Sushi Legal Structure

Why not Panama? To what extent will EU pressures play vis a vie Swiss laws? It seems the benefits of being in Europe but not in the EU are pretty much mute are they not?

1 Like

Many crypto companies choose between the following places
Cayman Islands – British Virgin Islands – United Arab Emirates – Bahrain–Vanuatu–Switzerland
We can do an extensive study on the advantages and disadvantages of these countries
and put them in a table and present them here to the community to choose the best among them

1 Like

I find your point of view very interesting, from a practical perspective, keep it simple is always a must.

I would like to discuss why other structures such as dydx, among others, continue to choose ZUG.

I agree that in the beginning one entity to operate with the traditional world might be enough to operate a project.

The goal of defining the needs of the project before creating complex structures seems to me to be appropriate.

For my part I opt for autonomy of the ecosystem, no taxes and limitation of the responsibility of the members.

But what about the treasury and the structure for the operation of the DAO itself? Is it structured in this operating entity? Should it not be protected in a found? Should it be left up in the air?

1 Like

Switzerland is the way to go. Proposals to create a Swiss Foundation should be combined with other legal entities and regulatory approval.
a. SushiDao supported in the Sushi Forum and proposed under Swiss Association Law, is an essential and urgent change. The SEC and regulators in Europe and Asia will crack down on illegal/un-regulated crypto exchanges, fining and or closing many. Switzerland is an excellent place for crypto businesses.
[Review of Swiss Crypto Laws:]
[Cryptocurrency exchanges are legal in Switzerland under license from, and regulatory oversight by, the Swiss Financial Market Supervisory Authority (FINMA). The 2020 Blockchain Act defined the legal basis for exchanging cryptocurrency and running cryptocurrency exchanges in Swiss Law. Several exchanges operate legally, notably Bitcoin Suisse.]
b. SushiDao would employ the Foundation’s management team (the SushiDao Foundation, with their actions governed by Articles which are overseen by the SushiDao Board, elected annually by the community.)
c. The SushiDao Board should experiment with voting systems, in elections and for important motions, which seek to precent ‘oppression of the minority.’
d. SushiDao will control the Treasury, so that the Foundation and Board must agree spending and other financial actions by vote and Multisig conformation.
e. A number of related entities should also be formed, for example:
i. ‘Sushi Exchange’, licensed to operate a crypto exchange in countries such as Switzerland and in other jurisdictions;
ii. ‘Sushi Developers’, providing software, services and operational support;
iii. ‘Sushi Ventures’, managing a range of non-core activities by developer teams working with but not necessarily being part of SushiDev’s; and
iv. Other functional entities which might be required to provide defined services such as Banking and Money Transmission (often overlooked by crypto entities, but critical going forwards.)

1 Like

I don’t agree with this sceptical view for three reasons: (1) organizations need to be based ‘somewhere’, and Switzerlan/Zug is friendly; its a defensive move to rapacious/aggressive US/EU regulators, (2) yes you need employees - but not many, and its smart spending, and (3) the Swiss have friendly Exchange regulations which are beneficial. Others talk about marginal jurisdictions like Dubai (now home to more dodgy money than Panama or Lichtenstein.). Switzerland is a good choice.

1 Like

Panama will continue to be scrutinized by global tax authorities (after the Panama Papers revealed what goes on there). Switzerland has cleaned up its act and, IMO, will become the global home for decentralized crypto projects …

1 Like

I worked with FINMA in 2018, and they were pretty challenging to obtain a VASP. The only more difficult place was BaFin, in Germany. What’s your reasoning for getting a VASP for a DEX? If we’re targeting a global market, the Cayman Islands, Bahamas, Panama, etc., have sufficient legal wrappers for DEX DAOs. I’ve set up offshore entities several times as a US-based director of a foreign-controlled company and obtained bank accounts as an offshore exchange operator. And, now more than ever, there are resources to accomplish this goal. Switzerland may be a fine choice, but not sure I’d discount the others so easily.

1 Like

Switzerland will emerge as the location of choice for many crypto business (Token Foundations, some Exchanges, DEX and deFi operations) for the following reasons … a lot has changed in recent years. In Switzerland, DEX operate as Virtual Asset Service Providers (VASP) and can easily obtain licences to transact in cryptocurrencies. Aside from it desire to promote the blockchain and crypto markets, two important technical changes made this possible.

First, the definition of LP tokens: FINMA divides tokens into three categories on a case-by-case basis (payment, utility, and asset tokens) and regulates them accordingly. LP tokens are utility tokens which require no particular regulation. Transacting in crypto does require the VASP licence.

FINMA applied the Anti-Money Laundering Act to VASPs and clarified it as part of its latest update to the FINMA-AMLO legislation (Article 10). Additionally, it published guidance covering the Travel Rule on August 26, 2019, which went into effect on January 1, 2020 (this required information on customers to be attached to trades.)

Complying with AML rules is the most onerous requirement for the VASP application process, BUT, according to recently published legislative guidance relating to the AMLA, fully autonomous systems that do NOT enter into a permanent business relationship with its users are excluded from the scope of the AMLA.

Secondly, LP/utility tokens – and so DEX operations – have very light regulation.

