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The situation with the regulation of cryptocurrency assets and blockchain technology for 2019

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In 2017 and 2018, the number of litigation related to cryptocurrency blockchain assets has increased dramatically, mainly in the United States. These litigations are of a different nature and include corporate disputes (R3 versus Ripple), claims of clients versus service provider companies ( US versus Coinbase ), regulatory actions in court ( SEC versus AriseBank ) and others.

The overwhelming majority of cases are related to allegations of fraud or claims for unregistered offers of securities made by supervisory authorities or individuals who participated in the initial offers of coins (ICO) .

The key legal question in such disputes is whether the token is considered a security by the law of the country where the company attracting the funds is located or by the law of the country where the person participating in the proposal was located or lived?

Tokens, in most cases, are classified according to:

  • Functional;
  • Technical specifications;
  • The way of creation;
  • Legal criteria.

Today, in terms of the right, cryptocurrency blockchain assets are correctly divided into two main categories: security tokens and all other tokens. This is due to the fact that the key differences in the legal regime for the existence of these rights objects take place precisely in this plane.

Inside these generic concepts, tokens can be classified into different types. When we talk about security tokens, we mean securities issued using blockchain technology. However, is a tokenized security a new object of law for which special regulation needs to be developed?

If we turn to history, the security, as an object of law, emerged as a way of securing a certain amount of rights on a certain carrier in order to simplify the transfer of such rights between the participants of civil circulation. Initially, such a carrier was paper, hence the name – “valuable paper”, that is, paper that represents value. With the advent of computers, this storage medium has become electronic. Now all the securities that are in circulation on the public market exist in electronic form and are recorded by the registrars and depositaries.

Blockchain technology is just a new way of securing rights to a security in electronic form. In theory, this is a more efficient way than current centralized accounting. Thus, a tokenized security is not a new object of law, which is somehow different from an ordinary security, but a new way of accounting for such rights.

Different jurisdictions have different views on the term “security”. The approach to the definition of what exactly is a security in the whole world (Europe, Russia, Asia) is more formal and is based on reading the corresponding definition in the relevant legislative act of the respective country. The list, as a rule, includes a share, a bond, another debt instrument, a certificate of ownership of shares in the fund, and so on. That is, everything that does not fall under this definition is not formally a security from the point of view of the law.

The American SEC regulator broadly interprets the term “security” and looks not only at the lists of instruments specified in US securities legislation, but also draws attention, first of all, to what particular rights such securities provide to their holders. For example, in the release released in mid-2017, the SEC analyzed in some detail the fact that tokens can be recognized as an investment contract, that is, a tool in accordance with which their owners invest money in certain enterprises for the purpose of making a profit and do not accept participation in enterprise management.

Hence, the key thesis of the crypto industry 2017–2018 – structure the token so that it is not a security, and sell as you want everywhere except in the United States and those countries where the sale of tokens is prohibited. The phrase “so that it is not a security” just means the requirement that the token does not consolidate the rights usually associated with the rights to such securities as stocks and bonds.

In general, the concept of financing for utility tokens has grown out of the crowdfunding industry of startups through prepaid products that are still being created. It was known before the appearance of the ICO, but there were other amounts of funding. The 2017–2018 ICO brought funding to the promise of future products or services to a completely different level, and this in itself should be alarming. But the key here is not this: the acquisition of a still uncreated product, for example, on Kickstarter, does not imply the creation of a secondary market for this product before its appearance.

In 2017 and 2018, the overwhelming majority of projects initially understood that the success of raising money for the realization of their ideas is possible only with the promise of a secondary market. The presence of a highly liquid secondary market on an empty, from the functional point of view, utility-token puts a big question mark regarding the correctness of the thesis that once such a token formally does not fall under the definition of securities, you can do anything with such an investment special regulation should not be applied. The correctness of this thesis is still subject to verification.

The issue of tokenized securities is not an improved version of ICO; rather, it is a traditional, in accordance with securities market legislation, method of raising capital, presented in digital format. From the point of view of the right, the issue and circulation of such instruments is subject to the same rules as the issue of classic securities. That is why the largest and most well-known tokens on the market structured the supply of tokens, taking into account the rules governing the global offering of securities.

The blockchain-ecosystem ecosystem is a combination of a number of elements that together ensure the implementation of a whole range of actions: from creating tokens to trading digital securities. Issuing tokens, complying with legal requirements, storing, carrying out subsequent transactions and realizing rights for such tokens — these relationships can be automated in many aspects.

