The Pangea Virtual Nation and its LEOS token aim to revolutionize global cooperation and governance using advanced digital technologies. Amidst regulatory challenges faced by many crypto projects, LEOS stands out for its adherence to the highest legal standards. This commitment is strengthened by a strategic partnership with Taylor Wessing, a firm renowned for its expertise in crypto-asset regulations. Their guidance ensures that LEOS aligns with stringent legal norms, including the EU’s MiCA regulations.

This article explores the crucial role of legal planning and expert advice in establishing a sustainable and compliant digital asset. By examining the strategies underpinning the LEOS token and Pangea Virtual Nation, we highlight a model for success in the complex world of cryptocurrency. For more information, visit Pangea's official website.

https://pangea.web4.world

Genesis of the Collaboration

The Tonomy Foundation partnered with Taylor Wessing to navigate the complex regulatory landscape of the EU's MiCA regulations. Taylor Wessing was chosen for its extensive expertise in cryptocurrency regulations. Their role ensures that the LEOS token sale, from private to public and eventual exchange listing, is executed within a robust and trusted legal framework. This comprehensive legal oversight is designed to foster investor confidence and set a precedent for future digital assets.

Taylor Wessing’s Comprehensive Legal Advisory

The collaboration between the Tonomy Foundation and Taylor Wessing was marked by a thorough legal review and strategic planning to ensure the successful launch of the LEOS token. The scope of Taylor Wessing's legal advisory covered several critical areas:

1. Review of Existing Documents and Corporate Structure: Initially, Taylor Wessing conducted a detailed review of the existing white papers to understand the tokenomics of the network and sale, and the corporate structure of the Tonomy Foundation. This included assessing the foundation's financial positions, such as founder capital and long-term debts from previous contributors. This comprehensive review was essential to identify the token category, and understand the existing corporate structure for suitability for the compliant sale.
2. MiCA Compliance: A key component of Taylor Wessing's advisory was ensuring full compliance with the EU's Markets in Crypto Assets (MiCA) regulation. Despite MiCA not being fully implemented until December 10th in the Netherlands, the firm proactively aligned the LEOS token sale with these forthcoming regulations. This forward-looking approach was aimed at smoothing the path for the token's launch by pre-empting potential legal hurdles and establishing a framework that would meet all regulatory requirements upon MiCA's enactment.
3. Private and Public Token Sale Setup: Taylor Wessing also provided comprehensive legal advice on setting up the token sale. This included the development of the token sale agreement and additional advice on necessary compliance measures such as Know Your Customer (KYC) protocols. These measures are critical for ensuring that the sale adheres to international standards for financial transactions and investor verification.
4. Financial and Tax Advisory: The law firm played a pivotal role in advising on tax categorisation and financial planning, including the disclosure requirements. Taylor Wessing assisted in structuring the sale in a tax-efficient manner, navigating complex tax laws to benefit the project while maintaining compliance with applicable tax regulations.
5. Corporate Structure: Further, Taylor Wessing analyzed the existing corporate structure of the Dutch non-profit Tonomy Foundation, advising on potential restructuring to better align with strategic goals and regulatory demands. This restructuring aimed to optimise the Foundation's operations and prepare it for scaling, ensuring that it could support the expansive vision of the Pangea Virtual Nation.
6. Legal Documentation: Finally, Taylor Wessing was tasked to provide legal documents and certifications to ensure trust and compliance with regulatory requirements. These documents are essential for interactions with investors, exchanges, and banking partners, building a foundation of trust and transparency necessary for successful operations in the global financial markets.

Key Milestones and Achievements

The journey of the LEOS token from concept to a compliant and established crypto asset has been marked by significant milestones and achievements, orchestrated under the legal guidance of Taylor Wessing. Here’s an overview of these crucial accomplishments:

MiCA Regulatory Compliance

The LEOS token sale has achieved MiCA compliance ahead of its formal implementation in the Netherlands on December 10, making it one of the first MiCA-compliant tokens launched in the Netherlands and the EU.

Categorisation

Under the EU's MiCA regulations, crypto-assets are classified into three types:

1. E-money tokens: Stabilize value by referencing one official currency, used for payments.
2. Asset-referenced tokens: Stabilize value by referencing multiple assets or currencies.
3. Other crypto-assets: Includes all other types of crypto-assets, such as utility tokens used within specific ecosystems.

LEOS is categorized as a utility token under the third type. This aligns with its role in the Pangea ecosystem, facilitating transactions and accessing services rather than acting as security. This classification ensures regulatory compliance while emphasizing its utility-focused nature, minimizing risk to investors and users.

For more details, refer to Title II of the MiCA Regulation.

