II. How to Launch a Token: Preparing for Launch

How to Launch a Token: Preparing for Launch 

Editor's note: "What do I need to know to launch a token?" is one of the most common questions we get from crypto founders, especially given the industry's dynamic regulatory landscape. To ensure compliance, security, and long-term success for your project, it's crucial to approach token launches from proper principles, especially during "hot" market periods.

In this series, we break down the token launch process into 3 distinct phases: (1) pre-launch, (2) preparing for launch (the lead-up to the token generation event, aka TGE), and (3) post-launch. We aim to provide founders a comprehensive, tactical resource at every stage of the token launch process. For more in-depth information on topics like specific types of token grants, allocations, and 83(b) elections, visit our resources.

This is the second post in Liquifi’s “How to Launch a Token” series.

Preparing for your TGE is a complex process that involves multiple stakeholders. Successfully managing the steps leading up to launch requires both careful planning and execution. 

In this 2nd part of our 3-part series, we'll breakdown the essential steps and considerations for the pre-launch phase—immediately leading up to your TGE (token generation event).

Jump to each of these sections by clicking on the sidebar.

1. Handle token tax planning for employees 
2. Understand how to hire domestically and internationally 
3. Choose the right custody partner
4. Prepare for token liquidity
5. Prepare for token distributions 
6. Choose the right payroll/PEO/EOR provider 
7. Make final preparations for airdrop 
8. Plan for governance
   *Bonus*

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#1 — Handle token tax planning for employees

One of the most important tasks to handle in the lead up to token launch: tax planning for your employees. 

Tax treatment and calculation will vary on 2 main vectors: 

1. The specific type of token agreements you issue
2. The jurisdiction/country in which you operate

Examples of common agreements include: 

• RTUs
• Restricted Tokens
• Token Options
• Others

Common jurisdictions that you might need to navigate include: 

• US
• UK
• Canada
• Switzerland 
• Others

Some examples of tools and tax firms that can assist in tax planning include:

• The Big 4 (Deloitte, EY, KPMG, and PwC) 
• EisnerAmper
• Cryptedge
• Harris & Trotter

Note that the above list is not exhaustive!

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 #2 — Understand how to hire domestically and internationally

As you prepare to launch a token (and potentially expand your team), think strategically about where you hire from. 

Consider the differences in regulations and tax implications for the United States, Europe, Asia, and other regions. 

Some countries don’t even allow you to pay your employees with crypto, or there are material tax considerations (timing of taxable events, additional tax, etc.). 

Hire strategically, based on the type and amount of work you need — then decide whether FTEs or contractors work better, especially for token-related work. 

Work with your in-house legal team or external counsel to stay up-to-date on tax withholding regulations and the timing of taxable income.

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#3 — Choose the right Custody Partner

As you prepare for launch, choosing the right custody partner is essential for securely holding your tokens.

Some options include: 

1. Multi-signature wallets — Gnosis Safe, Squads 
2. Multi-party computation (MPC) — Fireblocks, Copper
3. Qualified custodian — Anchorage, Coinbase Prime, BitGo

Note that these are not the only potential partners/vendors on the market! DYOR, compare options and find the partner that best suits your project's needs and strategic goals. 

For example, suppose you have registered investment advisors (RIA) on your cap table (certain funds fall under this qualification). In that case, you must use a qualified custodian to hold and manage their tokens.

Whichever provider you choose, remember to ensure that your internal distribution system (or external distribution system) integrates seamlessly with your chosen custody provider.

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#4 — Prepare for Token Liquidity

As you prepare for token liquidity, make strategic decisions around where you want to list your token: 

• Centralized exchange (CEX)
• Decentralized exchange (DEX)
• Launchpad

Make this decision working backwards from your project’s immediate and long-term strategic needs.

Additionally, consider engaging market makers to combat price volatility in the early days. 

