Tag Archive for: blockchain

Facecoin

FaceCoin: Facebook to Launch a Private Stablecoin for Whatsapp Users

By: Jon Avidor and Rachel Behar

Facebook is reportedly working on making a digital coin called FaceCoin for users of Whatsapp, a messaging application owned by Facebook. Its value would be derived from that of several different fiat currencies, not only the U.S. dollar.

FaceCoin would allow Whatsapp users to send and receive money, otherwise known as remittances. To put things into perspective, over $69 billion was sent to India in 2017 in remittances according to the World Bank. With over 200 million Whatsapp users, Facebook has access to a groundbreaking number of potential market participants.

FaceCoin would be a stablecoin–  a safe, risk averse cryptocurrency designed to maintain a stable value against an asset of fiat currency. The current problem faced by stablecoins for payment is that since most businesses don’t accept them, stablecoins have to be converted to a fiat currency to be used as a form of payment. Additionally, Basis recently shut down its stablecoin because the company could not prove that its stablecoin was not a security. SEC regulation of stablecoins could make it less attractive to potential buyers.

This is not Facebook’s first venture with virtual currencies. As far back as 2007, Facebook was pursuing patents related to digital currency when it applied for a patent which is likely what led to the creation of Facebook Credits and Facebook Gifts. Facebook began developing its own virtual currency in 2011 with Facebook Credits, then moved onto Facebook Gifts in 2012. Each application was shut down within two years because Facebook reportedly encountered issues with distance and localization problems to allow these payments to be made across borders. In 2015, Facebook Messenger Payments was launched in the U.S. and ultimately expanded to France and the UK in 2017.

Last year, Facebook created a new policy banning ads for ICOs and cryptocurrency. Facebook’s rationale was that they wanted to prevent misleading or deceptive ads. Nearly six months later, Facebook reversed its ban on ads related to cryptocurrency, now requiring advertisers to apply and be pre-approved to advertise cryptocurrencies. In these application, advertisers must disclose certain business information to Facebook, including the company’s name, whether the company has any regulatory certification, or if the company is publicly traded.

 If WhatsApp users have to convert their coins to a fiat currency to make payments, FaceCoin will have a much smaller market of users. Think about the users in third world countries – this would be more of a hassle than a utility. If this issue is still present, Facebook could offer goods and services for purchase. In that case, FaceCoin would be functionally similar to Facebook Credits and would have less utility than if it could be used for remittances.

Potential regulation of FaceCoin as a security is a potential hurdle, but likely not one that Facebook can’t handle. Facebook will have to keep in mind SEC regulations when developing FaceCoin. Facebook has more resources to deal with regulatory obstacles in comparison to smaller companies that have recently failed in releasing stablecoins due to this issue.

Given that Facebook has been under fire for privacy issues for some time now, users may be less keen on using FaceCoin if they don’t trust that their privacy will be protected.

Facebook still has banned ICO ads. It’s understandable to want to block any scam ads, but there are surely compliant ICOs that are blocked from advertising on Facebook. This begs the question – is Facebook trying to cut out ICO competition in light of their own upcoming token offering? If so, is that could potentially mean trouble with the FTC.

If Facebook can overcome regulatory and technological hurdles, FaceCoin could very well open up the cryptocurrency market to millions of people that were not already market participants.

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We would like to thank Rachel Behar for her contribution to this article.

 

security token summit

Steve Masur at Security Token Summit in Bermuda – March 18-19

By: Steve Masur

The first Blockchain Token Association (BTA) Security Token Summit was held in 2018 and started with an open invitation for those involved in the Security Token Industry to come together and make a commitment to work towards building a common framework on the issuance and trading of security tokens. Now, the BTA is grateful to the Government of Bermuda, the Bermuda Business Development Agency (BDA) and Fintech Bermuda for their partnership in the second Security Token Summit taking place March 18-19, 2019. Learn more and register here.

