Saturday, 14 July 2018

Regulation News - South Korea

"Expand the tax reduction for new growth engine investment and ease requirements for new technology support, including the blockchain technology investment support.."

Vice Minister of Strategy and Finance Ko Hyoung-kwon presiding over the 4th Vice Ministerial Meeting on ‘Growth through Innovation’ held on July 13

Friday, 13 July 2018

Regulation News - Bermuda

"I am pleased to advise this Honourable House and the public of the Initial Coin Offering Regulations that have been published to supplement the Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018."

Ministerial Statement by the Premier and Minister of Finance, The Hon. David Burt, JP, MP

Saturday, 12 May 2018

Robot Love

run robot run... ;-)

we're getting there...

Friday, 11 May 2018

ICO, Tokens and the Emergence of Tokenomics

Tokenomics... aka the tokenisation of everything, well lots of things now and more things later.

The great Voltaire once said:-

"Paper money eventually returns to its intrinsic value -- zero."

..if one was to dare paraphrase Albert Camus, he said “Having money is a way of being free of money”

could now well read:-

“Having crypto is a way of being free of money”

of course the converse may equally apply <g>

“Having money is a way of being free of crypto”

Enter Tokenomics

The Token types described below are not definitive and simply represent my own view of how the Token market may evolve:-

  • Physical Asset Tokens
  • Digital Asset Tokens
  • Equity Tokens
  • Futures Tokens
  • Payment Tokens
  • Reward Tokens
  • Service Tokens
  • Utility Tokens
  • SAFT's
  • ILPT's

Token TypeExampleDLT Element
Utility Tokens: the Maltese have an excellent definition; "..has no utility, value or application outside of the DLT platform on which it was issued.."Filecoin for file storage, Rouge for coupons irrefutable ownership, trade-ability
Physical Asset Tokens represent an item that exists on the physical planegold, diamonds, cars, race horses, houses, art.irrefutable ownership & origin - in a word provenance
Digital Asset Tokens represent an item that exists on the virtual or digital planea song recording, a discrete piece of software code, intellectual property or a protocolirrefutable ownership & origin plus the output be that royalties or licensing or simply unit sales
Equity Tokens represent an exchange of cryptocurrency or fiat in return for a percentage of the equity of the entity createdPhysical: a limited company, partnership, a public company, a co-operativea Decentralised Autonomous Organisation, a Decentralised Semi-Autonomous Organisation
Futures Tokens and their subsets represent an exchange of value now for an exchange of higher value later (hopefully)Futures Tokens; a concert venue sells Tokens for future events in 3 years time = interest / equity free capital now. irrefutable ownership, trade-ability
Payment Tokens: the Swiss have an excellent definition; "Payment Tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects.Perhaps many of the circa 900 coins listed on ownership, trade-ability
Reward Tokens: delivering a "reward"Frequent flyer or repeat purchase, simply scan your public keyirrefutable ownership, trade-ability
Service Tokens: delivering a "service" entitlementVehicle or equipment service or upgrade entitlement - simply scan your public keyirrefutable ownership, trade-ability
SAFT's - Simple Agreements for Future Tokens are essentially a form of security sold to accredited investorsE.g. Telegram SAFTirrefutable ownership, trade-ability
ILPTs - Initial Loan Procurement TokensInitial Loan Procurement Tokensirrefutable ownership, trade-ability
SAFFS's - Simple Agreements for Future Shares are essentially a form of security sold to accredited investorsthe logical evolution of the medium?irrefutable ownership, trade-ability

Note: many ICOs have opted for the 'Utility token' descriptive term in the belief that this may magically prevent their classification as a security sometime in the future.

KYC and all that...
Whilst the crypto community could be described as being resistant to KYC there are certain advantages in certain applications. For example with regard to Reward or Service tokens, making the assumption that the KYC element is completed at the initial stage (where appropriate) any subsequent engagement will not require the need for the somewhat boring lifelong repetition of ones identity that is the hallmark of government inefficiency everywhere.

On the subject of efficiency a somewhat simplistic example could be if one obtained Protocol tokens in a developing Decentralized Application (DAPP) and that DAPP in turn led to or produced a utility in the style of Zapier; so a Protocol Token to a functional DAPP to a Zap all via an autonomous ERC20 Smart Contract - a fully self contained entity, a DAO child, as it were. 

