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Welcome to Crypto Bytes, a short briefing on some of the week’s developments in the crypto currencies world.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  

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Claire Cummings

020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com


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Is Time Up for the US Dollar as the World’s Reserve Currency?

With equity markets looking jittery and continued concerns over a potential trade war between China and USA, the largest fund manager in the world, Blackrock, is questioning when will the US Dollar no longer be the world reserve currency. If the mighty Dollar is no longer seen as a safe haven, could cryptocurrencies attract further investments, especially as security tokens are offering asset-backed cryptocurrencies? 

(Source: “Is Time Up for the US Dollar as the World’s Reserve Currency?”, available at https://irishtechnews.ie/is-time-up-for-the-us-as-the-worlds-reserve-currency/).


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US Court Dismisses SEC’s Claims That Blockvest Sold Unregistered Securities 

A US court has dismissed claims from the SEC against decentralized blockchain-based assets exchange Blockvest.  The SEC suspended Blockvest’s ICO in October, alleging that the firm’s token were unregistered securities under US law.  However, the court recently ruled that the SEC had failed to adequately demonstrate that the tokens in question were in fact securities, according to the Howey Test.    The purchase of crypto-tokens may be deemed securities if they conform to the Howey Test: i) there is an investment of money, ii) there is an expectation of profits from the investment, iii) the investment of money is in a common enterprise and iv) any profit comes from the efforts of a promoter or third party.  Because the SEC was unable to demonstrate that the tokens were ‘securities’ as defined under the US securities laws, the court denied the SEC’s request for an injunction against Blockvest.

(Source: “US Court Dismisses SEC’s Claims That Blockvest Sold Unregistered Securities”, available at https://cointelegraph.com/news/us-court-dismisses-secs-claims-that-blockvest-sold-unregistered-securities.)


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$20 Million Sale 'Tokenizes' Student Residence

While we have seen the crypto market values fall and many talk about the challenges of ICOs, there is a groundswell of opinion that the next evolution is going to be security tokens that will be asset-backed by commodities, equities, collectibles and property. Tokenisation of illiquid assets such as commercial property that historically has only been accessible to high net worth and institutional investors is very popular given property's strong returns over the last few years.  Convexity Properties, which aims to raise $20 million in tokens, is offering ownership in a luxury student residence called The Hub, which is located near the University of South Carolina in the state’s capital.  The offering is the first tokenised real estate investment trust (REIT) in the US.

(Source: “Real Estate on the Blockchain: $20 Million Sale 'Tokenizes' Student Residence”, available at http://fortune.com/2018/11/27/blockchain-harbor/).


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Amazon Launches Blockchain Service

Amazon has announced plans to launch a blockchain service to help clients develop blockchain networks without incurring the costs of creating their own platform.  It is essentially a “plug and play” solution.  The Amazon Managed Blockchain platform “is a fully managed service that makes it easy to create and manage scalable blockchain networks.” Users can build platforms using either Hyperledger Fabric or Ethereum, though the latter is not yet available.  The new platform is another aspect of Amazon Web Services, Amazon’s cloud computing subsidiary which powers a large number of websites and services, including platforms like Netflix.  “Amazon Managed Blockchain eliminates the overhead required to create the network, and automatically scales to meet the demands of thousands of applications running millions of transactions,” the service’s website says. The service is currently in preview, meaning those interested can sign up. If approved, they will be able to create a blockchain network, at which point they can either invite other Amazon Web Services members or “create more members in your account to simulate a multi-member network,” according to an FAQ section.

(Source: “Amazon Announced Blockchain Builder Service”, available at https://www.coindesk.com/amazon-announces-blockchain-builder-service/).


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Will Blockchain Be a Boon to the Jewellery Industry?

With Christmas coming as you gaze in the windows of your local jewellers, they may be considering the benefits of using blockchain. In January De Beers unveiled Tracr, an initiative that aims to provide a single, tamper-proof and permanent digital record — from mine to consumer — for every diamond. And in September the Hong Kong giant Chow Tai Fook introduced a similar project developed with the blockchain provider Everledger.  According to Laurence Haziot, IBM’s global managing director and general manager for the consumer industry, blockchain could be a lifeline for the luxury sector because it could enhance trust between a brand and its consumers.  “Blockchain helps to authenticate, in an instant, the apparent high value of any luxury item — from where it comes from to what it’s made of; from how many hands it has passed through to where and when it has been stored, stocked and delivered — and that is extremely important in the world of watches and jewellery,” Ms. Haziot said.

(Source: “Will Blockchain Be a Boon to the Jewelry Industry?”, available at https://www.nytimes.com/2018/11/30/fashion/jewelry-blockchain-de-beers.html).  