March 18
4:00 pm – 7:30 pm Registration
5:30 pm – 7:30 pm Welcome & Cocktail Reception

March 19
7:30 am Registration Opens
8:00 am Continental Breakfast
8:45 am Summit Welcome / The New Capital Markets Ecosystem Taxonomy
Jeff Pulver, Blockchain Token Association (USA)
Damian Williams, Blockchain Token Association (USA)
9:00 am – 9:30 am Community/”Lighting Round” Introductions 
9:30 am – 9:45 am Bermuda Regulatory Update
Moad Fahmi, Senior Advisor – FinTech, The Bermuda Monetary Authority
9:45 am – 10:30 am International Security Token Regulatory Discussion
Moderated by Joshua Klayman, Founder and Managing Member of Klayman LLC
Keller Fisher, DLT Law Group (USA)
Robin Sosnow, Digital Securities Law Group (USA)
Steve Masur, Masur Griffitts & LLP (USA)
Alan Konevsky, tZERO (USA)
10:30 am – 10:45 am Break
10:45 am – 11:15 am Bermuda Security Token Regulatory Discussion
Moderated by Stan Stalnaker, Chief Strategy Officer, Hub Culture | Ven | Ultra
Chris Garrod, Conyers, Dill & Pearman
Simone Smith-Bean, SBC Corporate Services Limited
Natalie Neto, Walkers
11:15 am – 11:30 am The Industry Need for Interoperability/VTF Overview
Paul Salisbury, BlockchainLabs (New Zealand)
11:30 am – 11:45 pm Fireside Chat with Gabriel Abed, Founder, Bitt (Barbados) with Jeff
Pulver
11:45 AM – 12:05 pm Caribbean Blockchain Alliance: Update
12:05 pm – 12:25 pm tZERO Update TBA, (USA)
12: 30 pm – 1:30 pm Networking/Lunch
1:30 pm – 1:45 pm FinTech Bermuda Update
Major (Ret’d) Allan Wayne B. Smith, ED, MBA, pmsc (Bermuda)
1:45 pm – 3:00 pm Global STO Business Issues (mega session) with contributions from delegates representing: Bermuda, Canada, Mexico, New Zealand, Singapore, United Kingdom, USA
3:00 pm – 3:10 pm Break
3:10 pm – 3:30 pm Spotlight on Bermuda STOs
Matt Gallant, tribeOS (USA)
James Wallace (Canada)

Andres Banuelos, teknei (Mexico)
Joseba Lekube, teknei (Mexico)
3:30 pm – 4:00 pm Fireside Chat Premier of Bermuda, the Hon. E David Burt, JP, MP & Jeff Pulver
4:00 pm – 4:30 pm Presentation of Security Token Protocol Frameworks
Hyperlink Technology (UAE)
Kodebox (South Korea)
4:30 pm – 5:00 pm Show & Tell (Live Demonstrations of Working Solutions in the STO Ecosystem)
Securitize (USA)
Simple ICO (Guatemala)
5:00 pm – 5:30 pm Next Steps in Growing the Industry – Group Discussion
5:30 pm – 6:00 pm Networking/Summit Concludes

March 20 Security Token Unconference

8:00 am – 12:00 pm Security Token Unconference
Topics and Issues will be determined the week of March 18th by the attending community.
8:00 am – 8:30 am Welcome & Claim Your Session
8:30 am – 11:30 am Sessions 
11:30 am – 12:00 pm Wrap Up

This is an International Gathering with Delegates Representing at least 12+ countries including: Bahamas, Barbados, Bermuda, Canada, Costa Rica, Guatemala, Hong Kong, Mexico, New Zealand, Singapore, South Korea, UAE, UK, USA

legal hackers

Smart Contracts 101 Workshop on Wednesday, Feb 20 Presented by Legal Hackers

On Wednesday, Feb 20 at 7pm ET, NY Legal Hackers are partnering with OpenLaw for an informational workshop on how to build legal agreements using blockchain technology. This workshop is free to attend but RSVP is required. Instructors will demonstrate how to create an agreement on the OpenLaw platform and answer your questions, including:

– What does a smart contract look like?
– What basic concepts and terminology should I know before I build a smart contract?
– What types of legal agreements and other related projects can be built using blockchain technology?

Workshop Leaders:
Michael Chan, Legal Engineer, OpenLaw
Anne Griffin, Lead Project Manager, OpenLaw
Ross Campbell, Legal Lead at OMGPool

NOTE: Laptops are OPTIONAL for this event.

Legal Hackers is Co-Founded by MG+ Attorney Lauren Mack. Legal Hackers works to foster the global  movement of lawyers, policymakers, technologists, and academics who explore and  develop creative solutions at the intersection of law and technology. Legal Hackers is also the largest grassroots legal innovation community in the world, with more than 75 chapters on 6 continents and more than 10,000 members.

STOs MG+

Are STOs the New ICOs?

