XO | POWER SOCIAL IMPACTS → AT SCALE

Use XO to engender positive change and transformation

XO | LEGAL

Cryptoassets and the current legal landscape

XO | CORPORATE SPONSORSHIP

Use XO to carry out non-monetary sponsorships

XO | ORGANISATIONS

Use XO to raise funds, incentivise the public, etc

XO | UTILITY

Use XO to buy goods and services

Introduction

An ignition for positive change and transformation locally, nationally, globally → XO can be utilised in a multitude of ways to achieve a vast range of socio-economic purposes and objectives and to engender powerful transformative outcomes for society and the environment

From major global corporations benefiting millions of people worldwide to governments delivering prosocial growth and advancement for their citizens to SMEs, nonprofits and individuals bettering their communities → the permutations are endless

XO is a next-generation enterprise cryptoasset (also referred to as a cryptocurrency) which you don’t pay for with money or ‘mine’ with powerful, energy intensive computers → instead, you pay for it ‘in kind’ with social actions

1 XO has a fixed and stable value of £1 GBP, it’s created and supplied by Centrum through a low energy-use process and can be used as full or part payment for a wide range of commercial, consumer and personal goods and services worldwide: XO holders get access to a private online portal where they can use their XO → www.xo.cr

A social action is an activity that benefits society → e.g. donations, pro-bono work, sponsorships, etc; provided to nonprofits, arts and culture organisations, sports clubs (as they promote public health), etc

► If your social actions are eligible and qualified under the relevant laws, you may be able to regard their financial cost as an allowable business expense, thus reducing your tax liability

Whatever amount of XO you originate, you don’t pay for it with money. Instead, you carry out qualified social actions (QSA) with their total minimum financial value being not less than the total financial value of the XO you originate

► For instance, if you originate 1 Million XO (then as 1 XO = £1 GBP), this is worth £1 Million and so, the sum total financial value of all of your related independently verifiable social actions (which can all be non-monetary) must be at least £1 Million (it can, of course, be more)

XO is not listed, registered or traded on any cryptocurrency exchange and does not have a published value/price

However, as its value is fixed at 1 XO = £1 GBP and all independent parties who transact with it agree on this value, this is therefore its independently agreed upon fair market value. This is also independently verified and confirmed by reference to the fair market value of the goods, property or services exchanged for XO when the transactions occur

► In other words, the independent fair market value of XO is equal to the value the parties involved in the transaction subjectively assign to it as the consideration

Yes, although you don’t pay for your XO with money, there is an initial (one-off) registry charge that you pay with an agreed fiat currency when you originate your XO (the amount of this charge depends on specific circumstances and is negotiable with Centrum)

► The registry charge is an administrative fee and is not part of your actual payment for your XO, which you must pay in full ‘in-kind’ with qualified social actions

What is a cryptoasset under UK law?

The UK Government does not currently have a statutory definition of cryptoassets such as XO, but in some instances they are regarded as “cryptographically secured digital representations of value or contractual rights that can be transferred, stored or traded electronically”

Are cryptoassets legitimate assets under UK law?

Yes, in England and Wales [and also in many other countries] all forms of assets, including incorporeal [intangible] property generally [such as XO] and any currency other than sterling [or the fiat currency of the country in question], are considered an asset under tax legislation

► The UK High Court, the UK Jurisdiction Taskforce and the US Government (IRS) recognises cryptoassets to be a form of taxable/chargeable property

This means that as cryptoassets are taxable/chargeable property, they can also be used as legitimate consideration for private and commercial transactions

Note: although the above legal definition of consideration relates to VAT, it is still nevertheless equally applicable to non-VAT situations as well, unless specifically excluded or specified otherwise by applicable law

This is reinforced by the UK’s HM Revenue & Customs (HMRC) which states that "If a company or business is carrying out activities which involve exchange tokens [cryptoassets], they are liable to pay tax on them" - i.e. in order to tax such activities, exchange token cryptoassets must be recognised by law as legitimate consideration and lawful activities carried out with cryptoassets as legitimate transactions

What type of cryptoasset is XO under UK law?