Blockchain provides an interesting opportunity through the use of smart contracts . The release of securities as tokens theoretically allows you to automate the fulfillment by the issuer of its obligations under the securities (for example, to automate voting, dividend payment), which certainly provides very interesting and attractive opportunities.

Accounting for rights to securities and fixing the transfer of the right to them in many jurisdictions should be carried out in accordance with certain rules, often with the involvement of special professional intermediaries (registrars, depositories, custodians). In this sense, rights accounting using blockchain technology may contradict the law.

The main problem is that different countries have different systems of law and use different approaches to their accounting. In many states with a continental law system (for example, Germany) there are strict requirements regarding the registration of rights to securities of private companies (the need to attract a notary, keeping a register in paper form, and so on).

In other countries, such as Cyprus, there are no strict requirements as to where the registry is maintained. For the securities rights accounting system to work, changes will be required not only in the laws of countries with a continental law system, but also in the laws of countries with a common law system.

At the moment, special regulation for recording rights to securities using blockchain technology exists only in the state of Delaware and in France. The state of Delaware, in which most of the US companies are registered and which has the most developed corporate legislation, in 2017 approved a law allowing the use of the blockchain to record securities (rights accounting using a distributed registry).

In December 2018, a decree was passed in France, effectively securing the possibility of using the distributed registry technology for registering securities, fixing the transfer of rights on them and identifying the owner without the involvement of registrars, depositories and custodians as intermediaries. In a number of jurisdictions, such as Luxembourg, the countries of the Baltic region, as well as in Russia there are similar bills.

Thus, the recognition at the legislative level of the possibility of recording rights to securities using advanced technologies and systems, including blockchain technology, is one of the prerequisites for the development of the market for tokenized securities.

Publication date 06.02.2019
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In France, there will be another 10,000 points to buy cryptocurrencies for the euro

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French cryptocurrency startup Digycode is expanding its network. The company plans to open 10 thousand points for the sale of cryptocurrencies in France, cooperating in this matter with the payment giant Ingenico. The startup has already shared this good news on Twitter.

According to DailyHodl, a crypto startup will offer prepaid coupons, which can be purchased in three available options (20, 50 or 200 euros). A potential customer must go to the Digycode website and redeem a coupon. In this case, the euro will be converted into any of the selected currencies:

“Digycode integration is the result of a fruitful collaboration between Digital Service and Ingenico. By the way, tobacco shops equipped with Devlyx can offer our development to their customers. ”

Recall that in France they actively implement cryptocurrencies . We recently reported that by the end of February, 6.5 thousand tobacco shops will be equipped with devices for selling digital currencies. This is done, first of all, for those people who experience difficulties with buying Bitcoin online .

Publication date 18.02.2019
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The price of Bitcoin reached a monthly maximum, the bulls are preparing for a breakthrough for $ 4,000

On Monday, February 18, the price of the first cryptocurrency reached $ 3,700 at the Bitstamp exchange, thereby updating the monthly maximum. In the opinion of CoinDesk Markets analyst Omkar Godboul, this confirmed the formation of a downward wedge, a reversal pattern, which indicates a rapid change in trend. Nevertheless, Godboul noted that bitcoin is still stuck in a symmetrical triangle on the daily chart. At the same time […]

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On Monday, February 18, the price of the first cryptocurrency reached $ 3,700 at the Bitstamp exchange, thereby updating the monthly maximum. In the opinion of CoinDesk Markets analyst Omkar Godboul, this confirmed the formation of a downward wedge, a reversal pattern, which indicates a rapid change in trend.

Nevertheless, Godboul noted that bitcoin is still stuck in a symmetrical triangle on the daily chart. At the same time, the inverted head and shoulders on the four-hour chart speak in favor of breaking through the upper boundary of the triangle at $ 3,760, which will open the way to $ 4,030.

Note that today's growth of Bitcoin is supported by high volumes and an increasing number of long positions (38,237 BTC on Bitfinex). A break above $ 3,760 will change the situation on the daily chart in favor of the bulls, but failure will increase the chances of bears to return to $ 3,300.

The 5-day and 10-day moving averages (MA) on the daily chart point to the possibility of success for the bulls, while the 14-day RSI reached 61, the highest since September 2018.

It is noteworthy that on the four-hour chart RSI shows overbought. This may indicate a possible rollback before the rally to the specified values, says Godboul.

