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The emergence of tokenized assets in the financial industry have created a pathway for crypto projects to establish themselves. In definition, token is a digital representation of a certain unit that accomplishes different tasks.
Moreover, developers today leverage the capabilities of blockchain technology, which accelerate the creation of tokenized assets. We have seen a big buzz around initial coin offerings (ICO) in 2017 where unregulated tokens had been issued and distributed.
Just recently we’ve seen a wave of lawsuits and charges by the SEC, such as cases with XRP, Telegram, or Kik. Now more and more blockchain companies are seeking ways to issue, sell and distribute their cryptocurrencies in a fully compliant manner.
In December 2020 LCX.com was granted 8 crypto-related licenses in Europe to enable regulated and compliant token offerings. For this, LCX has built a one-stop-solution combining a legal tool kit and an advanced blockchain platform to manage and verify investors, meet international compliance requirements, securely accept payments and automatically distribute tokens.
Token Sale Definition: A compliant token sale is the issuance, distribution and sale of a predefined number of crypto tokens (utility token, governance tokens, or security tokens) to the public, typically in exchange for major cryptocurrencies, mainly Bitcoin (BTC) or Ethereum (ETH).
Utility tokens and non-security tokens fall under the larger token bracket and majorly open a gateway to unlimited products that the issuing ecosystem plans to offer. LCX’s token sale platform enables token sales of all cryptocurrency categories, whether it’s a utility token, governance token, security token or other.
LCX is a registered Trusted Technology Service Provider in accordance with the Liechtenstein Blockchain Laws and offers a variety of regulated crypto services. Liechtenstein is a highly reputable country, a financial power-house with the highest GDP per capita in the world and part of the European Economic Area.
Let us explain the most relevant registered roles where LCX gained approvals. As a so-called Token Generator, LCX develops the smart contract of cryptocurrency for blockchain projects.
As an Identity Service Provider, LCX is enabling blockchain projects to verify and manage their investors, handling all know-your-customer (KYC), anti-money-laundry (AML) and know-your-transaction (KYT) requirements. For token sales of non-security tokens, LCX can be the legal issuer of the token as well.
This is called “Token Issuer on behalf of clients” and enables companies located anywhere in the world to issue their token via LCX.com in a fully compliant manner.
As “Exchange Service Provider” LCX could then also list these tokens at the LCX Exchange and will publish reliable and compliance price reference data as price oracles, which is called “Price Service Provider”. And lastly as a “Key Depositary” and “Token Depositary” LCX is now regulated to provide crypto custody solutions.
At the core of LCX’s infrastructure is their native LCX Token. Aside from having a utility token, LCX supports security token offering (STO) activities on new blockchain-based projects.
To manage token sales in a fully compliant manner LCX has built an AI-powered crypto compliance suite from the ground up. The system is natively integrated into LCX’s blockchain platform and runs as the backend of all services.
KYC is one of the most effective compliance procedures whereby LCX gathers the identity details of a user. The method is quite common in traditional financial systems whenever users want to open bank accounts and are required to upload their identity details.
The process comprises a simple yet effective way of solving illicit transactions on corruption or even funding radical groups. Among the information that LCX requires to complete the KYC process include details like names and email addresses.
In case there's a bigger chance that an individual can participate in illegitimate behaviors that can affect the whole ecosystem and its users, he/she is closely monitored to ensure nothing suspicious occurs.
Money laundering is not a new phenomenon in the financial industry today. Anti-money laundering usually entails laws and regulations that seek to disclose honest income earners who receive illegal money in the background.
The criminals work individually or in organized groups as they leverage their legitimate businesses to move dirty money. Therefore, AML procedures look into criminal undertakings like embezzlement of public funds, trading illegal goods, or tax evasion crimes. It further finds out the tactics employed to cover up the crimes. LCX enforces this procedure to flag down any shady financial movements.
KYT is the third type of compliance suit by LCX, inspecting every detail relating to a transaction. Furthermore, the platform scrutinizes various forms of financial transactions from domestic to cross-border remittances.
Since it is a digital age, KYT functions mainly on online-based transactions, which assume a cashless procedure. The method detects possible occurrences of fraud or any financial-related crimes.
2021 might be the turning point of tokenized assets and digital securities powered by blockchain technology. Some early adopters already issued tokenized equity or tokenized bonds as registered Security Token Offerings (STO). For example we have seen INX token which was registered as initial public offering (IPO) but issued as a crypto-token, trying to raise more than 100 million USD.
The Security and Exchanges Commission terms security as an instrument that investors commit their funds to for-profit maximization. According to insider information the legal setup and registration process for the INX token sale costs at least 7 million USD.
LCX.com has chosen a different approach and set up the structure in a cost -efficient manner, highly scalable and ready for growth. They estimate to dramatically reduce the costs of issuing security tokens to a small percentage of the total sale amount.
Unlike ICOs, which are normally unregulated, STOs follow every compliance regulation set, thus encouraging an honest investment venture. Managing the security token on the blockchain network is later handled through real-time-cap-table, token production, auditing protocols, and smart wallet whitelisting.
Therefore, LCX provides access to tokenized assets while attracting new users to secure adequate returns on investments.
Tokenization of digital assets revolves around three factors, i.e., smart contract advancements, blockchain technology, and regulation protocols. Below are highlights of the benefits that tokenized digital assets bring to the table.
The exchange of digital tokens removes the need for intermediaries who take part in validating transactional data. It also saves a user's money that he/she would use as charges for third-party engagements.
Transactional operations with tokenized assets on the blockchain network normally take a shorter completion period. Additionally, it builds a positive record on the token issuer, making them a worthy investment destination in the financial market.
Digital tokens operate on automated systems like smart contracts. The smart codes automatically execute transactions per what the parties set.
Since the tokenized asset runs on blockchain technology, every transaction detail related to the token is visible on a public ledger. As a result, blockchains guarantee transparency while mitigating manipulation cases or instances of double-spending.
All the regulation procedures LCX implements ensure users feel comfortable trading on a trusted ecosystem.
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