International Holding Companies for Blockchain Projects: BVI, ADGM or Switzerland

A holding company can organise the ownership of a blockchain project. It cannot, by itself, determine the law applicable to all its tokens, contracts and users, or guarantee the delivery of an asset over which it lacks effective control.

A blockchain project may develop its technology in Europe, have American investors, issue tokens through an offshore company and operate through a decentralised organisation. In that scenario, one of the first decisions is where to incorporate the parent company.

The British Virgin Islands (BVI), Abu Dhabi Global Market (ADGM) and Switzerland frequently appear among the alternatives, and these are the three jurisdictions we will compare here. All three offer structures used in the digital asset sector, but they respond to different models. We deliberately leave out the Cayman Islands, which are the natural alternative to BVI for many projects and deserve a separate analysis.

The choice should not begin by asking where less tax is paid or where it is easier to incorporate a company. The first question is what function that company will perform within the project, because a holding company that owns shares in subsidiaries is not the same as an entity that issues tokens, holds assets in custody for third parties or administers a protocol. And the distinction matters: incorporating a company in one jurisdiction does not transfer all the project’s activities to that jurisdiction.

1. First: What Should the Holding Company Do?

Before comparing jurisdictions, it is worth separating four functions that should not be confused, because each raises different obligations and, as we will see at the end, each points towards a different structure.

• Ownership. The company owns shares, equity interests, contractual rights or certain assets.
• Financing. The entity receives investments, issues instruments or participates in financing transactions.
• Governance. A company or foundation establishes mechanisms for making decisions concerning the development and maintenance of the protocol.
• Regulated activity. An entity provides custody, exchange, intermediation or other financial services related to digital assets.

These functions may coincide within the same legal entity, but they are not the same. Incorporating a holding company does not amount to authorisation to carry out financial activities, nor does it transform a token into an unregulated instrument.

2. BVI: Corporate Flexibility and International Structures

The British Virgin Islands are a common jurisdiction for international companies and digital asset projects. Their main attraction lies in the flexibility of their corporate structures, particularly BVI Business Companies, which can be used to organise shareholdings, investments and certain assets of an international group, as the parent company of subsidiaries established in other countries or as a vehicle for certain financing and issuance transactions.

But BVI is not a jurisdiction without digital asset regulation. The Virtual Assets Service Providers Act, 2022, in force since 1 February 2023, establishes a registration and supervisory regime for those carrying out activities falling within the definition of virtual asset service providers, with registration before the Financial Services Commission. The regime may cover, among other activities, the exchange, transfer and custody of virtual assets on behalf of third parties, as well as certain financial services related to their issuance or offering.

It is important here to distinguish the primary issuance of tokens on one’s own account from the professional provision of services to third parties. The former does not fall within the VASP regime merely because tokens are issued; the latter may require registration. In addition, a token that has the characteristics of an investment instrument may trigger the application of BVI securities and investment legislation, which operates independently of the VASP regime and answers a different question: not who provides the service, but what the token is.

When it is suitable. When a flexible parent company is sought to hold shareholdings, organise investments or structure certain international projects.

Its limitation. A BVI company does not permit tokens to be freely marketed to European or American investors, nor does it avoid regulatory obligations arising where the activity is carried out. Nor should the company’s taxation be confused with the taxation of its shareholders or with the consequences of effective management being exercised from another country.

3. ADGM: A Legal Structure Designed for This Purpose

Abu Dhabi Global Market is an international financial centre in Abu Dhabi with its own legal framework, based on the direct application of English common law, subject to the particularities of its legislation. Its relevance to blockchain projects goes beyond company incorporation.

On 2 October 2023, ADGM enacted the Distributed Ledger Technology Foundations Regulations 2023, establishing a specific regime for foundations linked to distributed ledger technology, token issuance and decentralised autonomous organisations. These DLT Foundations have separate legal personality and may be used to develop, facilitate or support DLT-based projects.

It is worth examining the details, because this is where the regime ceases to be merely a label and becomes a governance design.

• The Council administers the foundation and consists of a minimum of two and a maximum of sixteen members. Its powers, decisions subject to approval and any rights of veto must be examined under the legislation in force and the foundation’s constitutional documents. It cannot be assumed that every veto power is general or mandatory.
• The Guardian, appointed in accordance with the applicable rules and constitutional documents, oversees compliance with the foundation’s purposes.
• Token holders exist as a category of governance participants where the relevant structure so provides. Subject to the legislation and the foundation’s charter, they may be given the power to approve or reject certain matters. The mere status of token holder does not, in itself, entail liability for all acts or omissions of the foundation, without prejudice to liabilities that may arise from other relationships or conduct.
• The corporate service provider must be appointed in the circumstances required by the legislation, together with the maintenance of a registered office in ADGM, subject to the applicable exceptions.

