Category: Smart Contracts & Blockchain

1
AUSTRAC, ATO and ASIC DISCUSS THEIR REGULATORY VIEWS ON ICO’S
2
Bank of England Blockchain Settlement Project
3
IOT Group to set up blockchain centre in the Australian energy sphere
4
Australia’s New AML Rules: Reducing the Anonymity of Digital Currencies
5
Federal Court to decide whether tokens issued through an ICO are securities
6
FINMA publishes ICO guidelines
7
AMF synthesis of the contributions received on ICO regulation in France
8
BaFin second notice on ICOs
9
Wyoming Moving to Exempt Virtual Currency from its Money Transmitter Law
10
Maltese Government releases consultation paper on DLT and ICOs

AUSTRAC, ATO and ASIC DISCUSS THEIR REGULATORY VIEWS ON ICO’S

By Jim Bulling and Felix Charlesworth

On 16 April 2018, representatives from the Australian Securities and Investments Commission (ASIC), Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Tax Office (ATO) convened in Melbourne and delivered presentations outlining their regulatory views on Initial Coin Offerings (ICOs) and blockchain technology in general.

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Bank of England Blockchain Settlement Project

By Jonathan Lawrence

The Bank of England, the UK’s central bank, is undertaking a Proof of Concept (PoC) to understand how a renewed Real Time Gross Settlement (RTGS) service could be capable of supporting settlement in systems operating on innovative payment technologies, such as those built on Distributed Ledger Technology (DLT). It is hoped that the service will deliver a stronger, more resilient, flexible and innovative sterling settlement system for the United Kingdom to respond to the changing payments landscape. The RTGS blueprint, published in May 2017, stated that the renewed service will offer a diverse and flexible range of settlement models, to enable existing and emerging payment infrastructures to access central bank money.

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IOT Group to set up blockchain centre in the Australian energy sphere

By Cameron Abbott and Sarah Goegan

Technology company IOT Group announced this week that it has signed an Australian first energy and blockchain deal. In the agreement with Hunter Energy, IOT Blockchain will build a blockchain centre at the Redbank coal-fired power station in the Hunter Valley, two hours north of Sydney.

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Australia’s New AML Rules: Reducing the Anonymity of Digital Currencies

By Jim Bulling and Edwin Tan

The Australian Government has recently decided to regulate Digital Currency Exchange (DCE) providers, as they have inherent money-laundering and terrorism financing risks stemming from their high degree of anonymity and ease of cross-border transactions.  As part of this regulation, DCE providers must provide regular reports to the Australian Transaction Reports and Analysis Centre (AUSTRAC).  These reports must include, if known, the social media identifiers, unique device identifiers and digital wallet addresses of the relevant customer.

Many digital currencies operate on public blockchains that contain records of all transactions ever made, which is essential to their transaction validation and anti-tampering features.  This public nature enables every client on the blockchain network to verify that any currency used in relation to a transaction actually exists, by looking through the transaction history of a particular digital wallet address.  As such, being able to link digital wallet addresses to particular individuals will, over time, give AUSTRAC the power to trace suspicious transactions up the chain back to an individual.  It may also be possible for the Australian Taxation Office to use this information in the future to ensure that individuals correctly report any capital gains resulting from the trading of digital currency for taxation purposes.

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Federal Court to decide whether tokens issued through an ICO are securities

By Clifford Histed

In a criminal case in Brooklyn, New York, a federal court has been asked to decide for the first time whether tokens or coins issued through an initial coin offering constitute “securities” under U.S. securities laws.

On September 29, 2017 the SEC filed a civil complaint against Maksim Zaslavskiy, alleging that he had committed securities fraud and sold “illegal unregistered securities.”  The instruments at issue were tokens that Zaslavskiy allegedly sold to the public through initial coin offerings of his companies RECoin Group Foundation LLC and DRC World, Inc.  The lawsuit followed an investigation that apparently took less than 90 days to conduct, and that involved reviewing social media and online postings.  The investigation appears to have been conducted parallel with a criminal investigation by the FBI, and a criminal complaint was filed 28 days after the SEC complaint.  The SEC case was stayed pending resolution of the criminal case.