XO is an ERC-20 Exchange Token cryptoasset that operates on the Polygon Blockchain. It’s pegged to £GBP (1 XO = £1 GBP) but not underpinned by it or by any other currency or by any other assets → it’s underpinned by the monetary value of the social actions carried out by its originator; and although the term ‘cryptocurrency’ applies to XO, it’s not considered to be a form of fiat currency or money

Exchange tokens such as XO are called ‘exchange tokens’ because they are generally intended to be used as a method of payment (i.e. exchanged) for good and services

As the value of XO does not fluctuate (unless special circumstances require it, XO always has a fixed and stable value of 1 XO = £1 GBP), it’s ideal for use as a form of full or part payment for good and service across the world. For this very same reason, XO is not ordinarily suitable as an investment asset or for speculative trades/acquisitions or ICOs

Note: this is why XO is not listed, registered or traded on any cryptocurrency exchange and does not have a published value/price

XO must also be anchored to social actions with (at minimum) financially equivalent value. Thus, XO can’t just be originated in return for money or social marketing (or for nothing in return) without corresponding qualified and auditable social actions in place first. Hence, XO is not suitable for Airdrops or Smartdrops at origination

Does the UK Government permit transactions carried out with cryptoassets?

Yes → see the Cryptoassets Taskforce report by the UK’s HM Treasury, Financial Conduct Authority and the Bank of England

What is the underlying legal position regarding the use of cryptoassets?

The UK Government has specific laws relating to certain types of cryptoassets (such as security tokens) but it does not have any rules or laws relating to exchange token cryptoassets such as XO

The UK Government does not regard exchange tokens such as XO as currency or money, but considers them as taxable intangible assets. The UK Government has, however, issued a brief on the tax treatment of exchange token cryptoassets, stating that their ‘taxability’ depends on the activities (disposal) and parties involved - e.g. when:

► Selling cryptoassets for money

► Exchanging cryptoassets for a different type of cryptoasset

► Using cryptoassets to pay for goods or services

► Giving away cryptoassets

See → HMRC Cryptoassets Manual for more information

| 5MLD (CFT/AML)

Exchange tokens are regulated in the UK for money laundering purposes, but the relevant applicable rules apply to providers of services (cryptoasset exchange and custodian wallet providers), not to the cryptoasset itself. Centrum is exempt from 5MLD regulations because it is not a cryptoasset exchange or a custodian wallet provider and its activities do not fall under CFT/AML regulations

On what legal basis are cryptoassets transactions carried out?

The UK Government’s guidance regarding the use of cryptoassets (such as XO) to pay for goods and services regards transactions in which they [cryptoassets] function as consideration given or received as ‘barter transactions’ (the guidance written for this is in terms of non-sterling currency but is also applicable to cryptoassets)

The barter transaction guidance referred to states that “A transaction in which an asset is disposed of for some consideration which is not sterling cash, but which takes the form of some other asset [e.g. cryptoassets such as XO], is a barter transaction. Where the bargain is at arm’s length, the measure of the consideration is the sterling worth, at the date of the acquisition or disposal, of what is given or received”

Are there any UK taxes to pay when using cryptoassets?

There may be, depending on which cryptoassets are being used and how. However, there is no Capital Gains Tax or VAT to pay on the sale, transfer or exchange of XO as they are sold, transferred or exchanged at the same value/price as when they were originated or acquired (as the price of XO is always fixed and stable)

Note: although the sale value/price of XO is always £1 GBP each, the actual settlement amount agreed by the transacting parties may differ. Therefore, Capital Gains Tax or other applicable taxes may apply for a seller where the sums received by the seller as the settlement of the transaction from the buyer is greater than the sums paid by the seller as the settlement when they acquired XO

| VAT

When cryptoasset exchange tokens such as XO are exchanged for goods and services, no VAT is due on the supply of the token itself. However, VAT is due in the normal way on any goods or services sold in exchange for cryptoasset exchange tokens. The value of the supply of goods or services on which VAT is due is the pound sterling value of the exchange tokens at the point the transaction takes place. For more information, see the UK Government’s VAT guidance for cryptoassets

How does HMRC regard cryptoassets?