Some options here (a non exhaustive list) include:

• Gradient
• Amber
• Caladan
• Wintermute
• Jump
• GSR
• CLS
• Skynet
• Keyrock
• Aquanow

Important: stay aware of your vendor’s fee structures—some are flat-rate, some are subscription-based, percentage-based, or based on call options.

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#5 — Prepare for Token Distributions

Preparing for token distribution involves several key steps: 

• Gather recipient wallet addresses 
• Conduct test transactions to validate those wallets 
• Ensure members of your team/stakeholders sign all necessary legal agreements

You also need to be sure you spin up the necessary tooling to distribute tokens. This typically includes:

• Engage a payroll provider to track all taxable income and process tax withholdings
• Spin up multi-sig wallets or custody accounts
• Engage an Employer of Record (EOR) if you’re working with international workers or contractors 
• Implemente the right vesting and lock up mechanisms
• Implement an airdrop or token distribution solution
• Find and implement the right crypto accounting tools

For your employees, remember to track tax obligations. Remember that tax rules vary by country and by the agreement type you’re using (RTU vs RTA vs Options). Vesting and lockup restrictions may also impact the timing of your taxable income, which also varies by country.

Final tasks as you prepare for token distribution include:

• Finalize your eligibility criteria (i.e. which groups of your stakeholders are eligible to receive what—and why) 
• Finish gathering wallet addresses
• Geo-blocking restrictions
• Conduct your final KYC/KYB checks 
• Ensure all 83(b) elections and grant agreements are ready by token mint date 
• Ensure your CEX listing is well-communicated to avoid last-minute changes
• Ask your investors if they have any qualified custodian requirements. 

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#6 — Choosing the Right Payroll/PEO/EOR Partner

As you prepare for launch, make sure you select the right payroll, PEO, or EOR partner. 

Whoever you partner with should have experience in crypto generally, along with the ability to handle the complexities of token-based compensation across various jurisdictions. 

Important: many potential partners will often treat tokens as non-cash bonuses, which means they’ll struggle to know how to determine which tax calculation method to use. Ensure that whoever you partner with knows how to: 

• Calculate gross taxable amount from the appropriate FMV (fair market value) of your tokens
• Support the real-time prices needed to support crypto wage tax calculation 

Important: if you’re working with full-time employees (FTEs) or contractors based around the world, make sure your payroll/EOR partner understands the specific nuances around how various countries treat token compensation. 

Ensure that these systems integrate with your internal token distribution technology provider or DIY system. For more information, and a deeper dive on automating token tax withholdings, refer to our HRIS integration blog post.

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#7 — Make final preparations for airdrop

As you make final preparations for airdrop, remember to: 

• Finalize eligibility criteria
• Gather wallet addresses
• Conduct KYC/KYB checks

Also consider relevant geofencing requirements, and decide whether to use either token claims or airdrops. Plan for custom parameters, redistributions, and vested airdrops as needed.

Ensure that your airdrop solution is capable of handling any custom parameters, subsequent redistributions, and vesting/lockups.

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 #8 — Planning for Governance

Governance planning is one of the final steps to handle prior to launch. 

When you’re making decisions about governance planning, decide between: 

• On-chain governance 
• Off-chain voting on locked tokens 

Tools like Agora and Aragon can facilitate on-chain voting, while Snapshot and Tally are suitable for off-chain voting.

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Bonus — Compliance considerations

Understand the compliance implications for any marketing around your protocol, product, and token.

Marketing tokens, talking about prices, and encouraging people to buy are all activities that encroach on unregistered securities violations. 

As you prepare for token launch, ensure your team does not market your assets in a way that does not fit into your legal compliance strategy. 

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Conclusion

Thinking strategically through these 8 (+1) areas—as you make final launch preparations—will prepare your team to handle any last-minute complexities.

It’ll also ensure you stay compliant with relevant laws and regulations. 

Note that this list is not exhaustive! 

It’s meant to serve as a tactical starting point, covering the main questions/concerns you'll face as you accelerate towards your TGE.

Our final post in this series will dive into everything you need to know in the days after launch.