The token issuance vehicle: how web3 projects issue and structure their tokens

DAO SPV

— 7 min read
The token issuance vehicle: how web3 projects issue and structure their tokens
In web3, vehicle emissions have a different meaning

Tokens are the lifeblood of web3. They are the basis of exchange, incentivisation, and speculation. Issuing a token helps projects raise capital; owning a token may variously give a token-holder the ability to accumulate value, trade, and vote. Binding a token to a real-world asset enables new forms of value to be brought on-chain, and the overall programmability and flexibility of tokens and smart contracts is what enables the creativity and dynamism of web3 business models. Without tokens and tokenisation, the web3 economy would not exist. 

If you’re a Web3 founder preparing to launch a project, two of the most strategic questions you will therefore face are:

  1. Should I launch a token?
  2. If so, where and how should I issue my tokens?

Whether to launch a token: this depends entirely on your aims and ambitions. Are you planning to raise funds? Are you seeking to provide utility on your platform - a reward for your gaming community, perhaps? Does your project need decentralized governance? Are you simply trying to hype your way to riches with the latest memcoin? If yes to any of these, some kind of token launch may be appropriate.

 Not all projects, however, suit token issuance. For some, it is simply irrelevant. For others, it may be a distraction from the ongoing tasks of building and maintaining a project. Founders should be aware for instance that once release , maintaining the liquidity and pricing of these tokens becomes a massive workstream in itself. We will deal with this in a subsequent post. For now, we address question (b), namely;

Where and how to launch a token: The answer to this question is rarely: "From my dev team’s local company."  For those projects who do long simply want to launch a token on Pump.fun - those projects who need and want something a little more structured -  most create a dedicated token issuance vehicle — a separate legal entity, often offshore, that exists solely to issue and manage tokens on behalf of the broader project.

This article explains:

  • What a Token Issuance Vehicle is
  • Why founders isolate token issuance from the DevCo
  • How token issuance works, from minting to distribution
  • The relationship between the Token Issuer and other entities (DevCo, foundation, DAO)
  • Which jurisdictions are most commonly used
  • What risks this structure mitigates — and what it doesn’t

What is a token issuance vehicle?

A token issuance vehicle is a legal entity incorporated specifically to:

  • Mint, hold, and distribute tokens
  • Engage in token-related contractual arrangements (e.g., SAFTEs, public sales, liquidity deals)
  • Separate token-related regulatory and tax risk from the rest of your project business

Importantly, it’s not the DevCo (the development company that builds the protocol), nor is it always the same as the foundation (if one exists). The Token Issuer is narrowly focused on token economics, issuance, and compliance.

Token issuance vehicles are commonly offshore, often based in jurisdictions that are neutral and politically stable, clear (or at least permissive) on token activities, and free of direct capital gains or income tax.

Practically speaking, in recent years this has generally meant one of three places - the British Virgin Islands, Panama, and the Seychelles. It is possible to launch tokens onshore, but typically this comes with a range of licensing requirements. Fast moving startup projects therefore often strive to avoid this. 

Why use a separate token issuer?

There are three key reasons Web3 founders create a dedicated Token Issuance Vehicle:

1. Regulatory Risk Segregation

Token launches are often a legally sensitive part of a project’s lifecycle — involving complex issues around:

  • Securities law: is this token a security under US or any other relevant regulatory regime? If so, this triggers a range of obligations
  • AML/KYC: Depending on the type of token being issued and where is it being issued from, there will be a range of AML and KYC obligations to think through
  • Taxation: If projects do not properly think through the tax implications of the token issuance, they can be hit with large and unexpected bills. Founders must think through the type of token they are offering, where they are offering it, where they and their other assets are based, and the timing of events.

By structuring the token issuance through a corporate vehicle, the project founders gain the benefit of limited liability for themselves and their other companies. Isolating the token issuance from the development team and any operating subsidiaries, founders can - if they do it correctly - protect those entities from liability, enforcement risk, or litigation.

2. Clear governance and control

A dedicated token issuance vehicle can:

  • Manage multi-sig wallets and token treasuries
  • Enter into legal agreements related to the token (e.g., lockups, market-making contracts, SAFTs)
  • Distribute tokens to early contributors, community, and investors in a formal way

It acts as a legal counterparty that can hold responsibility for the token distribution logic, giving investors, partners, and regulators a clear entity to engage with.

Certain jurisdictions allow the token issuer to operate in a tax-neutral way — meaning:

  • Any profits accruing to the token vehicle are not taxed
  • Token appreciation is not taxed at the entity level
  • Distributions to investors or other entities (like the foundation) are not subject to withholding

These features can be critical in maintaining clean accounting and defensible treatment of token-related income.

More importantly, by issuing tokens from specialized vehicles in specialised jurisdictions, you can avoid the need for an expensive licensing process. The British Virgin Islands has proven of particular use in issuing utility tokens; while the BVI is a regulated jurisdictions, their rules means that utility tokens do not have to be licensed. This makes things quicker and more cost-efficient.