As was pointed out in the Blockchain Policy Initiative Report:-
"... such protocol is fully transparent and by this the “promise of functionality” of the protocol can be completely validated by an actual or potential token holder. Considering this an intrinsic token does not require any trust or faith ergo it does require no law ensuring such behavior."

When I wrote about The DAO back in April 2016 it was envisaged that:-

"The Token holders are responsible for proposals they accept, this responsibility extends to;- 
  • legal issues
  • the auditing of proposal code
  • the evaluation of proposal merits"
The Decentralized Autonomous Organization (DAO) - April 2016

Alas we have gone away from the cooperative / community type structure envisaged by The DAO to a situation where in many cases Token holders do not obtain any rights other than the ability to (possibly) profit from appreciation in the value of their tokens. Nonetheless there are a number of ICO's where Token holders will be entitled to a share of any possible profits downstream.

The Current State of Play

Malta Financial Services Authority (MFSA)

The MFSA have produced very detailed documents as part of a process to codifying this in legislation and it may be useful to read all their documents for a full appreciation of their position. (See References for links)

With regard to Tokens they say:-

..further subcategorised into (a) securitised and (b) utility tokens. ‘Securitised tokens’ are defined as those embedding either underlying assets (akin to commodities) or rights (e.g. quasi-equity rights) and effectively refer to those tokens that qualify as financial instruments (for further details please see Section 4 of this Discussion Paper). ‘Utility tokens’ are further defined as those providing either platform/application utility rights or protocol access rights, without any underlying.

The Swiss Financial Market Supervisory Authority FINMA categorise tokens as follows:-

Payment tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects. Tokens may in some cases only develop the necessary functionality and become accepted as a means of payment over a period of time.

Utility tokens are tokens which are intended to provide digital access to an application or service.

Asset tokens represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives.

The Monetary Authority of Singapore have this to say:-

2.3 For instance, a digital token may constitute –
2.3.1 a share, where it confers or represents ownership interest in a corporation, represents liability of the token holder in the corporation, and represents mutual covenants with other token holders in the corporation inter se;
2.3.2 a debenture, where it constitutes or evidences the indebtedness of the issuer of the digital token in respect of any money that is or may be lent to the issuer by a token holder; or
2.3.3 a unit in a collective investment scheme (“CIS”), where it represents a right or interest in a CIS, or an option to acquire a right or interest in a CIS.

Please note that the characteristics of a share or a debenture described in paragraph 2.3.1 or 2.3.2 respectively are not exhaustive.

The above description should be read in conjunction with the footnotes contained in the MAS document -

The European Securities and Markets Authority (ESMA) 

"Depending on how they are structured, ICOs may fall outside of the scope of the existing rules and hence outside of the regulated space. However, where the coins or tokens qualify as financial instruments it is likely that the firms involved in ICOs conduct regulated investment activities, such as placing, dealing in or advising on financial instruments or managing or marketing collective investment schemes. Moreover, they may be involved in offering transferable securities to the public."

The key EU rules listed below are then likely to apply.
  • Prospectus Directive
  • The Markets in Financial Instruments Directive
  • Alternative Investment Fund Managers Directive
  • Fourth Anti-Money Laundering Directive

This statement is accompanied by "ESMA alerts investors to the high risks of Initial Coin Offerings (ICOs)" - although they do not provide any categorisation of the emerging Token class per se.

Ireland - Department of Finance 

Discussion Paper: Virtual Currencies and Blockchain Technology - March 2018
With regard to ICO's they say:-

"In December 2017, the Central Bank of Ireland issued a warning to consumers and investors in relation to investing in newly issued virtual currencies via Initial Coin Offerings. This announcement reflected an earlier warning that was released by the European Banking Authority in 2013. "

Regrettably the Department state that the purpose of this paper is not:

  • To provide guidance or set forth policy in relation to virtual currencies trading, purchasing, selling, or raising funds via Initial Coin Offerings (ICO).
  • To imply that virtual currencies are in any way a substitute for central bank issued currencies


A few Governments are taking a proactive approach, other Governments have not taken a position, or are taking a laissez-faire position or a negative position or perhaps are not in a position to take a position. <g> If this was a quiz I could list the following countries and let readers use their imagination to fit countries to the above positions:-

Malta, Gibraltar, Singapore, Switzerland, Ireland, France, America, England, 



The Blockchain Policy Initiative Report was a community-driven refined groundwork to help eliminate the regulatory uncertainty around distributed ledger technology.

