What documents should be placed on the site of blockchain project?

Elena Mashina

Table of content:

The world of traditional finance is changing dramatically. Entrepreneurs and investors are now engaging in blockchain-based projects. Such projects are usually aimed at raising funds to create a new and unique product. Due to the growing popularity of such projects, states have begun to create a legal framework aimed at prevention of money laundering. That is why it is very important for companies launching blockchain projects to conduct compliance procedures and post the necessary documentation on the project website.

White paper

Usually, at the development stage of any blockchain project, the first thing that is created is a white paper that contains all the basic information about the project and who can participate in it. A white paper is an informational document created to convince people to support and invest in a product, service or idea. It should include information on how the idea for the project came about, what it aims to do, and how those goals will be achieved. It should include details of the product that the founders want to raise money to develop as well as a roadmap or guide for investors on what requirements they will need to meet to join the project.

Terms and conditions

A user agreement (T&Cs) is similar to a white paper and is an important part of the legal structure of any blockchain project. The white paper in an ICO, for example, is presented at the top of the project's landing page. T&Cs are usually a link at the bottom of the ICO website, and investors often acknowledge them by clicking "I agree." This document is not always studied by investors; they have already found all the answers to key questions about the project in the white paper.

The user agreement is a legal agreement between the project owner and the investor.

T&Cs can include non-transparent provisions. For example, the terms of the Tezos call the purchase of tokens a "non-refundable donation."

If there are no terms and conditions on the ICO website, that it might trigger financial regulators of the jurisdiction where the company of blockchain project is registered.

Key points that should be reflected in the User Agreement:

Parties to the agreement. As early as the first paragraph of the document, it should clearly define who is entering into the agreement and with whom. In most cases, the buyer should see the official name of the legal entity in the document.
Token definition. A user agreement can refer to a white paper that defines the term "token." In that case, the User Agreement should contain a hyperlink to a specific section of the White paper. When talking about an ICO project, an investor should see in the project's legal documentation what the issuing company "promises" to them after they make an investment.
Terms and conditions for selling tokens. The ICO project's user agreement, for example, should include provisions on the prices and timing of token sales. This information should be available on the landing page of the ICO website.
Use of Investment. The ICO was successful, what next? The terms and conditions should include the issuer's plan about how the profits of the ICO will be used and at what point the investor will be able to receive the promised benefits.

For an ICO project, it is very important to have a template token purchase agreement. It is not always posted by companies as a separate file and often the terms of the token purchase agreement already exist in the User Agreement. For example, the entrepreneurs who launched the project HEROIC Ecosystem, developing a legal basis for the project, decided that all the conditions of the purchase and sale of tokens will be placed separately - in Purchase Token Agreement (https://heroic.org/token-purchase-agreement/).

Cookie policy

Cookie policy tells the visitors of the blockchain project website what cookies are used for, what data the site collects and how it uses this information. The policy should also inform potential investors/users how they can opt out or change their settings.

The cookie policy is legally required by the GPDR (General Privacy Policy) and the CCPA (California Consumer Privacy Act, the first comprehensive privacy law in the United States). Those who launch blockchain project must know exactly what cookies and other tracking technologies work on the project site and indicate so in this document. Generally, users of the site agree to the use cookies by clicking "I Agree" flyout box.

AML/KYC Policy (Anti-Money Laundering and Know Your Customer Policy)

As we mentioned in the article "How Do Cryptocurrencies Comply with AML?", AML policy is an anti-money laundering system is a set of monitoring and reporting measures aimed at preventing the government or private enterprise financial system from being used to make money obtained by criminal means appear legal.

KYC or "Know Your Client" is a certain operating principle applicable to all financial institutions (banks, exchanges, bookmakers, investment and mutual funds, payment systems, etc.), obliging them to identify the counterparty/customer prior to conducting a financial transaction.

Confidentiality policy/Privacy policy terms

During the course of its financial activities, the company is inevitably faced with the need to process and store the personal data of its customers/investors. In order to ensure that the personal data of those who participate in the activities of the company or use its services will not be disclosed to third parties who are not authorized to process such data, the Privacy Policy Terms are created. The document lists the personal data that will be collected by the company for security purposes, and indicates the measures that the company takes to maintain the confidentiality of personal data. Also, the document must contain a section on the legal regulation of collecting, processing and storing personal data in the jurisdiction in which the firm operates.

Thus, we have provided an overview of the documents that must be included on the website of any blockchain-based project that conducts operations with fiat or virtual currencies. This set of documents is mandatory and forms the legal framework for the operation of a blockchain project. Each jurisdiction will have its own specific requirements for drafting these documents, so in order to ensure that they are drafted on the basis of current legislation, it is a wise decision to contact the qualified lawyers of Law Firm A4.

So, the following documents must necessarily be posted on the blockchain project website:

White paper
User Agreement + Contract of token sales (for ICO projects)
Cookie policy
AML/KYC

Privacy and personal data processing policy