HMRC states that “The tax treatment of all types of tokens is dependent on the nature and use of the token and not the definition of the token…on its own, owning and using cryptoassets is not illegal in the UK and does not imply tax evasion or any other illegal activities”. HMRC has also published a range of other guidance on cryptoassets

How can my company support projects and causes without any money?

You can carry out qualified non-monetary ‘barter’ based (also known as contra or value-in-kind/VIK) corporate sponsorships of your chosen causes

Can corporate sponsorships be lawfully carried out without any money?

Yes:

| UK Regulations

The UK Government defines sponsorship as “…a payment to a charity, social project or a business for which the sponsor receives something in return. Payment may be in the form of money, goods and services (commonly referred to as ‘barter’), or a combination of money with goods and services”

Note: the above definition states that payments "may be in the form of", which means that it does not have to be specifically only with 'goods and services' or with 'money' and that in essence, anything of value can be used to make a sponsorship payment, including intangible assets, as long as the financial (cash-sum-equivalent/money's worth) value of the non-monetary sponsorship payment is independently quantifiable and verifiable. Additionally, although the above legal definition of sponsorship relates to VAT, it is still nevertheless equally applicable to non-VAT situations as well, unless specifically excluded or specified otherwise by applicable law

| US Regulations

The US Government defines sponsorship as “…any payment of money, transfer of property or the performance of services, by any person engaged in a trade or business, where there is no arrangement or expectation that the person will receive any substantial return benefit in exchange for the payment”

► Therefore, in the UK and the US (and in many other countries with similar laws) sponsorship payments can be made not just with money but also under a barter agreement with any asset or property of value (such as cryptoassets which, being legitimate taxable assets/property under the law of both countries, are a legitimate consideration)

What is the financial benefit of non-monetary sponsorship payments?

Under certain circumstances, you may be able to treat the financial (cash-sum-equivalent/money's worth) value of your non-monetary sponsorship payment (e.g. when its made wholly and exclusively for the benefit of your trade/company) as your business expense → freeing-up the amount you would have paid in corporation tax on the business expense amount. This is because:

► UK tax rules state that “You can deduct [qualified] sponsorship payments from your business profits before you pay tax by treating them as business expenses”

See → Specific deductions: advertising expenses: sponsorship

See → Corporation Tax (allowable costs)

Note: UK law allows the whole of the monetary value of the qualified sponsorship payment to be accounted for as an allowable business expense because a sponsorship payment made with anything of value (including intangible assets), not just with money, can also be deducted in the same way as it is for money, by treating it as a business expense; providing that the financial (cash-sum-equivalent/money’s worth) value of the non-monetary sponsorship payment (crystallised at the time of the payment) can be independently quantified and verified

► The tax rules in the USA, EU and other similar countries also allow for this but each legal jurisdiction has different sets of deductible ranges, rules and conditions

► If your sponsorship of specific eligible projects, causes, nonprofits and sports clubs are confirmed by Centrum as qualified social actions, then the financial (cash-sum-equivalent/money's worth) value of your sponsorship payments will count towards your social action obligations for originating XO

Can sponsorship payments be made with XO?

Yes, XO based transactions are permitted under UK and US law (and also by that of many other countries, see above for details) as XO is an exchange token cryptoasset recognised under UK and US law as taxable/chargeable property (hence, as legitimate consideration)

Once you originate XO, it becomes your legally owned asset/property, with an independently verifiable value and utility → you can then use your XO to make non-monetary (barter based) sponsorship payments to eligible projects, causes, nonprofits and sports clubs anywhere in the world

► All corporate sponsorships must be ‘wholly and exclusively for the purposes of the trade’ otherwise they will be disallowed as a deductible expenditure. In the US, there cannot be any arrangement or expectation that the [sponsor] will receive any substantial return benefit [from the sponsored] in exchange for the payment

► To meet both of the above (and other) conditions, it would be prudent to only sponsor registered charities where there is no personal or commercial link between the sponsor and the charity and also because in the UK payments qualify as business expenses if the charity:

• Publicly supports the sponsor’s products or services

• Allows the sponsor to use the charity’s logo in the sponsor’s own printed material

• Allows the sponsor to sell their goods or services at the charity’s event or premises

• Links from the charity’s website to the sponsor’s

► All of the above is simple and straightforward and is not (for US purposes) ‘substantial return benefit’ and some are also not subject to VAT in the UK

Do major companies use cryptoassets for commercial transactions?

