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Russia Begins Regulatory Framework for Security Tokens

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Russia Begins Security Token Regulatory Framework

Russian officials took some important steps this month towards the creation of a regulatory framework for security tokens. In the past, Russia has been on the fence of how to exactly handle the new technology. This undecidedness hurt the country’s blockchain community and slowed adoption.

Global Competition

Now it appears that lawmakers recognized the importance of staying relevant in the sector. Consequently, officials continue to usher in new laws pertaining to the use and ownership of digital assets. Now, Moscow wants to give its entrepreneurs the opportunity to compete on the global stage.

Legislation in the Works

Russia currently has three main crypto-related bills going into enforcement in the coming months. These bills are part of the “Open Russian Digital Economy” campaign. This campaign is about helping Russian develop alternative sources of revenue and finance through innovation.

Tip-Toe Crypto

Of the three bills set to activate in the coming weeks. Two of the bills fail to mention cryptocurrencies directly. However, the bills do cover crypto activities. The third bill does explicitly name cryptocurrencies.

Unfortunately, officials delayed the third bill three times already. This bill is known as “On Digital Financial Rights.” Many in the country consider this bill to be the most important piece of crypto legislation at this time and for good reason.

Categorize Crypto

The “On Digital Financial Rights” bill finally breaks digital assets down into three categories – Virtual Assets (crypto), Technical (utility), and Digital Financial Assets (security tokens). This legislation is a critical first step to increased adoption. Primarily, it would help build confidence in the crypto economy.

Multiple Amendments

Notably, the bill has seen multiple amendments since its introduction, mainly because of strong support from the local business sector and the Finance Minister. The Chairman of Russia’s Financial Market Committee, Anatoly Aksakov introduced the first two drafts of the bill on March 20, 2019.

Anatoly Aksakov

Anatoly Aksakov – Chairman of Russia’s Financial Market Committee

A co-sponsored third draft of the legislation went in front of lawmakers on March 26. The bill was filed by the head of the parliamentary Legislation Committee, Pavel Krasheninnikov and the Speaker of Duma, Vyacheslav Volodin. Interestingly, this version of the bill focuses on the use of self-executing contracts, or smart contracts.

Use of smart contracts

Regnum, Russian lawmaker Pavel Krasheninnikov, head of the parliamentary Legislation Committee stated that smart contracts are very similar to reoccurring payments systems currently in place. He believes that this FinTech is essential in the development of the Russian digital economy.

Russia Central Bank Doesn’t Like Bitcoin

The main reason for the postponement of “On Digital Financial Rights” is the fact that Russia’s Central Bank is still opposed to the entire concept of decentralized cryptocurrencies.

Not surprisingly, the central bank doesn’t support any other form of currency, other than the ones it issues personally. At one point, the bank’s deputy governor, Sergei Shevtsov went as far as to call cryptos a “high-tech pyramid scheme.” The statement highlights some of the blockades the Russian cryptocommunity must overcome in order to succeed.

On Digital Rights

On October 1, the second piece of legislation – “On Digital Rights” entered into force. This is the first piece of legislation to enter service. It’s similar in nature to the “On Digital Financial Rights” legislation but differs in many key ways. Mainly, the legislation doesn’t use the word “cryptocurrencies.”

The bill established basic legal definitions in the sector and the status of each. For example, Digital Rights is now a legally recognized term in the country.

Amend the Civil Code

The new law amends the Russian civil code. The addition now states that the use of information technology is legal for the fulfillment of obligations in certain circumstances. Basically, self-executing contracts are legally binding moving forward.

ICO Laws on the Way

In January, the third crypto-related bill will go into enforcement. This bill deals exclusively with crowdfunding campaigns such as security token offerings (STO). The law is called the “On Attracting Investment Using Investment Platforms” and its ramifications are far-reaching.

STO Restrictions

Russian President Vladimir Putin signed the bill on August 2019. The new law places investor protections, as well as, restrictions in the ICO and STO sectors.

Russian President Vladimir Putin via BBC

Russian President Vladimir Putin via BBC

For example, unqualified investors can only invest up to 600,000 rubles ($9000) per person. This law is meant to protect uneducated investors from taking large losses. Unfortunately, it can also limit normal investors from maximizes their ROI.

Exclusive STO

The legislation will also restrict what firms can host crowdfunding events. Not surprisingly, only parties registered with the country’s central bank can engage in crowdfunding activities at this time. Basically, any STOs in Russian need the blessing of the central bank to proceed.

Not Easy Being a Russian Crypto Investor

This law showcases Russia’s efforts to allow only the elite to utilize the blockchain sector, while at the same time, making it nearly impossible for the average person to do so.