Whitepaper Documentation

The LEOS token offering involved a rigorous documentation process to meet MiCA's stringent requirements. The Tonomy Foundation, a legally established entity, prepared an extensive suite of white papers detailing the Pangea Virtual Nation, LEOS tokenomics, technology, and sale processes. To specifically address MiCA compliance, a tiered whitepaper approach was developed.

This included a MiCA-specific White Paper tailored to jurisdiction-specific disclosure and compliance requirements, which was then hyperlinked to existing extensive white papers. This strategy provided a fully transparent documentation approach, facilitating extensibility for other jurisdictions and maintaining the existing documentation set efficiently.

On advice from Taylor Wessing, the final whitepaper significantly extended the requirements for MiCA by providing detailed insights into the corporate structure, management team and financial position of the Foundation. This was seen as a way to gather trust from investors and partners.

Our published whitepapers can be found here:

https://pangea.web4.world/whitepapers

Notification and Publication

The project successfully registered with the Dutch Authority for the Financial Markets (AFM), marking it as one of the first crypto assets in the Netherlands and Europe to achieve such recognition since the opening of registration on April 22. This registration was crucial in legitimising the LEOS token under European regulatory standards and positioned it for a compliant market introduction.

Marketing Compliance

Taylor Wessing crafted comprehensive strategies and legal frameworks to ensure that all marketing activities for the LEOS token adhered to MiCA's requirements. This included specific marketing notices within social media and other marketing channels. A notable challenge was adapting marketing disclosures to platforms with limitations on text length, such as Twitter. The solution involved developing a formal Marketing Notice on the website, linking directly from shorter marketing channels to this notice. This method mirrored strategies used for Privacy Notices on websites, ensuring transparency and legal adherence across all promotional activities.

Custody and Safeguarding Arrangements

A pivotal operational milestone was the implementation of a crypto custody service with Coinbase, ensuring the security and regulatory compliance of token custody. This arrangement not only enhanced the trust of investors but also reinforced the adherence to financial regulations, providing a secure environment for the custody of LEOS tokens.

Investor Fairness

Under MiCA, LEOS adheres to strict guidelines ensuring all investors are treated equally. Preferential treatment is prohibited unless disclosed in the white paper and marketing materials, ensuring transparency and fairness in all transactions. This commitment to equality and clear communication upholds the integrity and trustworthiness of the LEOS token.

MiFIDII Compliance

The LEOS token has been evaluated to ensure compliance with MiFIDII regulations. Under MiFIDII, a security right is defined as:

1. Transferable shares or certificates similar to shares.
2. Transferable bonds or debt instruments.
3. Certificates that can be converted into the above or settled in money.

A token that does not possess these characteristics is not considered a security right. According to Taylor Wessing, the LEOS token does not meet the criteria for securities or financial instruments under MiFIDII. Instead, it is classified as a utility token, meaning it is not regulated by MiFIDII or the Dutch Act on Financial Supervision (AFS). This classification underscores LEOS’s role within the Pangea ecosystem as a utility token rather than a security.

The LEOS token does not meet the criteria for securities

Token Sale Agreement and Legal Sale Process

The LEOS Token Sale Agreement, structured by Taylor Wessing, lays a solid legal foundation for the distribution of LEOS tokens. Here are the key elements that define this framework:

1. Compliance Requirements: The agreement enforces stringent KYC and AML procedures to ensure all participants meet regulatory standards.
2. Token Distribution: Tokens are issued based on the purchase amount, with clear guidelines on valuation and payment methods, ensuring transparency in the allocation process.
3. Protective Measures: Specific conditions for termination protect both the foundation and the investors, allowing for the agreement to expire if key milestones are not met by designated dates.
4. Legal Obligations: Both parties are bound by detailed legal and operational representations, affirming their capacities and the legality of their actions under Dutch law.
5. Dispute Resolution: All legal disputes are to be resolved under the jurisdiction of Amsterdam courts, clarifying the legal pathway for any potential issues.

The token sale agreement can be found here:

https://github.com/Tonomy-Foundation/documentation/tree/master/sales

Financial and Tax Advisory

Tax advisory for the Tonomy Foundation focused on ensuring a robust structure that met Dutch corporate and tax regulations effectively, particularly under the complex framework of the impending MiCA regulations.

Corporate Structuring and Tax Planning

Taylor Wessing provided strategic advice on the optimal corporate structuring to safeguard the Tonomy Foundation’s compliance with Dutch Corporate Income Tax (CIT) laws. This included careful consideration of the foundation's non-profit nature and its activities, which if construed as a business, could subject it to CIT. Strategies were implemented to manage potential taxable profits efficiently, ensuring they did not exceed thresholds that would move the foundation out of the small-sized foundation tax exemption.

