Lithuania’s Ministry of Finance has issued guidelines on initial coin offerings (ICOs), outlining when cryptographic tokens would be viewed as securities and how each aspect of a token sale should be regulated by different laws in the country.

According to the document published Friday, a defining feature in the recommended framework is whether a token “grants profits or governance rights” to investors who obtain the token through an ICO.

While existing civil code should apply to all projects with tokens that can only be used as a payment tool or the right to access certain products, a variety of financial regulations should apply if a token grants profits or governance rights.

The finance ministry further dissects an ICO into several areas, including tokens that are issued, the entity that organizes the sale, whether it participates in secondary market exchanges and whether the ICO itself is a crowdfunding activity, etc.

It goes on to say that these aspects should be regulated by corresponding laws already in place in Lithuania, such as those governing securities, crowdfunding and financial instruments markets.

While the ministry states that the framework is not a formal piece of legislation, the effort aims to bring transparency to the industry so that ICOs can grow in a regulated environment.

“ICO market has not been regulated yet. It has huge potential but there are risks that we must manage. We should make our efforts for Lithuania to become the main headquarters for those ICO project promoters who are willing to operate in a transparent and orderly legal environment”, Vilius Šapoka, Minister of Finance said in a statement.

In addition to financial regulations, the guideline also outlines thoughts from the country’s auditing, taxation and financial crime investigation agencies regarding how tax and anti-money laundering rules should apply.

For instance, the guidelines suggest, investors’ “income received from individual purchases and sales of virtual currencies will be taxed standard 15% fixed income tax rate.”

Lithuanian government building image via Shutterstock