Meanwhile, Ethereum again entrenched in second place CoinMarketCap. Over the past 24 hours, the coin has grown by almost 10% and is close to the $ 140 mark. EOS and Bitcoin Cash come on the heels: they have 6.5% growth.

CoinMarketCap data

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Overview of the most important events in the cryptocurrency market at the moment

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Since the beginning of 2019, more and more news has appeared on the crypto-market, which indicate a significant “maturing” of the entire industry. Compared to the previous year, experts note a faster pace of technology development, as well as a steadily growing dynamics of the market value of cryptocurrencies.

This is due to the influx of new capital from global financial corporations, which are not ready to further lose the opportunity to seize a competitive advantage, given the surge in interest in blockchain and cryptocurrency in previous years.

The current situation with Bitcoin ETF and the launch of the Bakkt platform

It is worth expecting that the issue of state regulation of transactions with Bitcoin that is relevant for 2018 will remain a stumbling block for many more months. However, the ending week brought some clarity on the situation with applications to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

First, we note the decision of the CFTC management, following another blocking organization, the SEC, which has taken up a more detailed study of the blockchain and how to use it. In a press release published on the official website of the Office, a decree is issued on the beginning of closer monitoring and research of the crypto-industry by the Market Watch Department (DMO).

In this decision, experts see the attempts of the state department to collect the most relevant conclusion regarding the application for the start of trading in Bitcoin futures on the Nasdaq exchange. Bakkt platform can help them in this matter, which also hopes to receive approval from regulatory organizations at the start of trading in bitcoin futures contracts with physical delivery.

Bakkt has already attracted funding of more than $ 182 million from the Microsoft venture capital fund, as well as Starbucks and a number of other organizations. Moreover, by the end of this year, another $ 25 million could be attracted, as told by one of the directors of the parent exchange ICE (also owns the New York Stock Exchange) Scott Hill during a speech to investors.

Continuing the theme of financial regulation and its interaction with cryptomere, it is necessary to note the interesting idea that the SEC considers tokens of functioning networks as non-securities. SEC Commissioner Esther Pierce, who received the tender nickname “crypto-mother” in the community for her support of cryptocurrencies, unlike many of her colleagues in the field of traditional finance, has a similar opinion.

Pierce has already officially confirmed the opinion of experts about the impossibility to apply the legislative base on securities in relation to utility tokens. This decision opens up new opportunities for the development of a crypto market without the threat of sanctions from the powerful American regulator, although creating investment contracts will already require meeting all SEC requirements that are not yet fully defined due to the novelty of the cryptocurrency subject.

Also this week, the American investment company Reality Shares, which specializes in managing client assets, decided to create an exchange-traded investment fund with access to Bitcoin futures on the NYSE Arca trading floor. For this, a corresponding application was filed with the SEC, but the very next day it was voluntarily withdrawn.

The whole background of such a lightning decision lies in the call from the representatives of the regulator, which came to the lawyers of the company Reality Shares, who told about the impossibility to approve any applications at the moment in accordance with the current law on exchange funds adopted in 1940. It should be noted that if the application had not been rejected within 75 days, then it would have all the chances of automatic approval.

Upcoming hardfork Constantinople in the Ethereum blockchain

The latest news suggests that the Ethereum technical team is trying to remove the last obstacles before the Constantinople network update scheduled for the end of this month.

Recently, programmers from the Ethereum Foundation described an error in smart contracts identified in the software update being developed (in addition to a double spending error), which allowed replacing the rules of a self-destructing smart contract, which could lead to loss of funds. This can be done using the Create2 function. To protect against this, developers are going to prescribe strings to remove the danger of additional playback.

While the process of debugging this update is in full swing and continues to identify errors. Recall that the ETH network update will occur approximately at block 7280000, which will be produced in the interval between February 26 and 28.

At the same time, activities are continuing to prepare the community for the upcoming changes in the field of mining of the ether . So, on February 10, the issue of this cryptocurrency dropped to 13,000 units, although a few months ago this value was 20,000, and the time taken to extract one block rose to 20 seconds. It is this event that led to the rise in the cost of many cryptocurrencies at the beginning of the week, so the hopes of many investors regarding the appreciation of crypto assets are related to the launch of the hard-core Constantinople.