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Crypto Monster Binance to Launch Joint Stablecoin Trading Platform

The biggest crypto exchange, Binance, has announced that it is looking at launching a trading platform for stablecoins as they see considerable commercial opportunities in this sector. It could be argued that in effect a stablecoin is a like a wrapper/investment vehicle similar to a Medium Term Note, or a fund or derivative.  . However, as we start to see regulated digital exchanges, stablecoins could be issued with their returns linked to an asset, e.g., a commodity, index S&P 500, currency, etc but they could be traded 24/7 globally and so would bring more liquidity and transparency. 

(Source: “Crypto Monster Binance to Launch Joint Stablecoin Trading Platform”, available at https://u.today/crypto-monster-binance-to-launch-joint-stablecoin-trading-platform#h2992/).  

 


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Russia's Nornickel May Roll Out Stablecoin in 2019

Norilsk Nickel is Russia’s leading metals and mining company and the world’s largest producer of high-grade nickel and palladium. The company is listed on the Moscow Stock Exchange as well as the London Stock Exchange (ADR) and has a market capitalisation of $27.345bn.  Norilsk Nickel are building a blockchain platform with unique value proposition. The platform will allow the issuance of digital assets backed by commodities. The company’s audited palladium reserves in Europe will serve as backing for the issuance of a Stable Coin and a Utility Token. 

(Source: “Russia's Nornickel May Roll Out Stablecoin in 2019”, available at https://cryptovest.com/news/russias-nornickel-may-roll-out-stablecoin-in-2019/).  


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Fidelity Looking to Expand Digital Asset Trading Beyond Bitcoin and Ether

Fidelity Investments, with $6.45 trillion under administration, have said they are looking to expand their institutional crypto asset platform to include trading services for the top five to seven cryptocurrencies by market capitalization. This is just more evidence of traditional asset managers looking to build infrastructure to enable crypto trading. 

(Source: “Fidelity Looking to Expand Digital Asset Trading Beyond Bitcoin and Ether”, available at https://www.coindesk.com/fidelity-looking-to-expand-digital-asset-trading-beyond-bitcoin-and-ether/).  


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SEC’s Next Move: Social Media Influencers Who Promoted Crypto ICOs

Individuals and organizations could be targeted by the SEC if there’s sufficient evidence to prove that an individual or an organization received compensation from ICO organizers to promote a token sale, without disclosing the amount received from an ICO project to the target audience.  “Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion,” the SEC said last year, emphasizing that the failure to disclose compensation is considered a fraudulent activity.  And recently, the SEC said “Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements. Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds.”  Promoting an ICO recognized as a security without disclosing compensation to the target audience could result in a penalty that is twice larger than the compensation itself, as seen in the case of Floyd Mayweather who paid over $600,000 for receiving $300,000 to promote three ICOs.  

(Source: “SEC’s Next Move: Social Media Influencers Who Promoted Crypto ICOs”, available at https://www.ccn.com/secs-next-move-social-media-influencers-who-promoted-crypto-icos/).  


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Fieldfisher and TeamBlockchain launch Blockchain and Crypto Telephone Surgery to offer rapid bespoke legal advice to businesses in the cryptocurrency and digital payment platforms sector

International law firm Fieldfisher and consultancy TeamBlockchain have launched a Blockchain and Crypto Telephone Surgery for companies looking for expert professional guidance on cryptocurrency and digital payments.   Focusing primarily on issues affecting tokenisation and distributed ledger financial technologies (fintech), the surgery will also offer advice and insights on the wider fintech universe.  Fieldfisher partners and TeamBlockchain consultants will give advice on different regulatory and legal issues in the context of specific industries, supported by relevant, real life examples of how organisations are using blockchain and the increasing role of cryptocurrency in digital business.  Surgery sessions will last between 40 minutes, in the form of one-on-one appointments or small group discussions, as clients prefer. Sessions will be interactive, enabling participants to get a better understanding of the subjects under discussion.  Clients will be asked to provide some prior briefing on their sector of interest, objectives and concerns in order to maximise the benefits they receive from surgery appointments.  This type of consultative support has proved helpful for professional advisors and their clients, who want to be more active in the cryptocurrency and blockchain sectors but lack the in-house skills to realise their ambitions. 
 
Fieldfisher and TeamBlockchain's experts are independent advisors who provide clients with honest, pragmatic advice on a range of fintech issues day-to-day.   These surgeries are designed to provide, swift, tailored advice on an as-need, no obligation basis, with follow-up support available as required.  The cost of each surgery is £500 +VAT and includes a pre-briefing, phone consultation and follow-up materials. For more information, please contact one of the Surgery Team: claire.cummings@cummingslaw.com; tim.bird@fieldfisher.com; and jonny.fry@teamblockchain.net.


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Feedback and requests

If there are any topics you’d like to see covered in next week’s version of Crypto Bytes or if you have any feedback on this or past versions of Crypto Bytes, please contact Claire Cummings at Claire.Cummings@cummingslaw.com.


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Cummings

Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
Devonshire House 1 Mayfair Place
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United Kingdom

www.cummingslaw.com

22 03 2019

 
 

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