Other exemptions have been granted (e.g. no banking or broker dealer licenses required for non-custodial exchange transactions)…

Several service providers can assist crypto exchanges to establish and operate legally in Switzerland (see: Travel Rule Crypto in Switzerland by FINMA 🇨🇭 [2022] - Notabene). The Crypto Valley Association ( also provides advice and support.

See: Swiss regulatory considerations [for Decentralized Exchanges], December 2021
From: Use of liquidity pools on DEX and the application of Swiss regulations to liquidity tokens | IFLR

1 Like

The main issue here is that xSushi is not a utility token, it’s an asset token distributing revenues from DEX operations and is heavily regulated in Switzerland, that’s why as I underlined in Discord, you should be very careful on the settlement on anything there and I believe it is not the best jurisdiction for that.

1 Like

I’m not entirely sure that I agree (and I’ve spoke to lawyers about this). In this context, FINMA / Switzerland generally distinguishes between payment, utility and asset tokens.

Payment tokens (synonymous with cryptocurrencies) are tokens which are intended to be used, now or in the future, as a means of payment for acquiring goods or services or as a means of money or value transfer. Cryptocurrencies give rise to no claims against the issuer.

Utility tokens, on the other hand, are tokens which are intended to provide digital access to an application or service by means of a blockchain-based infrastructure. [There is an argument that xSUSHI provides access to returns from the liquidity pool and NOT an irrefutable claim; these claims are conditional on trading. No one can assure that xSUSHI will receive a given return, AND its is the market’s dynamics, supply & demand, which provides returns.]

Finally, asset tokens represent an underlying asset such as a debt (structured product, derivative or bond) or equity claim against the issuer. [xSUSHI is not a claim on an asset, it is the right to a fee if a service is delivered.]

Now, I’m not going to say that this is settled law – I’m saying that this is an argument which deserves exploration.

1 Like

I am posting my comment here from Discord for continuity.

So, when I was CEO of Bitfineon, we had a rev share token similar to xSushi. This was 2017, well before DeFi. FINMA worked with us in building its first regulatory framework for token securities classification. Our token was not considered a security because it was initially launched as a fairly distributed proof-of-work coin. Sushi doesn’t have that distinction, and I’m concerned that Swiss law doesn’t make an exception for the rev share portion of the token, not the traditional LP token function. The Cayman Islands and BVI allow that functionality. The issue is which jurisdiction best shields the DAO’s liability from US regulators. My close personal friend, Cal Evans, is one of the leading crypto and blockchain attorneys in the space (worth Googling his name) and is someone I’d pull in to help steer Sushi on the right path. IMO, a Head Chef should source competent legal opinion on this matter.

1 Like

Great points Jared. We all need good lawyers; mine make the point that the utility nature of an LP token makes it ‘possible’ that they can be excused; and the currently distributed / decentralized nature of the token likely means it will be grandfathered in as this is it not an ICO.

1 Like

If FINMA commits to that opinion in an official memo or correspondence, I think Switzerland becomes a more exciting option for the DAO.

1 Like

Many thanks for your reply. From experience, there are at least 3 points to look at in regards to the regulation/security issue for a Sushi DAO:

  1. Generation of revenues similar to dividends from shares

  2. Not enough decentralised ( 87% of the token are owned by 100 wallets)

  3. Public liquidity pools of anonymous LPs that are the basis of Sushi (had the issue with my fund regulator didn’t wanted to hear from that) to be defined how it connects with a DAO

This is what the SEC in the US and FCA in UK are looking at, FINMA will probably follow, depends of their appetite for business or not, but in fine you should expect to have to defend at least these 3 points.

My opinion, with a good lawyer you will make it pass today, it will be long and expensive but they will grant it because it generates revenues, but in 2 years max, when clarity on regulation will be globally done, they will fall on everyone, SEC already announced yesterday that only Bitcoin was not a security for them, if they think that, everyone will think that soon. Also, don’t forget taxes in Switzerland even in Zug 12% revenues even post opex, CI, BVI, Bahamas, Dubai and Portugal are tax free, 12% on usd 65Mn or slightly less is close to usd 10Mn, it would pay nice bonuses to everyone…

My question then, why do you want to regulate Sushi at all? And why not use it as an experiment to see how far it is possible to go without being regulated and compliant waiting for more clarity? Maybe redesigning some elements of the protocol (you keep the same functions just redesign how they work) would be easier and cheaper than to deal with regulators? If I was HC, that’s what I would try to do.

1 Like

Great statement Timber! Since the regulations are still be formed by most of the regulatory agencies, seems like this is probably the best short term option.

1 Like

Can you please share a bit more about how these numbers were determined. As if this is based only on the token holders list on Etherscan I am afraid it may be not quite accurate. Most of the top holders are not EOA, but contracts. And these contracts represent many other wallets - like xSUSHI Token (which is SUSHI holder number 1) represent 17K addresses. Same goes for the CEXs wallets, the bridging protocols, etc… I do not know how the law treat these, but I think there should be a difference between wallets holding the token and wallets owning the token, right?


Tokens I refer to are xSushi, not Sushi. 100 addresses of the 17k total own 87% of the tokens. But I guess your question remain valid as a few of these addresses are contracts. I would say that wallets that control the tokens are by default owning them. In both case, the centralisation issue remains.

1 Like

hi ser, wanted to seek your guidance on some issues around DEX regulation. if you are on Discord you can @ me on the SushiSwap discord and will PM you