Argentina introduces bitcoins in public transport

Argentina can become one of the pioneers of the use of cryptocurrency not only in the financial world, but also in everyday life. Now you can pay for public transport in many major cities using the SUBE contactless card, replenishing it in the offices of bus stations, ticket sales terminals and kiosks of the national lottery. To do this, it was first necessary to conclude an agreement at the state level with Bitex cryptographic bureaux.

Now you can pay for the use of buses and subways in this South American country by first throwing money not only in fiat currency, but also with the help of bitcoins. In the near future, the function of paying utility bills using bitcoin wallets will also be available.

JP Morgan launches its own cryptocurrency JPM Coin

Wall Street continues to take confident steps to familiarize itself with the world of cryptocurrencies. And if Goldman’s acquisition of Circle startup by the investment bank Goldman Sachs, which subsequently introduced its own cryptocurrency USD Coin, became one of the first successful examples, then today you can declare a bold decision by another, no less large financial organization, JP Morgan, to launch your own JPM Coin .

In the coming months, the bank’s team will conduct product testing for possible use in third-party credit organizations and corporations conducted by a financial conglomerate, which amount to $ 6 trillion.

The main idea of the project being created is to increase the speed of payments made, which today only provides the blockchain, and its reliability must be guaranteed by smart contracts. The main competitors in the form of an international payment system between SWIFT banks are hopelessly outdated, and assets held in JP Morgan accounts in the form of dollars, securities and others need to transfer ownership more quickly when they are sold.

Created cryptocurrency will be provided in the ratio of 1: 1 US dollars, which will be credited to the vaults of institutional clients of the bank, that is, ordinary investors will not be able to use the new cryptocurrency.

By the way, speaking of Wall Street and its interest in the world of cryptocurrencies, we can note the fact that one of the world's largest technology stock exchanges Nasdaq from February 25 will begin to provide information about the current rate of Bitcoin and the air almost in real time. You can learn about the current situation on the spot market from the most liquid exchanges with a delay of 30 seconds from these Bitcoin Liquid Index (BLX) and Ethereum Liquid Index (ELX) indices.

Technical analysis of cryptocurrency rates

Speaking about the influx of new funds from large capital, we also note the rising cost of Bitcoin on the leading exchanges. So, at the beginning of the week there was a breakthrough from the previously designated supports within the range of $ 3,465– $ 3,500.

Bitcoin

At the time of this review, trades are slightly above $ 3,600 with the potential to continue moving after the completion of the short-term correction further up to $ 3,800 and key resistance values of $ 3,900– $ 4,000.

Capital inflows or approval of applications for the creation of ETFs or bitcoin futures can lead to a resumption of global growth. Provided that the verge of the Vimpel technical analysis model is overcome, we can expect the completion of the general correction that began in 2018, with the likelihood of subsequent withdrawal in the coming months to the $ 4,150, $ 4,500 area and $ 5,000– $ 5,041 area, where there are many levels of local extremes that will confident goals of the upcoming growth.

Do not forget about long-term goals in the form of a cluster of levels of $ 5,280– $ 6,000, which can also be achieved in the framework of 2019. Also, one of the factors in favor of global demand for Bitcoin could be the search for alternatives within the framework of the expected weakening of the US dollar this year and overvalued gold as a protective tool.

Ethereum and Altcoins

Ethereum after the development of a short consolidation within the limits of $ 100- $ 110 the previous week as part of this went into a decisive growth to the previously identified goals of $ 120 and in the future it can also reach $ 130, where a strong resistance level passes. This led to the return of the asset to the 2nd place in the capitalization rating, according to coinmarketcap .

In the short term, a decline to $ 100- $ 110 may be possible, but most likely is the conclusion of purchase transactions in anticipation of global growth to the current year's highs of $ 150 and $ 160 in the coming months.

Lightcoin also showed rapid growth and reached our first goals as $ 36 and $ 40, while maintaining the prospects of reaching $ 43.50 and the area of $ 48.50– $ 50 in the next weeks.

The most important events kryptorynka on February 2019

  • On February 11, Airdrop BitTorrent (BTT) was held for TRON (TRX) holders, and the distribution will last until February 2025, which may lead to TRX volatility.
  • Expiration of bitcoin futures contracts on the CME – February 22.
  • For the period from February 26 to 28, an update of Constantinople in the Ethereum network is scheduled, which has already led to an increase in the rate of the ether, and may also lead to volatility on a specified date before it.

Publication date 18.02.2019
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