When the token funds development: what to do first
If a token is sold or distributed to raise money for building a product, the classification duty under Regulation (EU) 2023/1114 (MiCA) starts the moment funds are accepted, not the moment someone decides to check the rules. The first step is to classify the token and confirm whether a whitepaper or an authorisation applies to the offeror before any further funds move.
Basis
Regulation (EU) 2023/1114 (MiCA) sets out the categories of crypto-assets and the duties that attach to an offer to the public, in force since 30 December 2024. Where funds move between service providers, Regulation (EU) 2023/1113 (TFR), in force from the same date, sets out what information must accompany the transfer.
Both instruments apply regardless of how the token is described in marketing material. The label "development token" or "utility token" carries no legal weight on its own; the classification depends on the rights the token actually confers and on whether the offer is made to the public.
What changes in practice
Once a token funds development, three things change at once. First, the offeror may need to publish a whitepaper and, depending on the token's category, hold an authorisation before the offer starts. Second, any crypto-asset service provider handling the transfer becomes subject to the information duties in the TFR. Third, the evidence trail — who paid, from where, and through which provider — becomes relevant to a regulator from day one, not from the day a dispute arises.
This means the usual sequence of "build first, comply later" does not fit a funded token offer. The compliance question and the fundraising question arrive together.
What to do first
| Step | Action | Who performs it |
|---|---|---|
| 1 | Classify the token against the categories in Regulation (EU) 2023/1114 (MiCA) | Legal counsel, before the offer opens |
| 2 | Confirm whether the offeror needs a whitepaper, an authorisation, or neither | Legal counsel, jointly with the founding team |
| 3 | Check which crypto-asset service provider handles incoming transfers and whether it applies the information duties under Regulation (EU) 2023/1113 (TFR) | Compliance function or external counsel |
| 4 | Freeze the wording used in any public communication until classification is confirmed | Founding team |
| 5 | Preserve the transfer records, the counterparty data and the whitepaper draft as a single file from the first payment onward | Compliance function |
The fifth step matters more than it looks. A regulator reviewing an offer after the fact asks for the file as it stood on the day funds arrived, not a reconstruction. Our approach to that file — the report, the extracts, and the copy we keep — is set out in Retention: the report, the extracts and our copy.
Who decides
The competent authority in the jurisdiction where the offer is made decides whether the classification is correct and whether the whitepaper duty was met. The decision rests on the whitepaper notification filed, the token's actual features, and the transfer records collected under the TFR. Where the offer reaches several jurisdictions, more than one authority may take an interest, and the classification has to hold up in each of them.
If your situation differs
- If the token is used only inside a closed platform, with no offer to the public and no transferability outside that platform, the MiCA offer duties may not apply — but the boundary is factual, not a matter of naming the token "internal".
- If a partner or reseller distributes the token on your behalf, the classification duty does not move to the partner automatically; see When a partner distributes the token: what to do.
- If funds have already been received before classification was checked, the TFR information duty applies retrospectively to the transfers already made, and the file described above needs to be reconstructed rather than started.
What this page does not resolve
This page does not establish which counterparties actually sent funds, through which providers, or from which jurisdiction. It does not calculate a fee or a timeframe for building that evidence. It sets out the order of steps and the authority that decides; the underlying facts about a specific offer come from a separate exercise.
Sources and limits
The classification and transfer duties above rest on Regulation (EU) 2023/1114 (MiCA) and Regulation (EU) 2023/1113 (TFR), both in force since 30 December 2024. Neither instrument tells you who your counterparties are or where the funds actually originated — that is a separate, evidentiary question, and it is answered by a dedicated report rather than by legal analysis.
Where the counterparty side of the file needs building, a Counterparty report italy establishes what can be confirmed about the paying party. Where the whitepaper or contract itself is in question, a Document report italy establishes what the document shows. Where the relevant jurisdiction of a counterparty or a transfer is unclear, a Jurisdiction report italy establishes that layer.
How we respond
Write to a partner directly once the classification question is open. A first reply arrives in minutes during business hours. Where the file needs building — several jurisdictions, several counterparties, or a deadline already running — the price for the work is confirmed within one business day, once the scope of the file is clear.
Related publications
If distribution runs through a partner rather than directly, the sequence of steps differs; see When a partner distributes the token: what to do.
FAQ
What is the first step when the token funds development?
Classify the token against Regulation (EU) 2023/1114 (MiCA) before further funds are accepted, and confirm whether a whitepaper or an authorisation applies to the offeror.
Which deadline is already running?
The classification and information duties under Regulation (EU) 2023/1114 (MiCA) and Regulation (EU) 2023/1113 (TFR) start from the moment funds are accepted, not from the moment the offeror decides to review compliance.
Who decides, and on what evidence?
The competent authority in the jurisdiction of the offer decides, based on the whitepaper notification, the token's actual features, and the transfer and counterparty records kept from the first payment onward.
Verified
Checked against the consolidated text of Regulation (EU) 2023/1114 (MiCA) and Regulation (EU) 2023/1113 (TFR), both in force since 30 December 2024.