This pattern of neglect toward the civilian investor isn’t anything new. Back in 2017, Russia hinted towards banning crypto at the same time the central bank announced plans to issue its own native cryptocurrency in the coming 2 years – the cryptoruble.

Russian Association of Blockchain and Cryptocurrency

Despite the country’s history of cloudy crypto legislation, Russia continues to see further blockchain expansion. The country already has numerous firms working together to help add transparency to the sector – the Russian Association of Blockchain and Cryptocurrency.

This group provides investors with a rating system to better gauge the validity of an ICO or STO. The firm seeks to create an international standard to rate crowdfunding campaigns. In this manner, investors can accurately assess the risks associated with these investments more consistently.

Sanctions Result in Change

Russian officials took the monumental steps to further the local blockchain sector after dealing with a host of crushing sanctions imposed by the US. US lawmakers insisted on the sanctions for what they deemed as election meddling in the 2016 presidential elections.

Since the start of the sanctions, Russian President Vladimir Putin has criticized the US’s decision. He stated that the US’s move weaponized the dollar. Consequently, this strategy makes it difficult for competing countries to keep faith in the currency. Essentially, the move forced Russia to consider alternatives.

Russia Goes Crypto

Russia is now ready to turn towards blockchain solutions. The country possesses the network and technical skills to be a dominating force in the crypto sphere. Considering that the country is set to launch its own native cryptocurrency in the coming year, it makes sense that lawmakers start to promote a more blockchain-friendly business environment.

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David Hamilton is a full-time journalist and a long-time bitcoinist. He specializes in writing articles on the blockchain. His articles have been published in multiple bitcoin publications including Bitcoinlightning.com

Security Token News

VeVue Signs Partnerswith CBX for Token Launch

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VeVue Partners with CBX Exchange for STO

The blockchain-based social media platform, VeVue announced plans to host an STO in the coming weeks. The company intends to expand the platform’s capabilities with the funds raised. Now content creators have a more lucrative alternative to consider moving forward.

News of the company’s intentions first broke via an October 14 press release. In the post, the company announces its new strategy and partnership. As part of the firm’s new crowdfunding approach, VeVue partnered with the hugely popular CBX exchange.

CBX Exchange

For its part, CBX will be responsible for the sales, token issuance, and distribution of the VUE token. CBX is one of the largest crypto exchanges based in the Middle East. The firm operates a fully compliant EU exchange. Developers integrated both AML and KYC protocols directly into its trading platform.

VeVue via Homepage

VeVue via Homepage

CBX recently launched a campaign with Alibaba competitor GoJoyin in which the platform secured over $10 million in funding. The experience gained in this campaign will be critical for VeVue STO’s success.

VUE STO

The VeVue STO will commence on October 28, 2019, at 4 pm PST. Interestingly, the event is scheduled to only last 48 hours. CBX intends to issue 5 million VUE tokens to qualified non-US investors. Vevue also announced that there will only be 100 million VUE tokens in total available to investors. Of these tokens, 35 million are reserved for investor purchases.

Vevue and CBX Unique Strategy

CBX and Vevue have a unique strategy for their crowdfunding efforts. The company intends to host an STO monthly moving forward. Additionally, these auctions will be Dutch-style. Basically, the official token price is set after taking in all bids.

Highest-Price VeVue STO

This strategy enables the firm to receive the highest price for the total offering. For example, investors place their bids which include the price and quantity they desire. The firm will then accept the top 5 million bids for the tokens.

VUE Token Benefits

VUE token holders receive a portion of gross revenue collected via the VeVue social media app. Consequently, investors actively earn from VeVue’s ecosystem. The App provides content creators with a revenue-generating outlet. Here, users can create and monetize content such as videos easily.

VeVue Transaction Fees

Vevue charges a 5% transaction fee on the monetized content. This fee then enters into the dividend pool from which STO investors receive payments daily. Importantly, dividends are paid in VUE tokens. This unique strategy encourages users to create high-quality content to earn more tokens.

Next Level Social Media

Traditional social media doesn’t allow users the opportunity to earn from their content contributions.  In fact, the current social media giants provide content creators with zero payment for their efforts.

Social Media Heat

VeVue’s timing is impeccable as social media giants such as Facebook continue to confront lawmakers over a myriad of concerns. Facebook, in particular, appears to be in the target of regulators after announcing plans to issue its own native cryptocurrency called the Libra.

A Better Social Media Alternative

VeVue appears to have unlocked a better way to social media for everyone. Providing users with an opportunity to earn tokens for their content is a smart concept that has proved to be a great alternative in the past. You can expect to hear more from VeVue in the coming weeks as its STOs hit the market.