By: Jon Avidor, Jaclyn Wishnia and Kristen Kennedy

As the SEC continues to crack down on noncompliant ICOs and token exchanges, many investors and crypto developers are expected to embrace the trend of adopting security token offerings, or STOs, due to the surer regulatory framework in which they operate. Though it’s possible to issue ICOs that conform to SEC guidelines, the use of STOs provides issuers with several advantages over ICOs. Indeed, experts forecast that ICOs will ultimately play a minor part in the blockchain ecosystem, while STOs will become the primary investment vehicle. Which begs the question: what exactly are STOs?

“All STOs are ICOs, but the same isn’t true the other way around.” Unlike ICOs’ user participants, STOs are token offerings made to accredited investors “who pay and receive a security,” such as equity, stock shares, derivatives, etc. Initially, issuers of ICOs had to decide whether to classify a token as a security or a utility, which could have major regulatory implications and potentially expose them to liability. However, because the tokens issued in an STO are already labeled as securities, the offering automatically falls under SEC regulations. Thus, STOs must comply with securities law, including AML/KYC rules, and therefore, provide “liquidity, traceability, and accessibility,” at least within the U.S.

The fact that STOs are definitively regulated makes them less susceptible to scams and vests them with greater credibility than ICOs. For instance, because “STOs are subject to federal security regulations, one of the regulations they need to follow is Regulation D.” Within Regulation D, there are particular rules pertaining to offer limit amounts, the ability to use general solicitation, and investor requirements (i.e., Rule 506(b), Rule 506(c), and Rule 504). These rules require that investors must be accredited, information used to solicit cannot be “false or misleading,” and issuers must continuously verify that tokens are not resold to non-accredited investors. If those regulations had initially applied to ICOs, problems like “pump and dump” schemes and “front running” might have been avoided.

Although one of the primary benefits of STOs is that they provide clearer legal standards and protections, “STOs are regulated according to the jurisdiction in which they are based.” This presents issues of comity, potential trade agreement problems, unfair competition law, lack of uniform standards (or in some countries, no relevant laws at all), foreign tax reporting requirements, and assessing other various security laws associated with the jurisdiction where the STO will be offered. What began as a contained problem—labeling STOs under U.S. law—could become an international dilemma, by having to thoroughly ensure STOs adhere to other countries’ securities laws and practices.

Also, in relation to jurisdictional issues, being subject to another country’s laws and rules means its governing authority will have centralized control over all filed paperwork and information associated with a company’s STO, including its participants. These procedures run contra to the spirit of decentralization, one of the tenets that blockchain and cryptocurrencies were founded upon, and could pose potential privacy or data problems. Additionally, since these technologies remove the component of an intermediary, the duties attached to financial regulations, e.g., “underwriting, preparation of marketing materials in accordance with rules, and high levels of security,” will shift the burden directly to the buyer or seller of the STO, who will then have to remain compliant, as opposed to allowing traditional financial institutions to assume the responsibilities. This could drive up costs for companies, rather than aid them in saving resources.

Regardless of these issues, the STO space is currently seeing high levels of activity and innovation. For example, LXDX, a high-speed cryptocurrency exchange, will become one of the first companies to issue stock through an STO this December. Investors will be permitted to purchase LXDX’s cryptocurrency tokens, which represent direct ownership in the exchange, complete with dividend rights. Investors will be permitted to purchase LXDX’s cryptocurrency tokens, which represent direct ownership in the exchange, complete with dividend rights. This represents an exciting development in this space. On one hand, the regulatory framework which applies to STOs ensures compliance and legitimacy and reduces security risks and legal liability. On the other hand, stricter regulations impede innovation, reestablish the challenges that start-ups face to raise capital, and return the finance marketplace to the status quo, which begs the question: why alter traditional methods in the first place? LXDX’s launch of its new STO exchange may provide a model as to how other STOs might operate in the future, and will hopefully help to move the industry forward in a way that brings STOs closer to worldwide acceptance.

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We would like to thank our interns Jaclyn Wishnia and Kristen Kennedy for their contribution to this article.

legally defining blockchain

Legally Defining Blockchain

By: Jon Avidor and Jaclyn Wishnia

The lack of U.S. federal regulations governing blockchain and the crypto industry has led some states to adopt their own interpretations of these technologies. A recent New York Times article compared the diverging regulatory theories stemming from various federal authorities to a parable about six blind men touching separate parts of an elephant, each defining the animal differently every time. Though the analogy was meant to send a message to federal agencies to compromise on standard definitions and finally resolve haphazard crypto industry regulations, the message should resonate with state governments as well. If states continue passing bills using their own terminology for blockchain, they will find themselves in the same predicament that the federal authorities are in now- saddled with fractured legislation and confusing jargon.

