Questions and Answers for Entities on Cryptoassets
1. Under what circumstances are Initial Coin Offerings (ICOs) and Cryptoassets subject to Portuguese law?
In the event that an ICO is addressed to investors residing in Portugal and the cryptoassets issued in the ICO are securities within the meaning of the Securities Code (SC), the relevant legislation at national and community level regarding public offerings of securities will apply.
Cryptoassets qualify as securities or financial instruments that have been issued or are being marketed in Portugal, are subject to a set of rules, which include, in particular and without prejudice to others: (i) the rules regarding the issue, representation and transmission of securities; (ii) the rules relating to the trading of financial instruments; (iii) requirements on the quality of information; (iv) and the market abuse regime.
2. Do all cryptoassets qualify as securities?
Not all cryptoassets qualify as securities since their classification depends on a case-by-base analysis.
The concept of security in Article 1 of the SC is open and broad. Under the terms of the CMVM, securities other than those listed are atypical securities, i.e. documents representing similar legal situations provided they are market tradeable (Article 1(g) of the SC).
A cryptoasset is a security whenever the following requirements are cumulatively met (which require case-by-case assessment):
• is a document representing one or more legal situations of a private and asset nature (that is, rights and duties);
• is comparable with typical securities, taking into account the legal situation(s) represented;
For the purposes of the comparability referred to above, it is necessary to consider including elements in the information made available (namely, in the so-called whitepaper), that may link the issuer to conducts that may result in the expectation of return for the investor, such as:
• Assigning the right to income (for example, if the cryptoasset provides for profit or interest); or
• The practice of acts by the issuer or related entity that are adequate to the increase in the value of the cryptoasset.
The documents relating to offers of cryptoassets that are not securities should refrain from using terms that could be confused with those commonly used in securities offerings (e.g. "investor", "investment", "secondary market" and "admission to trading").
3. Is it possible to set up a fund registered at the CMVM that invests directly in cryptoassets?
Yes, but the fund must be an investment undertaking in non-financial assets or a specialised alternative investment fund, with the applicable legal regimes. The need for an adequate identification of the investment policy, the definition of valuation rules and the management of the risk associated with the investment, are critical elements for registration at the CMVM.
4. What are the legal requirements for the establishment of a crypto exchange?
If the platform/exchange in question purports to transact a cryptoasset that qualifies as a security or financial instrument, this platform will need to register in advance with the CMVM in order to establish itself as a regulated market management entity, multilateral trading system or organised trading system and is subject to the respective regime provided for in the SC. The applicable registration dossier may be consulted
here.