This raises a structural difference compared with a traditional holding company: a DLT Foundation is not necessarily a parent company with shareholders. It may be an independent entity organised around specific purposes, without owners in the conventional corporate sense. If the objective is to hold shares in subsidiaries and distribute profits among shareholders, it will be necessary to consider whether an ordinary ADGM company is more appropriate. If the objective is to establish a governance entity for a protocol, the DLT Foundation offers a regime specifically designed for that purpose.

What the regime is not, however, is a financial authorisation. ADGM distinguishes the functions of DLT Foundations from activities subject to the Financial Services Regulatory Authority. A foundation cannot provide regulated financial services merely because it is registered: custody, intermediation and other activities falling within the financial framework require their own analysis and, where applicable, specific authorisation.

When it is suitable. When the project needs a governance structure linked to a blockchain network, a foundation with separate legal personality or an institutional presence within Abu Dhabi’s financial ecosystem.

Its limitation. A DLT Foundation does not replace a financial licence, nor is it equivalent to a traditional shareholding company.

4. Switzerland: Foundations, Companies and Legal Certainty

Switzerland combines a financial tradition, developed corporate law and regulatory experience in blockchain projects. It allows the use of public limited companies (Aktiengesellschaft, AG), limited liability companies (Gesellschaft mit beschränkter Haftung, GmbH) and, where the legal requirements are met, foundations.

The choice between these forms depends on their purpose. An AG may serve as the parent company of a group, hold shareholdings, receive investment and organise relations between shareholders. A foundation, by contrast, involves assets dedicated to a specific purpose and is subject to its own regime of incorporation, organisation and supervision. For this reason, the term “Swiss foundation” should not be used as though it described a flexible company whose founders could freely retain control and dispose of its assets: the governance of a foundation depends on its purpose, its articles and the applicable mandatory rules.

In relation to digital assets, the Swiss Financial Market Supervisory Authority (FINMA) has developed criteria for classifying tokens and determining the regulatory obligations of different business models. Swiss DLT legislation has also introduced legal instruments recognising certain forms of representation and transfer of rights through electronic registers. But the existence of this framework does not mean that every token issued by a Swiss entity falls outside financial regulation: its nature and the rights it incorporates remain decisive.

When it is suitable. When a long-term corporate or foundation structure is sought, within a developed legal environment and with institutional relationships with investors, service providers and financial institutions.

Its limitation. Incorporation, administration and compliance costs, organisational requirements and the need to analyse specifically the nature of the tokens and the activities carried out.

5. The Comparative Table

The comparison provides guidance, but does not resolve the structure. A BVI company may own an operating subsidiary in Switzerland; an ADGM foundation may enter into contracts with developers established in Europe; and a Swiss company may contract technology services from providers in several countries. In all these cases, the legal personality of the parent company is only one part of the analysis.

6. The Tax Question: Where a Company Is Incorporated Is Not Always Where It Is Taxed

Taxation is often one of the main reasons for comparing jurisdictions, but knowing the nominal tax rate applicable to a company is not enough. It is necessary to examine where its effective management is located, who makes the decisions, where the activities are carried out, which subsidiaries generate income and how profits are distributed. Rules on controlled foreign companies, transfer pricing, permanent establishments and the prevention of tax abuse also matter.

A holding company incorporated in BVI but effectively managed from Spain may give rise to tax consequences very different from those originally anticipated. Incorporating an entity in ADGM does not allow one to presume that all its income will benefit from a preferential regime: the specific conditions of the United Arab Emirates’ tax legislation must be checked. And in Switzerland, taxation also depends on the legal form, the canton, the activity and the circumstances of the shareholders.

There is also a specifically blockchain-related problem that traditional international taxation did not anticipate. The criterion of effective management requires identifying where the relevant management decisions are actually made. But in a protocol governed by voting among dispersed token holders, there may be no single obvious place where those decisions are taken: there is not necessarily a room, a meeting or a jurisdiction common to the voters.

This does not eliminate the criterion; it requires examining who prepares, implements and can veto what has been voted on, where the relevant decisions are made and which individuals actually exercise management over the project. The location of those who control the technical mechanisms may constitute an important indication, although it does not, by itself, determine the entity’s tax residence.

The international structure must reflect a genuine business reality and cannot rest solely on a registered address.

7. Who Really Controls the Protocol?

Blockchain projects present a difficulty that does not arise in the same way in traditional holding companies. The company may own certain assets, but effective control of the protocol may depend on private keys, smart contracts, technical administrators or token-based voting mechanisms.