While many of the answers to the legal uncertainties surrounding these technologies rely on implementing uniform federal regulations, the initial problem stems from general misconceptions about how the technology operates, which directly correlates with how to properly define it for legal purposes. For instance, California’s legislature adopted a bill containing legal definitions for “blockchain technology” and “smart contract”. Specifically, the bill amends sec. 1633.2(c) of California’s civil code to define “blockchain technology” and concludes its definition by stating, “…data on the ledger is protected with cryptography, is immutable, is auditable, and provides an uncensored truth.”

This definition simply is not accurate. First, blockchains should be referred to as tamper-resistant, not immutable. Immutable means, “unable to be changed.” Blockchains are not impervious to change, it is just very challenging to do so. Second, blockchains are only auditable if they are public, or if an individual possesses a key to a permissioned network. Even if they are public, numerical identifications make it difficult to trace the person to whom the transactions belong. Finally, they do not unequivocally provide an uncensored truth, but they could. For example, fraudulent information can still be entered on a blockchain. So while that fraudulent data is truly displayed on the distributed ledger, it does not mean that the information itself is valid.

A better legal representation of blockchain can be found in a bill passed by Nevada, but it still does not negate the fact that these two states provide altered meanings within the texts of their acts. Nevada describes blockchain as, “an electronic record of transactions or other data…”, whereas California depicts it as, “distributed ledger technology that uses distributed, decentralized, shared, and reciprocal ledger.” While Nevada provides a more accurate definition than California, the issue remains that blockchain is inconsistently defined across state boarders. Not only does varying vocabulary pose an issue for understanding the technology, but as demonstrated by these two bills, it could potentially create “inconsistent regulation across subject-matter domains and jurisdictions.”

Word choice is also pertinent for assessing risk when formulating laws. For example Vermont’s bill, which under Vermont’s rules of evidence, permits blockchain records to be admissible in court. Data on a blockchain, however, may potentially be fraudulent. Fortunately, Vermont’s legislature was prudent to include a clause denoting how to challenge such information.

Though states already adopting blockchain legislation should be commended for forging ahead of their reluctant federal administrative counterparts, the best solution to prevent discrepant precedent and continue innovation in these fields must come from the top down, namely, national standard legal definitions and definitive determinations for how the technology operates under already existing laws.

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We would like to thank our intern, Jaclyn Wishnia for her contribution to this article.

panel of people sitting at table

Blockchain & The Music Industry: Panel Discussion at the Music Business Association Tech & Law Conference (9/25/18)

By: Steve Masur

On September 25, 2018 we hosted a panel for the Music Business Association’s Entertainment & Technology Law Conference where the topic was “Blockchain & The Music Industry”.

Blockchain has the power to transform and disrupt numerous industries. In the music industry, it is already having an impact on royalty payments, ticketing platforms, streaming music platforms and more. On this panel, topics included blockchain innovation, smart contracts, global trends in tokenized assets, the regulatory landscape and more. If you missed this panel, be sure to check our site or subscribe to our newsletter. Also be sure to click on the links below to learn more about what our panelists are working on in blockchain and music.

Moderator

Steven Masur

Speakers

ICO_Crowdfunding

Crowdfunding and Jurisdiction: Tokenizing the World by ICO

By: Jon Avidor

The crypto industry has caused yet another crack in the regulatory foundation of the global landscape- this time, it’s regarding digital assets and initial coin offerings (“ICOs”). ICOs are a relatively new method of fundraising utilized by start-ups and seen as a quick way to gain capital. The surge of start-ups relying on ICOs over the past two years has sent lawmakers scrambling to address the ICO regulatory framework and its other inherent risks. However, regulators are divided on how to best regulate ICOs while also protecting investors.

The EU’s European Parliament Committee on Economic and Monetary Affairs (“Committee”) is the latest regulator to tack itself to the growing list of jurisdictions attempting to define the legal treatment of ICOs. The Committee is currently drafting new crowdfunding regulations for ICOs. Many consider this a good first step towards legitimizing ICOs and hope that this regulation will serve as proof for mitigating any potential fraud or cyber security risks for ICO investors.

