not only do ICOs lets anyone invest, including contributors can invest at any time. This differs from traditional models of funding start-ups, where it is close to impossible to become an early investor unless you are in close contact with one of the founders.

Investing early is worthwhile, as contributors tend to pay less by avoiding premiums. To become an early investor, contributors just need to pay attention the upcoming ICOs and be ready to buy tokens soon after the launch.

  1. Variation in Cost

The chance to use ICOs to fund any project means tokens can vary greatly in value from start-up to start-up. This lowers risk while also increasing the opportunity to make a considerable profit. Plus, the ability to take in a large number of investors to contribute to multi-million-dollar ICO projects.

  1. Lower Competition

Many projects struggle to find funding through traditional methods, especially if they lack appeal for one reason or another. Sometimes, this is simply due to location (for instance, the project is based outside a main centre of wealth) or the type of offering, which is especially the case for non-profits. The simple funding procedures of ICOs allow potentially any project to receive funding.

  1. Invest Cryptocurrency Profits

Holders of Cryptocurrencies are often hesitant to make use of their wealth, as they would rather not turn it into ‘fiat’ and pay taxes on it. This means cryptocurrencies continue to accumulate value, but people are unable to make use of the wealth. ICOs are the perfect outlet.

More investors are understanding the benefits of ICOs better and are therefore are looking out for more projects to invest in. If you are seeking a way to fund your idea, bear in mind the key advantages for both your start-up as well as the investors when considering an ICO.

 How an Initial Coin Offering (ICO) Works

When a cryptocurrency start-up wants to raise money through ICO, it generally creates a whitepaper which outlines what the project is about, expectations to fulfil upon completion, how much money is needed, how many virtual tokens to be kept by the founders , what type of payments accepted, and the duration of the ICO campaign.

During the ICO campaign, it is very common for the founding team, enthusiasts and supporters of the project to buy some of the project’s coin with fiat or digital currency. These coins are referred to as tokens and are similar to shares of a company sold to investors in an IPO. If the money raised does not meet the minimum funds required by the firm, the money shall be refunded and the ICO is deemed unsuccessful. If the funding requirements are met within the specified timeframe, the money raised is used to pursue the goals of the project.

 Key Advantages of a Labuan Credit Token License

  • 100% foreign ownership, Malaysian local partner not required
  • 3% corporate tax on trading profit
  • NO Withholding Tax on Interest, Management Fee, Royalty Fee and Technical Fee
  • NO Foreign Exchange Controls
  • NO Stamp Duty
  • NO GST
  • NO Import Duty / Sales and Service Tax
  • NO Capital Gain Tax
  • NO Inheritance Tax
  • Ability to access to more than 70 Malaysia Tax Treaty partners
  • 50% tax reduction for expatriate professionals/managers’ salary
  • 100% tax exemption on director’s fees for foreign directors
  • NO tax on dividends to shareholders
  • 2-year multiple entry working visa (renewable) to stay in Malaysia – Optional

Labuan offers Credit Token License to legalise your utility ICO making it regulated and safer to operate without violation of any laws. Low tax rate and affordable operational costs including the similar time zone for Asia Pacific regions, positions Labuan as one of the most sought-after jurisdictions which complies with the Common Reporting System (CRS) including other international standards and regulations! Contact our QX Trust team of consultants at +60 3 9212 6940 or consultant@qx-trust.com for a complimentary consultancy.