Crypto currencies – arrested development?Crypto currencies - a technical experiment for enthusiasts since the beginning has gradually became an exchange tool used by more than 5.8 million people with a total market capitalization over $100 billion.

At the moment crypto markets show the first signs of bottom formation. Bitcoin’s (BTC) dominance, the leading crypto currency, on which the pricing of all others remains, continues to decline after reaching a growth of about 57.80% in mid-September 2018. Bitcoin's stagnation has conditioned the trend towards the so-called altcoins. The good news for Bitcoin is that after the famous slump in value, its price is gradually rising. Its volume exceeded $11 billion during the 24-hour period on March 15, a level that has not been observed since April 25 last year.

The rapid development of the market did not give EU regulators enough opportunities to fully assess the potential risks and the need for a legal framework for crypto currencies. This, of course, does not mean that they have remained out of sight.

What is the blockchain development around the world?

In Japan, Mitsubishi UFJ Financial Group (MUFG), the world's fifth largest bank, has recently announced that it will launch a payment scheme by 2020.

Anthony Pompliano, one of Bitcoin's biggest supporters, wrote on Twitter: "The US stock and bond markets are closed today. Bitcoin never closes." The collapse of the Visa network last summer is an example proving Pampliano's defense claims about crypto currencies. In June, the Visa network fell due to hardware failure, prompting customers across Europe to look for alternative ways to pay for goods and services.

The US Securities and Exchange Commission (SEC) plans to clarify when securities laws can be applied to the sale of cryptо tokens. The Commission will focus on violations involving distributed ledger technology (DLT) and initial coin offer (ICO) as part of the new cybercrime efforts.

Another important player on the world stage - the Republic of China, sets national standards for blockchain technology. The related representative offices will establish a National Committee for Standardization of Allocated Accounting Technology by the end of the year.

The European Union, in turn, announced the launch of International Association for Trusted Blockchain Applications (INATBA) on its official website on April 3. According to a representative of Cointelegraph, who attended the ceremony at the European Commission in Brussels, more than 100 members, including IBM, Accenture and Deutsche Telekom, have signed the charter. According to the announcement, INATBA aims to bring together industry start-ups, small and medium-sized enterprises, regulators and standard-setting bodies to implement blockchain technology and DLT in everyday life.

The evolution of ICO

In China ICO's activity was banned in 2017, because it was announced as unlicensed financial activity. Shortly after, South Korea followed the example of the Chinese government, but is currently struggling to abolish the ban by preparing legal provisions to regulate ICOs.

In Switzerland the Financial Supervisory Authority ( FINMA ), has developed special guidelines to assess tokens by category, which will serve as a basis for further legal requirements.

Rules in blockchain issues were adopted in Malta, with the creation of an independent oversight body - the Malta Digital and Innovation Authority.

Regulators in the European Union have been working towards a regulation on blockchain technology, with each Member State in the meantime striving to build its own approach.

In America, the financial supervisor has not yet expressed on the status of ICO. According to the legal interpretation, they are investment contracts, with investors acquiring crypto currencies and expecting an "acceptable value" on the counterparty instead of acquiring tokens for service purposes.

According to the financial authorities, flexibility must be achieved - not as a lack of legal regulation nor as an opportunity for companies and startups to use ICO according to their own criteria, but by creating a regulation customized to different types and circumstances around ICO and tokens, as protecting investors.

The idea of ICO decentralized management is a hot topic, as the inclusion of many different jurisdictions makes blockchain technology very difficult. In the United States, a Coin Governance System (CGS) was established, a mechanism for protecting token holders from fraud and poor performance. The system holds the funds acquired during the ICO in an escrow smart contract archive. If investors are not satisfied with the progress of ICO, they may file a complaint with the System, which would lead to the withdrawal of the remaining funds if the arbitrator considers that the claim is relevant.

What is the Simple Agreement for future Tokens (SAFT) ?

Simple Agreement for Future Tokens (SAFT) is an investment contract offered by cryptocurrency developers to accredited investors. It is considered a security and, thus, must comply with securities regulations. When a company offers an investor a SAFT, it is accepting funds from that investor but does not sell, offer, or exchange a coin or token. Instead, the investor receives documentation indicating that, in the event that a cryptocurrency or other product is created, the investor will be given access. The SAFT is the commercial instrument used to convey rights in tokens prior to the development of the tokens’ functionality. The main thing is that by signing up, the investor provides a certain funds to the company. The investor receives a dividend from the company at a later stage upon the occurrence of certain pre-agreed terms.

Greta Stoyanova

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Tags: Cryptocurrency