Tokenization is a rapidly developing area in the financial industry that enables investment in the form of digital tokens backed by real-world assets. In the case of Private Listing Tokenization, it is the process of attaching value to utility or hybrid tokens like cryptocurrencies.
2017 saw a huge rise in Initial Coin Offerings (ICOs). This created a new asset class that has challenged the traditional makeup of financial markets. It presented a new pathway for raising funds. However, as the technology of blockchain developed rapidly, the regulatory framework has not been able to keep pace. As such, we saw plenty of ICOs associated with scandal and fraud, which has naturally caused uncertainty from issuers and shareholders.
With ICOs in decline, 2018 has been called by many as the year of the shift to STOs. Security tokens are regulated and, in most cases, backed by underlying assets. Then the world moved to IEO. Similar to ICO, IEO offer tokens through an exchange partner, instead of being distributed to the contributors’ wallets directly through the project.
However, things got restructured in the industry towards the end of 2019. Efficient technologies become interested in blockchain technology, which led to traditional security service providers entering the market and tokenized assets becoming more attractive than others.
Private Listing Tokenization in Cyprus
The most feasible road to private listing tokenization in Cyprus is to incorporate a Cyprus limited liability company that will launch the project.
While the Cypriot Legislation provides many types of corporate vehicles, the Cyprus limited liability company is considered as the most suitable option. The company is an independent legal personality, and its shareholders have no personal liability for its debts and obligations further than the nominal value of their share participation. There are minimum requirements to set up a Cyprus company, such as having a registered office in the Republic of Cyprus, and the incorporation process is quick. It can become even faster by paying an additional fee.
Private Listing Tokenization Regulations in Cyprus
Cyprus is one of the most Blockchain/Crypto friendly jurisdictions in the world. An attestation to this is that it is home to the University of Nicosia. The first university in the world to accept the tuition fees in a Cryptocurrency and offer blockchain-related courses.
Cyprus offers a favorable tax regime, which includes several tax reliefs for companies incorporated by foreigners. For instance:
- the rate for corporation tax is the lowest in Europe, at 12.5% of the net profits;
- no withholding tax is collected from dividends originating from subsidiaries;
- dividends paid by a Cypriot company to non-Cyprus resident shareholders (individuals or corporations) are not subject to withholding tax;
- the legislation of Cyprus provides various reduced rates of VAT paid by companies and, in some cases, exemption from VAT.
- Cyprus has concluded some double taxation treaties with almost 60 countries, including Singapore, Russia, India, Ukraine, Canada, the USA, Ireland, etc.
In conclusion, many advantages can be derived from executing private listing tokenization of your utility or hybrid token from Cyprus. Especially since there is currently no specific regulation on the matter, and Cyprus’ favorable tax environment makes it one of the best jurisdictions to carry this out.