This works in both directions. A company may claim to control a digital treasury while the keys are held exclusively by independent developers. Conversely, a foundation may formally be entrusted with the governance of a protocol while a small group retains the ability to modify smart contracts, suspend functions or transfer assets.

The legal documentation must reflect this reality. It is necessary to determine who has the authority to update the protocol, modify parameters, administer keys, authorise transfers and act in emergencies, and to establish mechanisms for replacing responsible persons, recovering control and resolving disagreements.

8. The Question That Matters to BACS: A Holding Company Can Only Deliver What It Can Control

So far, we have examined the structure. What remains is the consequence, and it is more serious than it may seem.

Imagine a structure in which a BVI company issues certain tokens, an ADGM foundation coordinates governance and a Swiss company develops the technology. A dispute arises over the use of the protocol’s treasury, and an arbitral tribunal orders the parent company to return the assets.

The first difficulty is the diversity of legal relationships, because the shareholders’ agreement may be governed by one law, the foundation’s constitutional documents by another and the contracts with developers by a third. The second is the arbitration agreement itself: a clause included in the articles or in a contract does not automatically bind all participants in a network, and token holders are not bound by arbitration agreements entered into between the companies in the group. Both difficulties are familiar.

The third is the one that determines the outcome, and it is specific to these structures. A holding company may own digital assets without possessing the keys necessary to transfer them. If the treasury is held in a multisignature wallet whose signatories are independent developers, ownership by the parent company does not, by itself, guarantee effective control over the asset.

An arbitral award ordering the return of those funds may therefore depend on the cooperation of those who control the keys or on the legal mechanisms available to compel that cooperation. Even if the award is valid, recognisable and enforceable under the 1958 New York Convention, its practical implementation may require additional action against those who possess technical control.

This is the point that runs through all our work: the recognition of a right and its effective fulfilment are two different things, and the latter does not depend solely on the jurisdiction of incorporation of the parent company, but on whether there are individuals and mechanisms within the structure capable of materially implementing the decision.

That is why legal infrastructure must be designed alongside technological infrastructure: corporate agreements, governance rules, arbitration agreements and asset-control mechanisms must be compatible with one another. Legal oracles and certain programmed enforcement mechanisms may facilitate this connection where their use is legally valid and technically appropriate.

The objective is not to replace judicial oversight or to attribute powers to smart contracts that the law does not recognise. It is to prevent a legally effective decision from becoming impossible to enforce because the project’s design failed to anticipate the problem. And that is decided when the structure is established, or it may never be decided at all.

9. The Final Decision: Not a Flag, but a Structure

BVI, ADGM and Switzerland may be suitable for different projects, and the choice follows from the four functions identified at the beginning.

• Ownership and financing may call for an ordinary company with shareholders: a BVI Business Company, an ADGM commercial company or a Swiss AG, depending on the institutional environment sought.
• Protocol governance may call for an entity without owners in the corporate sense, and this is where the ADGM DLT Foundation offers a regime specifically designed for this purpose.
• Regulated activity is not authorised in any of the three jurisdictions merely by incorporating the entity: it requires compliance with the applicable regime and, where necessary, obtaining the required authorisations in the relevant jurisdictions.
• Control and enforcement require a separate determination of who can authorise and sign transactions involving digital assets, because this determines whether a decision can effectively reach the asset.

A holding company that owns shares is not necessarily the most appropriate entity to administer a DAO. A foundation intended to promote a protocol is not necessarily the ideal vehicle for raising equity investment. And a company incorporated in a favourable jurisdiction does not thereby obtain authorisation to provide financial services in any country.

The best jurisdiction for a blockchain holding company is not the one where a company can be incorporated most easily. It is the one that allows the project to be legally organised, identifies who controls its assets and makes the rights and obligations of its participants effective.

Institutional note: BACS (Blockchain Arbitration & Commerce Society) is a non-profit association registered in the European Union Transparency Register under number 9106897105368-14. It has established BACSIT, an international arbitration tribunal that administers proceedings under its own rules. This article is general in nature and does not constitute legal, tax or regulatory advice for any particular project or jurisdiction.

Main legal and regulatory sources:

• British Virgin Islands: BVI Business Companies Act; Virtual Assets Service Providers Act, 2022, in force since 1 February 2023; Financial Services Commission guidance on virtual asset service providers.
• Abu Dhabi Global Market: Distributed Ledger Technology Foundations Regulations 2023, enacted on 2 October 2023, as amended; Financial Services and Markets Regulations 2015; FSRA guidance on virtual assets and digital securities.
• Switzerland: Code of Obligations; Civil Code; federal DLT legislation; FINMA guidance on ICOs and token classification.
• International arbitration: 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.