Yes, cryptoassets are rapidly becoming mainstream and are now routinely being used by major global corporations for large-scale, enterprise-class transactions → see Deloitte and Goldman Sachs

Is the overall (end-to-end) process of sponsorship with XO a tax avoidance scheme?

No, this is a straightforward barter based sponsorship where the payment is with XO instead of money (barter transactions are permitted by UK, US, EU and other similar laws, see above)

Non-monetary barter based sponsorships of all types have been carried out by businesses of all sizes and by major global corporations for a very long time (and currently being carried out to the value of hundreds of billions every year all across the world), so this is nothing new. Only the use of XO as the medium of payment is new; but UK, US and other similar governments permit transactions carried out with exchange token cryptoassets such as XO

| In terms of the overall process: no aspect of sponsorship with XO falls under the UK GAAR or DOTAS legislations as it doesn’t meet any of the tests or hallmarks and there are no elements that require notification to (or to be approved of, permitted, registered or certified in advance by) any tax or other authorities

Why is the sponsor allowed to ‘write-off’ the financial value of their non-monetary sponsorship payment as a qualified business expense?

As with all types of valid and qualified sponsorship, this is the natural effect of the relevant laws → i.e. this is simply what the law inherently permits, and is incidental to the sponsorship itself

The principle is the same as personal tax relief from making personal donations to charity in that it reduces personal tax but is not regarded as a tax avoidance scheme or a loophole → it’s just what the law naturally allows and often encourages

The potential tax reduction resulting from sponsorship with XO is a tangential feature that may attract sponsors but there are clear primary commercial and social reasons why sponsors would use XO to sponsor eligible projects, causes, nonprofits and sports clubs, even if there is no tax benefit at all:

► The marketing, PR, advertising, publicity, goodwill, CSR, etc outcomes directly for the sponsor, enabling them to gain significant commercial and financial benefits from the invaluable publicity and goodwill generated, without risking their capital

► The positive ESG outcomes (some small, some transformative) for society → helping to generate real, measurable, potentially world changing social impacts

► The sponsor’s support of a wide range of industries and activities → sports, arts and culture, the creative industries, renewable energy, carbon and net-zero industries, etc

How does XO sponsorship benefit the sponsor?

If you sponsor eligible projects, causes, nonprofits and sports clubs using XO, you will get the normal marketing benefits of sponsorship (publicity, PR, goodwill, etc). However, because:

1 - You don’t pay for your XO with money, and

2 - Barter based sponsorships with XO won’t cost you any money

Your net financial benefits could be significantly greater than normal because you can still deduct the financial (cash-sum-equivalent/money's worth) value of the barter based (XO) sponsorship payments (if it’s qualified) from your business profits before you pay tax by treating them as business expenses → see working example

How does XO sponsorship benefit the sponsored?

They can use XO to raise funds, increase their social impact activities, incentivise and reward supporters, donors, the public, etc → see below for more information

Can a cryptoasset other than XO be used for sponsorship?

Yes, you can use any cryptoasset for sponsorship but unless it has a wholly and completely (at arm’s length) independent and verifiable financial (fair market) value, the stated cost of the sponsorship may not be accepted by your tax authority as an allowable business expense

Moreover, cryptoassets that have such independent values will not be cost-free for you to originate, create, maintain or to obtain and they often have wildly fluctuating open market prices, making fair value determination challenging

On the usage side: the sponsored party receiving cryptoassets in sponsorship payment from you must be able to put them to beneficial use. Most cryptoassets (especially newly created ones) don’t have practical real-world utility and those that do, often have volatile value fluctuations, making them ineffective for the sponsored party to receive as sponsorship payments and for shops and merchants to accept as full or part payment for goods and services provided by them

Why use XO and not other cryptoassets?