With regard to the genesis of BPIR I'd suggest readers have a look at Neufund, a Berlin-based blockchain startup building a community-owned investment fund.

* Tokens have been described as Intrinsic and/or Protocol Tokens in the Blockchain Policy Initiative Report, Tokens as Novel Asset Class (July 2017). In the BPIR Doc they are described as representing rights or assets on the blockchain. This is somewhat confusing as it would seem that to split these into separate categories helps make a clear delineation between the two types.

**The ERC20 technical standard was proposed on November 19, 2015 by Fabian Vogelsteller.

Malta Consultations

Note: these files may go to auto download

The establishment of the Malta Digital Innovation Authority; the Framework for the Certification of Distributed Ledger Technology Platforms and Related Service Providers; and a Virtual Currency Act.

Consultation Paper on the Financial Instrument Test

Monday, 2 April 2018

ICO News - Pantos

Bitpanda, the well respected Austrian based digital currency trading platform have announced Pantos, the first Multi-Blockchain Token system.

"It is an open-source, open-innovation driven research project, bringing all major blockchain platforms closer together, which will set new standards for decentralised cross-chain token transfers."

Pantos is a collaboration between the Technical University of Vienna and Bitpanda.  An important output of the collaboration will be their Token Atomic Swap Technology (TAST). The project output will be released as an open-source technology.

The full article is available at:-

Monday, 19 March 2018

The American CLOUD Act

A New Backdoor Around the USA Fourth Amendment: The Clarifying Overseas Use of Data (CLOUD) Act.

The Electronic Frontier Foundation have drawn attention to the US CLOUD Act which has two major components:-
  • First, it empowers U.S. law enforcement to grab data stored anywhere in the world, without following foreign data privacy rules.
  • Second, it empowers the US President to unilaterally enter executive agreements with any nation on earth, even known human rights abusers.

S. 2383 -

H.R. 4943 -

Please read the full article here:-

In a further background article entitled "The CLOUD Act: A Dangerous Expansion of Police Snooping on Cross-Border Data" EFF say:-

"The Clarifying Overseas Use of Data (CLOUD) Act expands American and foreign law enforcement’s ability to target and access people’s data across international borders in two ways. First, the bill creates an explicit provision for U.S. law enforcement (from a local police department to federal agents in Immigration and Customs Enforcement) to access “the contents of a wire or electronic communication and any record or other information” about a person regardless of where they live or where that information is located on the globe. In other words, U.S. police could compel a service provider—like Google, Facebook, or Snapchat—to hand over a user’s content and metadata, even if it is stored in a foreign country, without following that foreign country’s privacy laws."

In the context of the above it is most interesting to observe that this Act conflicts with the EU’s General Data Protection Regulation (GDPR). Christine Galvagna, the German Chancellor Fellow at the Global Public Policy Institute (GPPi) in Berlin provides an illuminating article:-

"The GDPR will generally prohibit a company that processes EU citizen data from sharing personal data with third state (e.g., US) law enforcement agencies, except through a process created by a mutual legal assistance treaty (MLAT)." 

Ms Galvagna goes on to say:-

"A state’s jurisdiction normally ends at its territorial boundaries. Absent a legal basis, the exercise of jurisdiction beyond those boundaries undermines another state’s sovereignty. This is a cornerstone of international law."


It is disappointing that the principles of international law are being disrespected and that we face a further attack on net neutrality.

The EFF are asking people in the USA to contact their representatives to voice their opposition to this act.

For those in the EU you can search for your MEP here:-


Saturday, 3 March 2018

ICO / Token Sale Regulations

Anyone following the emergence of the ICO as a fundraising mechanism will be aware of some of the developments in this space, particularly over the last 24 months. As the market continues to evolve and mature it is encouraging to see the emergence of guidelines from a number of governments worldwide.