How the token issuance vehicle interacts with other entities

A full Web3 project structure might include:

Entity

Role

DevCo

For-profit company that employs the team and builds the protocol

Foundation

Non-profit or neutral steward of governance, often a Swiss association or Cayman foundation

DAO

The decentralised, on-chain governance mechanism. This will often also be wrapped in the foundation, but can sometimes be seperate

Token Issuer

Offshore vehicle that issues and manages tokens

The Token Issuer is often:

  • Contracted by the Foundation to mint and distribute tokens
  • Receives services from the DevCo (e.g., development milestones paid in tokens)
  • Enters agreements with investors and launch partners for token distribution

It may license IP from the DevCo, or act under delegation from the Foundation, depending on the nature of the project and how centralised the launch is.

How token issuance actually works

Issuing a token through a Token Issuance Vehicle typically involves the following steps:

  • Often a BVI or Panama company. 
  • Designed to be tax-neutral and easy to manage

2. Token generation and smart contract deployment

  • Smart contracts are written and deployed (usually by the DevCo team)
  • Control of the token contract (mint/burn, treasury wallets) is handed to the Issuer

3. Token allocation

  • Token supply is split across buckets: investors, team, treasury, ecosystem, etc.
  • The issuer holds unsold tokens in treasury wallets

4. Fundraising and Distribution

  • The Issuer signs SAFTEs or token warrants with investors
  • Executes public or private sales
  • Distributes tokens in accordance with legal agreements

5. Ongoing Administration

  • Token lockups, vesting, airdrops, staking rewards, and buybacks
  • Treasury management and grants to DAOs or third parties
  • Working with market makers, exchanges, and liquidity providers

Benefits of segregating the token issuance

By housing all of this inside a dedicated vehicle (and, of course, making sure they get the rest of their structuring sorted out in a manner to complement their new token issuance vehicle), founders gain several advantages:

Benefit

Explanation

Liability isolation

Protects other entities (DevCo, founders) from regulatory blowback

Clarity for counterparties

One entity issues tokens, signs contracts, and is responsible for compliance

Tax optimisation

Avoids high-tax jurisdictions for token activity

Investor assurance

Investors can enter direct agreements with the issuer, improving legal certainty

Simplifies DAO decentralisation

The Token Issuer can later hand over governance of the tokens to a DAO or Foundation

Jurisdictional comparison

Below are popular jurisdictions for token issuance and how they compare:

Jurisdiction

Pros

Cons

Cayman Islands

Token-friendly, widely used, stable law, no tax

Substance requirements increasing; cost. Token issuance requires a license

BVI

Simple structure, low maintenance, neutral, no licensing required for utility token launch

Perception risk outside of web3

Panama

Strong privacy, low tax, no licensing requirements as no VASP regime

Perception risk outside of web3; lack of VASP regime may create regulatory uncertainty

Marshall Islands

Innovative DAOs laws, no licening required to issue utility tokens

Less widely used; banking issues; lack of VASP regime may create regulatory uncertainty

Seychelles

Used in early DeFi, low-cost

AML/KYC risks; low credibility with VCs. New licensing regime

Delaware (US)

Familiar to VCs, clear contracts

U.S. securities law exposure, tax risk

For most projects, the British Virgin Islands remains the gold standard. It offers:

  • Familiarity with global law firms and VCs
  • No corporate tax
  • Flexible company and VASP law that supports token activities
  • Jurisprudence derived from English common law

The BVI token issuance company: a classic vehicle

Key risks to watch

Using a Token Issuance Vehicle does not eliminate all risks. Key things to manage include:

  • Substance Requirements: Jurisdictions like Cayman and BVI are tightening rules on “economic substance.” If your issuer is just a shell, you may face regulatory scrutiny.
  • KYC/AML obligations: Token sales (especially to the public) may trigger AML/KYC laws, even in offshore jurisdictions.
  • Transfer Pricing: Payments between DevCo and Token Issuer must be arms-length and documented.
  • Investor Relations: You must coordinate carefully if investors are signing SAFEs with the DevCo and tokens are coming from another entity.

How to decide if you need one

You probably need a dedicated Token Issuance Vehicle if:

  • You are raising money via tokens (SAFTEs or direct sales)
  • You plan to issue community or ecosystem tokens
  • You want to limit the tax or legal risk of token sales
  • You want the DAO or foundation to receive tokens cleanly
  • You want the DevCo to remain distinct and focused on product

If your project will never issue a token, or if the token is purely internal (e.g., no market, no investors), then it may not be necessary.

Final thoughts: structure for scale and safety

The Token Issuance Vehicle is one of the unsung heroes of serious Web3 project design. While devs focus on smart contracts and DAOs, and founders worry about pitch decks and tokenomics, the Token Issuer quietly holds the legal keys to the kingdom.

Get this part wrong, and you risk:

  • Personal or team liability
  • Regulatory intervention
  • Tax blowups
  • Failing investor due diligence

Get it right, and you have:

  • Clear separation of concerns
  • Safe, scalable operations
  • Investor-ready documents
  • Clean governance path to your DAO

It’s worth doing carefully — and with the right legal and tax advice. Alongside our company formation work, DAO SPV can facilitate tax and legal advice across all major web3 jurisdictions.

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