ICO regulatory framework provides not only more clarity for potential investors, but it also impacts where a start-up company may choose to incorporate its business. A jurisdiction with specific ICO regulation, such as Malta and Singapore, is more likely to attract crypto-based start-up companies looking to conduct ICOs as these companies can confidently rely on ICO-specific rules and regulations in those jurisdictions.

As jurisdictions continue to regulate the crypto space, there is still a lack of overall uniformity regarding ICO regulations. According to a recent PwC report, the U.S. views ICOs as traded securities, while the EU classifies its tokens into three subsets—asset, payment, and utility tokens—which gives the buyer direct access to a product or service, as opposed to an investment.

It is yet to be determined if a worldwide consensus on ICO regulations is necessary, but ICOs could potentially morph into something similar to, if not the same as, traditional financial system currently in place, such as raising funds through venture capital or corporate debt. For now, the only universal consensus among regulators is that ICOs potentially pose a threat to both financial and economic risks, and thus, some form of regulation is required.

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We would like to thank our intern, Jaclyn Wishnia for her contribution to this article.

USPTO Blockchain Patents

Banking on Blockchain Patents

By: Jon Avidor and Jaclyn Wishnia

The U.S. Patent and Trademark Office (“USPTO”) has seen a recent tidal wave of blockchain patent filings, specifically from large banks and financial institutions, such as Bank of America and Mastercard. Though the USPTO has been receiving blockchain-related patent applications since 2012, the recent surge has many worried that a patent war is looming on the horizon.

The banking and financial sector is looking to utilize blockchain technology as a solution to inefficiencies within its industry, such as slow payment processing and a deficit of trust and transparency. If blockchain is in fact the “future for financial services infrastructure”, big banks would rather be at the forefront of this industry-wide evolution than behind it. One way to do this is to secure intellectual property rights in the blockchain innovation or blueprint through a patent.

Patents, if granted by the USPTO, afford banking and financial institutions the right to protect their innovations and have exclusive market control over their trading and banking platforms. The earlier the patent is granted, the more room there is for a company, like Barclays, to control this new market and gain leverage over other institutions.  However, the patent application process is complex and time-consuming, and it can take over two years for the USPTO to issue or reject a patent application.

There are also challenges specifically for blockchain patents. In 2014, the Supreme Court ruled in Alice Corp. v. CLS Bank Int’l that claims to a computer-implemented technique of mitigating “settlement risk” in financial transactions were ineligible for patenting. The Court clarified that a claim directed to an abstract idea is not eligible for patent protection when it “merely requires generic computer implementation” or “attempt[s] to limit the use of [the idea] to a particular technological environment.”

Blockchain technology is inherently an open-sourced network, thus, a patent based solely on a blockchain system will most likely be rejected as it is an abstract idea. Banking and financial institutions will need to ensure that their blockchain patent applications either “identify an actual patentable innovation” or describe it in such a manner that indicates their platform—built atop blockchain technology—is a “novel idea that solves a problem.”

The rise of these blockchain patents for large institutions is a double-edged sword. On one hand, the continued pursuit of blockchain-related patents helps to legitimize the blockchain industry and increases public awareness. On the other hand, issuing patents primarily to large banks and financial institutions that can afford to file and legally reserve blockchain patents may result in the hampering of technological innovations. This may discourage potential competition from smaller business and hinder the industry’s growth. As these blockchain-based patents continue to be filed, the USPTO may need to develop consistent guidelines for patent filers to follow, especially as it pertains to blockchain, to prevent any patent wars.

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We would like to thank our intern, Jaclyn Wishnia for her contribution to this article.

Is Blockchain HIPAA Compliant?

By: Jon Avidor and Jaclyn Wishnia

The healthcare industry remains one of the largest sectors to potentially benefit from blockchain technology.  By implementing its application, the healthcare industry can eliminate some of the risks plaguing its community, such as inconsistencies with patient medical records, risk of data security breaches, and inefficiencies of patient record retrieval. As with all new technology, however, companies utilizing blockchain for its potential benefits will need to learn how to navigate such a heavily regulated industry, especially when it comes to storing and protecting patient data and medical information in compliance with the Health Insurance Portability and Accountability Act, or HIPAA.

HIPAA regulations were developed to protect the privacy and security of certain health information. The regulations are two-fold: there is the HIPAA Privacy Rule, which establishes national standards for the protection of certain health information, and the HIPAA Security Rule, which establishes a national set of security standards for protecting certain health information that is held or transferred in electronic form.

