Law n° 1.491 dated June 23rd, 2020 relating to token offerings (the “Law“), is part of a continued government approach to reforming digital laws. The purpose of this law is to allow fundraising carried out via a shared digital recording device (for example, the Blockchain technology) leading to an offering of tokens, counterpart of allocation of said funds by potential investors. When the funds raised correspond to the amount initially planned by the issuer of the offer and relates to the overall projected financing, the tokens thus issued will allow their holder either to receive a portion of the profits generated by the issuing company, or use the tokens to use the company’s service(s).
It should be noted, as a preliminary point, that the Law has as a corollary law n ° 1.383 dated August 2nd, 2011 for a digital Principality, as amended, which provided legal definitions of many terms, such as “digital asset”, “token” etc …
It is essential to be aware that a Sovereign Ordinance will define all the conditions for the application of the Law, which will be incorporated in a new note from us to replace the present one.
1 – Token offering mecanism
The Law provides that any offering of tokens is a proposal to subscribe to these tokens, whatever its form, and that this offer can be private or public, being specified that in the latter case, it cannot relate to tokens with the characteristics of financial instruments. The issuer of said token offering must determine the nature of the token to be issued, all the rights relating thereto, as well as the public or private nature of this issuance.
Issuance of an offering of tokens is subject to obtaining a prior administrative authorization, a “certificate”, issued by the Minister of State, after a motivated opinion of a commission responsible for examining said authorization requests (the “Commission“). The examination carried out by the Commission covers all the documents constituting the certificate request, in particular a document intended for information of potential subscribers, including information on the issuing company, the detailed presentation of the project, the details of the token offering and the risks related to said offering (the “Information Document”). The Law provides that the content of the Information Document must be accurate, clear and not misleading.
It should be noted that under the terms of the Law, only a legal entity registered in Monaco can make an offer of tokens. The Law provides for some specific obligations for this issuer:
– It must propose means to safeguard the funds collected with the offering, as well as monitoring their use in accordance with the project presented in the certificate request;
– The funds collected within the framework of the offering are placed in escrow as from the issuance of the tokens and throughout the duration of the transaction, on a bank account specially dedicated to the offering and located in the territory of the Principality.
In addition to these conditions, the issuance of token offerings must comply with a set of practical modalities, such as the fact that any offer must be made through a digital platform authorized by the Minister of State, the Information Document must be made available to subscribers by the issuer no later than the day before the start of the token offering or that subscribers are informed of the results of the token offering and, where applicable, the dedicated online service allowing the exchange of tokens etc …
2 – Token offering control
The control relating to the authorization granted to issue tokens offerings is exercised by agents of the Department of Economic Expansion (“Direction de l’Expansion Economique”), with the assistance of all experts bound by professional secrecy. Audit reports are referred to the Minister of State by the Department of Economic Expansion and the Minister of State must forward them to the Commission, which will follow-up on the procedure, whether there is a sanction in the event of breaches of the above-mentioned obligations, or not.
Any failure to comply with the obligations provided for by the Law will be subject to various sanctions, both administrative (suspension or revocation of the administrative authorization under certain conditions, etc.) and criminal (fines, imprisonment under certain conditions, etc.).
 Any request for a certificate can also be made by a company under incorporation process in the Principality and any offering duly authorized is therefore subject to a publication.
 The Law provides that in the event of revocation of the administrative authorization (certificate), abandon of the investment project or when the minimum amount relating to the project is not reached, the funds in escrow are returned to the subscribers.
 The Law expressly provides that any new fact likely to have a significant influence on the investment decision of any subscriber and which occurs after the administrative authorization has been granted and before the closing of the offer, is subject to a modification authorization request.