XO has a fixed and stable (and independently verifiable) financial (fair market) value along with a complex, extensive and expansive ecosystem and infrastructure built around it so that it has significant real-life, real-world economic utility → this means the eligible projects, causes, nonprofits and sports clubs you support can benefit greatly from its use

For instance, due to its fixed value and stability, XO can be used as full or part payment for a wide range of commercial and consumer goods and services worldwide. This is not something a newly created or just any cryptoasset can offer → XO is designed from the ground-up to do exactly this

► You don’t pay for your XO with money

► You pay ‘in kind’ with social actions (e.g. sponsoring eligible projects and causes)

► As you don’t pay with money, you can get very large amounts of XO (there is no upper limit)

► The use of cryptoassets is lawful in the UK, US, EU and in many other countries and they are used routinely by major global corporations

► Sponsoring with XO is based on UK, US and EU law and it doesn’t need notifying to or approval from any Government

► Sponsoring with XO will not cost you any money, so you can sponsor many eligible projects, causes, nonprofits and sports clubs, using large amounts of XO

► Sponsoring with XO will give you all the marketing benefits of normal sponsorship (publicity, PR, goodwill, etc)

► Sponsoring with XO is easy, just agree terms with the eligible projects or causes you want to sponsor, document this for accounting and audit purposes and transfer your XO to them

► Sponsoring with XO is beneficial for the projects or causes you want to sponsor, as they can use XO in a variety of ways

► Sponsoring with XO means your net financial benefits could be significantly greater than normal (see example below)

► You get (originate) 1 Million XO from Centrum (worth £1 Million GBP)

► You have to pay for your 1 Million XO → but not with money. Instead, you pay ‘in kind’ with social actions

► You must now carry out social actions independently valued at £1 Million (at minimum) to pay ‘in-kind’ for your 1 Million XO

► You opt to use your 1 Million XO to make a qualified sponsorship payment (worth £1 Million) to your chosen eligible projects, causes, nonprofits or sports clubs

► You do this by having a formal sponsorship agreement with them and transferring your 1 Million XO to them

► Your sponsorship payment, valued at £1 Million, is your full and complete payment ‘in-kind’ for your 1 Million XO that you got (originated) at step 1

► The eligible projects, causes, nonprofits and sports clubs you sponsor use their XO for beneficial purposes and you get all the normal benefits of sponsorship

► You can also immediately deduct the financial (cash-sum-equivalent/money’s worth) value of your 1 Million XO sponsorship payment (i.e. £1 Million) as a business expenses from your business profits

► In the UK and subject to your circumstances, this could free up to → £190,000

► You can use this freed-up money for any purpose (e.g. to increase cashflow for your business, to pay the registry charge, to give cash support to the same or other causes, etc)

► Become financially stronger and more resilient

► Build and increase supporter/donor loyalty and a long-term income/donation pipeline

► Reward current supporters/donors by giving them XO (just like giving them any other gift) and incentivise them to support/donate more

► Incentivise new supporters/donors and the public to support/donate more by using XO as a prize (e.g. in raffles, etc)

► Increase positive PR and publicity by giving away XO to the public

► Hold XO as an investment asset and gain from value increases (under special circumstances)

► Sell XO to supporters/donors or others to realise capital

► Sell XO on public and private exchanges to realise capital

► Use XO as a medium of exchange (i.e. facilitate trades and transactions)

► Use XO to buy goods and services from a wide range of merchants and retailers

► Gift XO to others (staff, volunteers, etc, who can use or on-gift XO to others)

XO utility → end users can use their XO to achieve a multitude of social, personal and business/corporate objectives and to make full or part payment for a wide range of high quality, high value commercial, consumer and personal goods and services worldwide; and to get private concessions and exclusive, privileged price reductions → see www.xo.cr

This is because XO has a fixed and stable value, multiple built-in economic incentives and based on its practical, real-world usage and inherent sophisticated ecosystem → the potential to power a new type of transformative economy driven by user momentum: