Initial Exchange Offering (IEO) – A Long term alternative to ICO?
Initial coin offering is a way to raise money by creating a cryptocurrency linked to a business idea, such as a new way to pay for babysitting between parents and babysitters, let’s call this Sitcoin.
How does an ICO work?
The process to offer an ICO would be to create a document detailing how the whole process would work, this is normally called a white paper which explains the idea and how and why it is a great idea to invest in. Based on this document you ask people to send you money usually bitcoin or ether and you give them some Sitcoin in return. The expectation is that the idea will be successful and Sitcoin will be in great demand, therefore raising its value.
The issue with ICO’s was that they were mostly fake or fraudulent, and never resulted in anything ever happening.
What is an IEO (Initial Exchange offering)
An IEO is the sale of a cryptocurrency which is held on an exchange. The main difference between an IEO and ICO is that in an IEO the exchange team reviews and audits the technicalities of the project and the attractiveness of the idea and its potential, only if they are sure about the viability of the project is when they would announce the IEO.
This means that IEO’s are a more secure and safer way to invest in cryptocurrency projects.
The IEO service is only being offered by a few exchanges currently such as Binance, EXMO, Okcoin and GBE.
Tax Issues when dealing with Cryptoassets
Buying and selling crypto assets can create certain tax implications. With rapid changes in the crypto-asset industry, the rules surrounding the valuing and taxing of these assets are also constantly changing. The terminology within this industry can also get complicated, it is therefore advised to find a suitable personal tax accountant who has expertise working within the industry to avoid any confusion. In order to understand the potential tax concerns, it is important to understand the definition of crypto assets or cryptocurrency as they are also called.
Crypto assets are a secure digital representation of a value or contractual rights, which are secured using cryptographical measures, these have the functionality of being transferred, stored or traded electronically. The taxation of a crypto asset is therefore dependent on its use and not its definition, the tax treatment will also depend on the type of cryptocurrency, Exchange tokens, Utility tokens or Security tokens. The complication around the taxation of this can get even more complicated with constant changes, an expert tax accountant who has experience working with such matters can simplify the whole process.
Generally, individuals who hold crypto assets do so for the purpose of capital appreciation, if so they will be liable to capital gains tax on any gains they make on the sale of the asset. If the crypto assets are given to an individual from their employer they will have to pay Income tax and National Insurance on the crypto assets which they receive.
Clear House Accountants are specialist Accountants in London who have experience in working with cryptocurrency-based companies, they also understand the personal tax implications which arise on the gains of cryptocurrency, if you are an investor. We have helped businesses develop their white papers for ICO’s or review documents for IEO’s in the UK. Having an accountant by your side through the process of an IEO or ICO can make a huge difference between the success or failure of your offering.
You might also want to read: