Monthly Archives: November 2024

How (& Where) to set up a Web3 Gaming Business Offshore?

Are you looking to monetize a GameFi project ie a blockchain-based ecosystem that combines decentralized finance with online gaming?

 

Have you considered setting up “Offshore”?

 

Would you like expert guidance on How (& Where) to set up a Web3 Gaming Business Offshore?

 

Such games are typically play-to-earn ie they use their own cryptocurrencies and NFTs (Non Fungible Tokens) to incentivize potential players – In order to earn crypto tokens and NFTs in-game, participants have to complete various objectives and engage in contests against other participants.

 

Starting up your own GameFi enterprise typically necessitates the issuance of a native cryptocurrency token or an in-game NFT. These would be used as currency for game participants to earn and trade. With the game’s native token, gamers in the ecosystem will be able to acquire land, character skins, costumes, weapons, etc depending on the nature of the game.

 

Game Fi/Defi projects are increasingly capturing the attention of law makers. In the current regulatory environment, to be able to offer your own crypto token or NFT to game participants, you must ensure that you launch in such a way as to keep your enterprise within the relevant regulatory framework. As a starting point you’ll need to ensure that your Token/NFT wouldn’t be classified as a Security which would typically require one to obtain a Securities Dealer’s License or a Financial Services Provider License.

 

You’ll also need to consider the Crypto/VASP (Virtual Asset Service Provider) and Gambling regulations (if any?) of the country where you intend to incorporate. As a rule, a crypto license is needed if a platform offers any kind of crypto-to-fiat or fiat-to-crypto transactions. A Gambling/Gaming license may be required if the result of the proposed game can be determined by some form of randomness or chance.

 

The good news is that OCI specializes in incorporating Blockchain related startups and our in-house Lawyer can help map out a safe path enabling you to glide through the sea of regulation without running aground on an unseen reef! In short, we can supply the expert guidance you’ll need if you’re in learning about How (& Where) to set up a Web3 Gaming Business Offshore!

 

Crypto Token Launches

 

Are you looking to issue a Crypto Token or NFT as part of your game?

 

If so, there are various ways to Legally structure such an enterprise but the most common approach we see is to create a collective of legal entities including:

    1. A DAO Foundation +
    2. A Developer Company +
    3. A Holding Company +
    4. A Token Distribution/Issuance Company (Token Co) ie the Exchange intends to sell it owns native Token +
    5. A Management Company

 

(Check this Flowchart which maps out the inter-relations between the various players: https://www.dropbox.com/scl/fi/x6beptavr0xbai1q3nxfq/ICO-Legal-Structure-Typical-DIAGRAM.pdf.jpg?rlkey=cmjui85wfw85uq6unkznafyuy&st=11qu31zj&dl=0 )

 

DAO Foundation

 

In terms of roles the DAO Foundation can potentially do several things ie it can/would/could:

  • Engage/pay the Developer Co
  • Act as an Incubator fund for collecting seed Capital (eg privately introduced/early stage investors and/or DAO members could make donations to the Foundation and in return receive tokens or a SAFT ie a Simple Agreement for Future Tokens)
  • Own the Tokens as developed and or it could own/provide working capital to the Exchange Company (ie act as a/the Treasury)
  • It could be used to incentivize sweat equity (ie it could be used to gift and/or air drop tokens to high performing team members or to benefactors)

 

The Developer Company

 

The Developer Company would be engaged to do the IT/Tech work and would typically be owned by the Tech Members of/Coders for the Collective. This enables the software developers to be remunerated on a commercial basis for the work they do.

 

Public Facing Token Issuing Company

 

If you plan to develop/sell your own Coin or Token (ie a Token that could be publicly traded) then ideally (eg to minimise liability exposure to the rest of the Group) this function should be carried out by a stand-alone Company. This Company could be owned by the DAO Foundation and or by stage 2 Investors/founders collectively via a Holding Company.

 

Management Company

 

To ensure that the Founders get paid fairly for running the business (ideally before taking on substantial investors) the Founders should form their own Management Company. This Company would be engaged via contract by the Token Issuing Co to manage the day to day affairs of the business.

 

IP Holding Company

 

Sometimes we see the DAO Foundation form an IP Company so that the technology/IP can be sold separately later and/or protected from law suits. Where an IP Company is deployed typically it is owned by the DAO Foundation and it hires/engages the Developer Company.

 

Investors Company

 

Occasionally we see a Holding Company deployed to own the Exchange Co and or the Token Issuing Co. Typically post launch Commercial Investors (eg if/when you need to do a 2nd capital raise to fund expansion) would hold shares in this Company as would the Founders of the Enterprise.

 

There’s no one perfect way to structure a Crypto Token Enterprise. Every business is different. Moreover you don’t necessarily need to kick off with a menage of Companies – some can be “bolted on” later as the business grows. That said I/OCI can provide detailed guidance in this regard ie we can assist you to tailor a Legal structure designed to meet your particular goals/needs having regard to your budget, potential for legal exposure, location, growth aspirations and time frames.

 

Where to Incorporate?

 

The first thing you’ll need to decide is where to incorporate your web 3 EGaming Company Offshore (and then how to structure the entity).

 

If all you are looking to avoid having to go down the Licensing road and if tax minimisation (or ownership privacy) is a key consideration then you might want to think about incorporating your Gaming Company in one of the following jurisdictions as all can deliver a nil tax result and none of the these currently have in place activated VASP regs:

 

 

Cost there would be:

 

  • For a St Vincent Company, including incorporation, registered/agent office service and one year’s basic admin: $1,300. 2nd and subsequent years $990
  • For a Panama Company, including incorporation, registered/agent office service and one year’s basic admin: $1,500. 2nd and subsequent years $890
  • For a Samoa Company, including incorporation, registered/agent office service and one year’s basic admin:  $1,500. 2nd and subsequent years $990
  • For a Costa Rica Company, including incorporation, registered/agent office service and one year’s basic admin:  $2,600. 2nd and subsequent years $1,700

 

All of these countries are low regulation and thus historically have been very popular with Cryptocurrency/Blockchain related businesses.

 

Crypto Business License Options

 

Depending on your business model and particularly if you’re looking to attract a higher level of investor/client and or if you want to have Regulatory certainty moving forward (eg if you are looking to do an ICO or an ITO or launch some form of Exchange) you might think about applying for some form of Crypto License.

 

There are a number of Licenses you could potentially apply for “Offshore” for Crypto/Blockchain related Enterprises including:

 

 

The cost to incorporate and apply for a License for businesses of the kind described above typically ranges from $US 18,000 to $50,000 depending largely on which jurisdiction you choose.

 

OCI & Defi

 

For the past 7 years we have specialized almost exclusively in assisting Blockchain/Cryptocurrency/Defi focussed startup, (including one of the world’s biggest Cryptocurrency Exchanges (eg the Bitmex Group) and some of the world’s biggest Defi DAOs including

 

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.