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FINMA publishes ICO guidelines

By Rizwan Qayyum

The Swiss Financial Market Supervisory Authority (“FINMA”) have published guidelines on initial coin offerings, after receiving numerous requests for guidance from start-ups aiming to launch their own ICO and considering Switzerland as their jurisdiction. Having reviewed the document, its evident that FINMA have aimed to create a regulatory environment which balances the central tenet of consumer protection whilst existing in an ecosystem conducive to innovation. The guidelines can be found here.

FINMA CEO, Mark Branson commented: “The application of blockchain technology has innovative potential within and far beyond the financial markets. However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework. Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system”.

FINMA notes that they have identified a sharp increase in the number of ICOs planned or executed in Switzerland, alongside the increased activity relating to enquiries about the current regulatory framework and its applicability.

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AMF synthesis of the contributions received on ICO regulation in France

By Claude-Étienne Armingaud

The French Autorité des Marchés Financiers has recently published a synthesis of the contributions it received in response to its public consultation on Initial Coin Offerings (ICOs) to obtain stakeholder views on how these new types of blockchain offerings might be regulated.

The consultation included a presentation of ICOs, a warning on the risks they present, a legal analysis of ICOs with respect to the rules overseen by the AMF and the regulatory options proposed by the AMF. Respondents were invited to give their views on all of these points.

The English version of the synthesis can be found here and our previous coverage of the consultation can be found here.

 

BaFin second notice on ICOs

By Rizwan Qayyum

On February 20, Germany’s financial regulator, the Federal Financial Supervisory Authority (“BaFin”) published a letter of advice on ICOs. This is the second statement from BaFin on the matter and it provides more substance to how they expect to manage the growing interest in ICOs within Germany.

The letter (an English version is not available at this time) notes that BaFin will conduct a “precise case-by-case examination” of tokens issued via ICOs to determine their legal status and application under current regulations. As such they have stopped short from issuing any sector specific guidance.

The letter is available here

Wyoming Moving to Exempt Virtual Currency from its Money Transmitter Law

By Dan S Cohen

With unanimous support, the Wyoming House of Representatives passed House Bill 19, which exempts virtual currencies from the state’s money transmission law. HB 19 defines virtual currency as a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and is not recognized by the federal government as legal tender. If enacted, the Wyoming Money Transmitter Act would no longer apply to the buying, selling, issuing, or taking custody of virtual currency, or receiving virtual currency for the purpose of transmitting that currency within or outside of the United States.

The proposed change comes almost two years after Coinbase announced its indefinite suspension of business in the state due to its belief that the Wyoming Division of Banking interpreted the Wyoming Money Transmitter Act to apply to entities offering hosted wallet services. Wyoming would become the first state to completely exempt virtual currency from its money transmitter law if the bill is adopted. To date, Illinois, Kansas, Tennessee, and Texas have issued guidance excluding some but not all virtual currency activities from their respective money transmitter laws.

HB 19 is one of several virtual currency and blockchain-related bills the Wyoming legislature is considering. Bills to exempt “utility tokens” from securities regulation, and to allow companies to store records and accept shareholder votes through blockchain technology are also under consideration. Wyoming political leaders are clearly moving quickly to adapt to the rise of virtual currency and blockchain technology.

Maltese Government releases consultation paper on DLT and ICOs

By Rizwan Qayyum

The Government of Malta has issued a consultation paper on the framework relating to distributed ledger technology, ICOs and cryptocurrency exchanges and wallet providers dealing in such assets. This follows their initial Discussion Paper on ICOs and Virtual Currencies published in November 2017, which outlined the basis for this consultation paper.

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