In the past year, tokens have nudged their way into mainstream consciousness with the proliferation of “initial coin offerings,” or “ICOs,” and the blockbuster rises — and drops — in the prices of cryptocurrencies. An emerging trend sees companies and virtual organizations leveraging the value of these tokens, not only for non-dilutive capital raising purposes, but also to compensate and incentivize founders, directors, employees, consultants and other service providers. Just as with issuances of founder’s stock, stock options and other traditional equity-based compensation, token-based compensation requires significant consideration from both a tax law and a securities law perspective.
Morrison & Foerster attorneys Alfredo B. D. Silva, Ali U. Nardali and Aria Kashefi published a thought piece in Bloomberg Law on the legal issues related to use of blockchain tokens as service provider compensation.
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