{"id":351,"date":"2019-03-28T09:42:07","date_gmt":"2019-03-28T08:42:07","guid":{"rendered":"https:\/\/advokatskafirmasajic.com\/blog\/?p=351"},"modified":"2019-04-22T07:48:13","modified_gmt":"2019-04-22T05:48:13","slug":"law-keeping-up-with-technology-4","status":"publish","type":"post","link":"https:\/\/advokatskafirmasajic.com\/blog\/law-keeping-up-with-technology-4\/","title":{"rendered":"Law – keeping up with technology"},"content":{"rendered":"\n

Cruptocurrency, ICO and legal dilemmas<\/strong>
<\/h3>\n\n\n\n

There are still intensive polemics related to cryptocurrency phenomenon.\nIn fact, the same gets new a dimension over time, since new questions about\ntheir functioning are being raised on daily basis. However, even though this topic is old news for some people, for most, it is still a rather unexplored area, both for\nordinary people as well as for regulatory bodies and public authorities, especially\nwith regard to its legal regulation.<\/p>\n\n\n\n

Being aware of\nthe importance of this topic, in the previous text, we have mentioned that we\nwill further explore it but highlighted some basic information necessary for\nunderstanding of this phenomenon. The one should have in mind that cryptocurrency\ncannot be viewed as a separate issue, but as part of a puzzle involving new\ntechnologies, primarily blockchain technology and associated Initial Coin\nOffering (ICO), then smart contracts, along with other related issues and terminology,\nwhich somehow flooded the internet community.<\/p>\n\n\n\n

There are\nstill different, but inconsistent views, on this issue so in the close future\nit should be expected that the state and other regulatory bodies will begin to\ntake a clear view on numerous issues related to the blockchain technology and\nICO. This is relatively significant due to the fact that it will not only have\nan impact on the close community, involved in the development of these\ntechnologies, but also on financial transactions, data protection, population\nand work of various institutions. New opportunities were created due to the use\nof new technologies, which further opened the door to alternative ways of\nbusiness operations. Many financial institutions are faced with a dilemma,\nwhich position to take in relation to this new phenomenon. On the one hand,\nthey are supporters of the same, while on the other hand they are harsh\nopponents of everything that has to do with blockchain, Bitcoin and ICO in\ngeneral, and are against their introduction into regular business operations.<\/p>\n\n\n\n

If we pay a\nclose attention to the ICO’s definition which reads – an unregulated method of\nfundraising to secure a new project by offering of a cryptocurrency<\/a> to the public, it is then clear that the problem actually exists in the fact the same\nis not regulated. The ICO has become the latest trend in fundraising especially\nfor new projects since there are obvious advantages of smart contracts such as\nsecurity and the inability to modify their content, transparency, then no\nchance for money laundering (which is often emphasized as one of the main\nadvantages or disadvantages, depending on the position), the inability to forge\ncryptocurrency, but it still opens the door to numerous questions. For example,\nthe Croatian National Bank has warned about many risks arising from such\nproducts, noting that cryptocurrency is not electronic money in accordance with\nthe definition of the Law on Electronic Money, neither it is a service under\nthe Payment Transactions Law, so the business entities dealing with the same\nare not licensed and they are not under the supervision of the Croatian\nNational Bank.<\/p>\n\n\n\n

Different\ncountries in the world have a different approach to this phenomenon. Countries\nsuch as Australia, Japan and Canada consider cryptocurrency as legal, in fact\nthey already have cryptocurrency exchange\nregulations.<\/p>\n\n\n\n

In Switzerland, cryptocurrencies and exchanges are legal, and the\ncountry has adopted a remarkably progressive stance towards cryptocurrency\nregulations. The Swiss Federal Tax Administration<\/a> (SFTA) considers cryptocurrencies as an asset since it is subject\nto the Swiss wealth tax and must be declared on annual tax returns. The Swiss Financial Market Supervisory\nAuthority (FINMA) has published a set of guidelines on the existing financial\nlegislation for a range of areas – from banking to securities trading and\ninvestment plans (depending on the structure).<\/p>\n\n\n\n

The EU Parliament has not adopted a special law on cryptocurrencies, and\ncrypto-exchange\nregulations vary from state to state. What is particularly interesting is that\nthe tax on cryptocurrency does also vary, but many Member States charge a\ncapital gains tax on crypto-gain profits – at rates of 0-50%. Therefore, if\nthere is a tax there is room for regulations, which is certainly a significant\nshift forward. The Court of Justice of the European Union in 2015 decided that\nthe exchange of the traditional currency for the cryptocurrency should be\nexempted from VAT, which is a rather firm step forward when it comes to\nregulation of certain issues. <\/p>\n\n\n\n

In certain<\/g><\/g> Member States, the exchange of cryptocurrency will have to be recorded\/registered with appropriate regulators, such as the German Financial Supervision Agency (BaFin), the French Autorit\u00e9 des March\u00e9s Financiers (AMF) or the Italian Ministry of Finance.  In April 2018, the EU agreed on the text of the Fifth Money Laundering Directive (5MLD) for cryptocurrency exchanges in accordance with the EU legislation on the prevention of money laundering. This implies that cryptocurrency exchanges will have to meet the KYC standards (Know-your-customer) which will have to be respected by financial organizations with the purpose of preventing money laundering and terrorist financing as well as in order to satisfy standard reporting requirements. While advocates of new technologies advocate it for the sake of reliability but also to avoid possibilities of money laundering, there is a certain paradox, as most regulatory bodies, in the field of finance, require compliance with certain established procedures for carrying out transactions and obtaining information about those who requested the transaction as well as about end-users. However, ICO, smart contracts, and cryptocurrency do not imply such classic checking procedures neither<\/g><\/g> submission of data in a way known or acceptable to regulatory bodies, although bitcoin’s blockchain can be considered the safest database in the world. However, there is a dilemma<\/g><\/g> how to reconcile the current, i.e. traditional legal framework related to transactions and transfer of rights with new technologies and capabilities. We are aware of the fact that the practical side of life takes precedence over formal rules for transactions (of any kind), which is witnessed by mobile banking, various applications, etc., which in general is yet not regulated by our state legislation<\/g>. Therefore, considering the legal aspect of cryptocurrency and smart contracts the same seems very far away from us. However, it does not need to be strictly believed. On January 9, 2018, the Central Bank of Bosnia and Herzegovina announced that the convertible mark is the only legal instrument of payment in the country, and it is not possible to exchange it for bitcoins or other cryptocurrencies. At the same time, the Bank stated that there are no plans to limit or prevent the purchase and trading of virtual currencies. It is not neglectable for the beginning, is it?

Author: Milica Karad\u017ea, e-mail: milica@afsajic.com<\/a>

<\/p>\n\n\n\n

<\/a>Law – keeping up with technology – Blockchain and its applications<\/a><\/p>\n\n\n\n

Law – keeping up with technology – ICO projects, products and tokens\ufeff<\/a><\/p>\n\n\n\n


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