Crowdfunding was essentially an initial first step in the democratisation of capital - we saw some excellent platforms like; 

The pervasive nature of internet technologies allows founders or promoters to put projects in front of prospective purchasers globally. It is normal to provide the development back story, the detail of prototype development, the roadmap. This then forms the story designed to persuade investors to pledge their capital for a future product, or idea, or a reward of some description. There is often very robust conversation around the project together with direct engagement with the founders.


It could be argued that the ICO / the Token offering is a logical extension of the crowdfunding concept. The numbers are persuasive, this is simply people voting with their own money.


Latest figures:

Whilst it is recognised that any investment related project has the propensity to attract bad actors the consensus is that self regulation is both necessary and desirable and in the interest of all participants. This is especially relevant to those investors (and founders <g>) coming to the market for the first time.

An interesting aspect of the ICO is that to a large extent there is no equity on offer and none expected. It is expected that this will change as the mechanism evolves.

A number of financial regulatory bodies have produced guidance / rules or in some cases have prohibited ICOs entirely. (as is the case for the China and the USA, although this prohibition in the US may not apply to what is known as 'accredited investors'. 

The countries taking a proactive / sensible approach include:-

  • Australia 
  • France
  • Germany
  • Malta
  • Switzerland
  • Singapore 

Australia was one of the first with definitive guidelines and a cohesive policy for both buyers and sellers issued by the Australian Securities and Investments Commission (ASIC).

a machine translation of the (French only) document released by AMF - The AMF regulates the actors and products of the French financial center: financial markets and their infrastructures, listed companies, financial intermediaries authorized to provide investment services or financial investment advice.

The original release

The consultation document in English can be downloaded here:-

On Feb 22nd the AMF released an outline of the feedback received

BaFin - the German Federal Financial Supervisory Authority, a machine translation of the German only document issued by BaFin.
here is the original release


Malta Financial Services Authority (MFSA) is adopting an excellent approach in that they issued a discussion document and requested industry feedback with a view to laying down legislation related to Virtual Currencies, ICO's and Distributed/Digital Ledger Technology.

The PR notice can be found here:-

and the full discussion document here:-

The MFSA went a lot further and issued an additional consultation as a precursor to the establishment of the Malta Digital Innovation Authority. The intention of the Maltese Government is to now put in place the necessary legislation.

"The establishment of the Malta Digital Innovation Authority; the Framework for the Certification of Distributed Ledger Technology Platforms and Related Service Providers; and a Virtual Currency Act."

"The Monetary Authority of Singapore is the central bank of Singapore. Our mission is to promote sustained non-inflationary economic growth, and a sound and progressive financial centre."

FINMA is Switzerland’s independent financial-markets regulator. Its mandate is to supervise banks, insurance companies, exchanges, securities dealers, collective investment schemes, and their asset managers and fund management companies.

The Crypto Valley Association is an independent, government-supported association established to take full advantage of Switzerland’s strengths to build the world’s leading blockchain and cryptographic technologies ecosystem.

The EU

The European Securities and Markets Authority (ESMA) has issued two statements
ESMA alerts investors to the high risks of Initial Coin Offerings (ICOs)

ESMA alerts firms involved in Initial Coin Offerings (ICOs) to the need to meet relevant regulatory requirements

ESMA says:-
"Depending on how they are structured, ICOs may fall outside of the scope of the existing rules and hence outside of the regulated space."

Industry Led
ICO Governance: a Protocol-Based Self-Regulation of Token Sales in
Decentralized Capital Markets by Miko Matsumura

The ICO Governance Foundation (IGF) is a decentralized global organization and Swiss Foundation whose mission is the establishment of a protocol-based global community that performs a self-regulatory function for ICOs in decentralized capital markets.


Like many of the innovations delivered by internet technologies their adoption is largely driven by citizen engagement. The fact that many governments worldwide are resisting both crypto currencies and the ICO may have more to do with the control of capital than the potential risks for investors. 


Caveat emptor  "Let the buyer beware" applies to any and all transactions one ever engages in. Due diligence or careful thought and analysis is absolutely essential when considering ICO's or any crypto currency related instrument.