Legal Considerations: Regulatory compliance for Blockchain Companies

the past year (2017), regulatory compliance became a concern for
Blockchain companies. Blockchain companies became aware and conscious of
the need to comply with legal considerations.

The Internet was
once an unregulated playground for all sorts of experimentation to
flourish. Technologies like Bitcoin took root quietly, and without much
fanfare. However, over the years, Bitcoin and Blockchain technologies
became more widely adopted. Given the nature of Bitcoin’s open source
code, it was not surprising that the project had been forked and
imitated widely.

This year, regulatory bodies worldwide began to take a keen interest
into Bitcoin, Blockchain, and the suddenly explosion in the popularity of
initial coin offerings (ICOs). As you may know, ICOs have exploded upon the
tech scene, helping their creators to raise hundreds of millions of dollars,
for the purpose of funding a project, without giving up any shares in their
companies. The result is that startups are suddenly able to get funding while
retaining full control of their companies.

However, the hack on the DAO, and the ensuing drama, in which there was an “hard fork”, for the recovery of stolen cryptocurrency known as Ethereum, led to the SEC in the US to declare in August 2017 that certain types of coin offerings may be unlicensed securities offerings. This led to the outright ban of ICOs in China, follows by Korea, and a swathe of regulatory rulings popping up in every developed country. Singapore and Switzerland remain favourite destinations for Blockchain startups looking to start an ICO.

The Unregulated Status of Blockchain and Legal Considerations

In some countries, there is no clear regulation on cryptocurrency. Most
lay persons imagine that without specific laws to regulate cryptocurrency,
and/or Blockchain, they are free to do as they like with their technologies,
including running ICOs. They fail to recognise that many countries have
existing laws, which deal with various aspects that are relevant to ICOs: laws
related to securities, for instance, and laws related to investments. Property
laws and company laws may be applicable to Blockchain projects which seek to
implement the use cases of Blockchain technology, already so famously outlined
in Vitalik Buterin’s earlier papers.

It is highly recommended for Blockchain companies check with a lawyer on
any ICO they wish to launch. All ICOs involve the issuance of tokens. It is the
type of usage rights, and privileges, attached to the tokens, that are the main
issue. Invariably, there will be ICO promoters who wish to promise things that
will encourage usage of their token. However, such promises may be dangerous to
make, and may sometimes create the promise of a token that have features of
securities. (As you can see, there are many legal considerations for the tokens
in a Blockchain project.)

For that reason, please seek proper advice on your Blockchain project, and your ICO. Taxation, for example, might be an issue for your project. Another might be gender equality and gender protection.

We can help identify
key legal considerations for your project.