VAT Implications and Strategy

The advisory extended to managing VAT implications associated with the token sale. Taylor Wessing’s analysis suggested that the token sale itself might not trigger VAT due to the lack of a direct link between the tokens issued and any immediate services provided at the point of sale. This aligns with the treatment of multi-purpose vouchers, where VAT is applied not at the point of sale but upon the actual provision of services or goods. The foundation's status as a VAT entrepreneur was confirmed from the start, which is pivotal for full recovery of input VAT on related expenses.

Token Sale Agreement Taxes

The token sale was set up through simple Token Sale Agreement, which required careful tax consideration as their proceeds could be considered taxable profit subject to CIT. The advisory ensured that any potential tax liabilities were clearly understood and managed, particularly regarding the timing mismatch between token sale income and incurred costs, which could affect the tax profile.

Handling Token Payments and Future VAT Considerations

Payments made to team members or service providers in LEOS tokens were addressed, considering the implications for payroll and income taxes. Taylor Wessing helped navigate the complexities of such transactions, ensuring compliance with Dutch tax regulations, which could consider such token payments as salary or business income, thereby subject to income tax.

Corporate Structure Advice

A strategic decision was made to use the Dutch nonprofit Tonomy Foundation for the initial private sale, fostering trust and simplifying compliance for this limited round, establishing a foundation for future expansions. A corporate restructuring may still be undertaken for the larger upcoming private public sale rounds.

Sales Jurisdiction Advice

The legal groundwork laid for the LEOS token sale is not only robust for the current jurisdictions but also paves the way for potential future expansions. This strategic foresight allows for scalability and adaptability in entering new markets, further supported by Taylor Wessing’s global presence.

Building and Ensuring Investor Confidence

Investor confidence is pivotal to the success of any financial venture, particularly in the volatile world of cryptocurrency. The LEOS token sale, underpinned by the legal expertise of Taylor Wessing, offers a high level of security and compliance that is crucial for building and maintaining trust among investors. The firm's rigorous legal groundwork provides a robust framework that not only meets current regulatory standards but also anticipates future legislative landscapes, ensuring the LEOS token is well-positioned for longevity and success.

Taylor Wessing's legal team has played an instrumental role in crafting a comprehensive legal strategy that covers all bases—from the intricacies of compliance with the MiCA regulations to the details of corporate structuring and tax planning. Their meticulous attention to detail ensures that all potential legal pitfalls are addressed preemptively, which is essential in a sector where the regulatory environment can shift rapidly.

The Future: Expanding Horizons

As Pangea prepares to enhance its global footprint, the focus remains on strategically expanding the LEOS sale into new jurisdictions. Our current priorities include the UK, UAE, Canada, Australia and the USA. This involves not only broadening the scope of the LEOS token but also adapting to diverse regulatory landscapes to support upcoming sales rounds. Adjustments to the whitepaper, token sale agreements, and legal certifications are ongoing, ensuring that each iteration meets the specific legal and regulatory requirements of new markets.

Pangea aims to redefine global governance using innovative legal technologies and democratic decision-making frameworks. By integrating blockchain with legal processes, it seeks to create a transparent, accountable, and efficient system accessible worldwide. Taylor Wessing plays a pivotal role in this journey, leveraging their expertise in international law and crypto regulations to guide Pangea's expansion. This partnership ensures Pangea's growth is legally sound, setting a global standard for digital nations and governance structures.

Conclusion

The partnership between Pangea Virtual Nation and Taylor Wessing represents a cornerstone in the legal foundation of the LEOS token, illustrating the profound impact of meticulous legal planning and international expertise on the project's success and expansion. Through their collaborative efforts, Pangea has not only adhered to the stringent requirements of the EU’s MiCA and MiFIDII and Dutch AFM regulations but also set a new standard for compliance and transparency in the crypto space.

This strategic legal guidance has significantly enhanced the global reach and potential of the LEOS token, positioning the Pangea Virtual Nation as a pioneering model for future digital governance and virtual sovereignties. As Pangea continues to evolve and expand into new markets, the opportunities for investors and participants are both vast and exciting.

We encourage readers and potential investors to become part of this innovative venture. For more information, to view detailed documents, or to engage with the project, please visit the following resources:

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Pangea Virtual Nation Official Website: https://pangea.web4.world

LEOS Whitepapers: https://pangea.web4.world/whitepapers

Customer Resources and Buy LEOS: https://pangea.web4.world/leos/buy-leos

Join us in shaping the future of digital nations and explore the numerous opportunities that Pangea offers for participation and investment.