Data security risks are a major issue afflicting the healthcare industry, despite HIPAA’s stringent privacy and security regulations. In 2015, the healthcare industry was the target of one of the largest security breaches. Hackers were able to breach Anthem Inc.’s record database containing personal information for nearly 80 million of its current and former customers and employees. Vulnerability to cyberattacks is due in part to the way patient information is stored.

Blockchain could provide a way for healthcare professionals to securely store patient health information.  Blockchain uses cryptographic coding through complex mathematics, allowing only the data’s intended recipients to decrypt the information. This mitigates the risk of a data breach by hackers because the information would be useless in its encrypted form. Mathematical encryption, however, conflicts with the HIPAA Privacy Rule. HIPAA prohibits the use of mathematically-derived encryption of protected health information because the encrypted information can potentially be re-identifiable. This strict regulation would seemingly render the use of blockchain in the healthcare industry non-compliant with HIPAA.

Blockchain technology can potentially be the solution to many of the problems within the healthcare system that HIPAA was designed to address and fix.  There are, however, still issues and questions regarding blockchain technology that would have to be resolved before its implementation in the healthcare industry.  For example, how certain types of medical records stored on the blockchain, such as psychotherapy notes, can remain inaccessible to its subjects, and whether there’s a way to completely anonymize patients’ protected health information, rather than cryptographically store it in a way that complies with HIPAA as it is written.

Companies, such as Timicoin and Patientory are looking to develop blockchain-based platforms to secure health data for patients, healthcare providers and medical institutions, while remaining compliant with HIPAA.  While a quick adoption of blockchain technology is not likely, its enormous benefits can be an opportunity to disrupt and transform the current healthcare industry.

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We would like to thank our intern Jaclyn Wishnia for her contribution to this article.

New Laws Make Malta a Leading Global Innovator in Digital Currency

By: Steve Masur and Jaclyn Wishnia

The Malta Parliament passed three cryptocurrency and blockchain bills into law recently, making Malta one of the first jurisdictions in the world to create a fully regulated environment specific to blockchain, cryptocurrency and digital currencies of all kinds. This legislation is significant because it assists in creating a framework that legitimizes blockchain businesses and ensures that those in the cryptocurrency market are compliant with the corresponding laws. It makes sense that Malta would act first, because they succeeded in capturing much of the worldwide e-gaming market, by creating a regulated environment for online gambling.  The hope is that the new laws will help them to capture a large cross-section of the crypto and blockchain market as well.  This article expands upon an article I wrote several months ago containing a shorter description of what makes Malta ideal for cryptocurrency initiatives.  Here are the basic components outlined in each bill:

Malta Blockchain Laws

Innovative Technology Arrangements and Services Act

The Innovative Technology Arrangement and Services Act sets out the regulation and certification requirements for technology service providers and digital ledger technology, or DLT, platforms. The specific language of formalized regulation and certification will provide crypto-exchanges with more legal certainty when operating in Malta in an otherwise globally underdeveloped area of law.

Malta Digital Innovation Authority Act

The Malta Digital Innovation Authority Act formalizes the regulatory procedures for the DLT industry.  This law creates Malta Digital Innovation Authority, or MDIA, by setting up a regulatory authority that will be responsible for overseeing the industry and supervising compliance with these newly enacted laws. It will focus on protection for consumers and promoting education for any DLT users.

Virtual Financial Assets Act

The Virtual Financial Assets Act regulates initial coin offerings by setting up requirements for companies raising capital through ICOs, such as publishing a white paper detailing the project and making past financial history available to the public. This law also includes a financial instruments test that determines whether a virtual token is a DLT asset under the law. If the virtual token is a DLT asset, meaning it has no utility, value or application outside of the platform on which it is issued and cannot be exchanged for funds on the platform, then the token is exempt from this law. If the token is not considered to be a DLT asset, the regulators will apply existing EU securities and financial law definitions to assess the token.

As resources continue to be allocated to DLT, two major crypto-exchanges creating headquarters in Malta, and now the development of these advanced regulations, Malta is poised to achieve its goal in becoming “Blockchain Island.”

This legislation, however, is not only beneficial for Malta. It also has the potential to set a global precedent for how other markets could structure their own authoritative bodies in this realm and utilize Malta’s existing laws as a model to institute regulations. These new laws enacted by Malta suggest that blockchain and cryptocurrencies are becoming a more permanent fixture within the world’s business and financial culture.

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We would like to thank our intern Jaclyn Wishnia for her contribution to this article.