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CFTC Labels Ether a Commodity

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Ether is a Commodity

The crypto community got some exciting news this week after the Commodity Futures Trading Commission (CFTC) Chairman stated that Ether (ETH) is a commodity. The news follows similarly worded statements from SEC officials in the past.

The news came via an Oct 10 statement from acting CFTC Chairman Heath Tarbert. In the post, the Chairman announced that he believes Ether is not a security at this time. The news comes at a critical point in Ethereum’s development.

The news is a huge win for the Ethereum community. Currently, Ethereum is the second-largest cryptocurrency in the world by market cap ($20 billion). The ruling is important because it means Ether falls under CFTC regulations and not SEC securities regulations. Consequently, the decision allows financial institutions to offer a wide array of new products and open up entirely new markets moving forward.

Ether Futures and Derivatives

In the past analysts pointed out that the Ether derivatives market suffered due to the lack of transparency. Tarbert now says that you can expect to see both Ether futures and derivatives markets in the very near future. Surprisingly, he stated that these financial tools would hit the market in less than a year.

Ether Creator Vitalik Buterin via Medium

Ether Creator Vitalik Buterin via Medium

Transformative Token

According to the Chairman, Ether is a case of a transformative token. Basically, the token started as a security during the ICO event. At that time the enterprise was playing a controlling role over the digital asset. As time progressed, the Ethereum enterprise faded to the background as the cryptocurrency decentralized. Now the token serves as a utility.

Reverse Securities

Additionally, Tarbert described the reverse scenario in which a utility token slowly develops into a security. In this situation, you start off with a fully decentralized organization. Over time, the enterprise steps back in to take more control. Consequently, this creates a scenario where investors seek profits from the efforts of others. Now the token is a security.

Notably, SEC officials stated that they do not consider Ether a security in its current state. However, both the SEC and CFTC did point out that during the company’s ICO, Ether acted as a security. Luckily the SEC declined to fine the Ethereum development team for its ICO.

Bitcoin is a Commodity

Falling along this line of thought, Tarbert explained that Bitcoin is also a commodity. This statement coincides with the SEC’s decision to decline to label Bitcoin as a security. Analysts consider these actions as a precursor to this week’s news.

PoW to PoS

Also, Ethereum developers announced a shift from the Proof-of-Work (PoW) consensus algorithm to a more energy-efficient alternative, a Proof-of-Stake (PoS) consensus mechanism. PoS systems don’t require your PC to do heavy computations. Instead, users earn rewards for “staking” tokens in their wallets. In this manner, PoS tokens use far fewer resources.

Ether Moving Forward

The Ethereum community has much to celebrate moving forward. The cryptocurrency continues to see development across the entire sector. You can expect to see the Ethereum community expand as more ETH-based products enter the market in the coming months.

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SEC Seeks Input on ‘Boston Securities Token Exchange (BSTX)’ Proposal

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SEC Seeks Input on 'Boston Securities Token Exchange (BSTX)' Proposal

Launching Markets – BSTX

The Boston Securities and Token Exchange (BSTX) has recently filed a proposal for various rule changes with the SEC. These changes would allow for BSTX to launch what would be the market’s first digital exchange supporting full-fledged digital securities.

Joint Filing

The Boston Securities and Token Exchange is a by-product of a partnership between tZERO and BOX Digital. This pairing of companies launched the joint venture in mid-2018, with the intent to develop the first fully regulated digital exchange in the U.S.

BSTX is expected to utilize blockchain technology provided by tZERO, while BOX representatives work towards establishing regulatory clearance. With each providing different areas of expertise to BSTX, both tZERO and BOX have made it clear that this is a joint venture, with each having a 50% say.

Rule Change

The proposed rule change discussed here dates back to late June, 2019. At the time of the filing, it was viewed as having the potential to create a ‘rulebook’ for the operation of such exchanges in the United States. Only now, months later, is the SEC making the filing available for public commentary.

A few of the noteworthy attributes of their proposed exchange are as follows:

  • Asset ownership recorded using a private blockchain
  • Trading enabled through use of BSTX tokens
  • Whitelisted clients

At the initial time of its filing, we took a brief look at BSTX and their plans, including the use of an in-house token developed by the exchange.

Boston Security Token Exchange (BTSX) Seeks SEC Rule Change

Commentary

In their filing, made public by the SEC, the BSTX begins by outlining their plans and intentions for the proposed exchange.

“BSTX would operate a fully automated, price/time priority execution system for the trading of “security tokens,” which would be equity securities that meet BSTX listing standards and for which ancillary records of ownership would be able to be created and maintained using distributed ledger (or “blockchain”) technology.”

Boston Securities and Token Exchange (BSTX)

Operating within the United States, BSTX is a proposed digital securities exchange, which was founded in 2018. The company looks to become the first exchange of its kind, supporting full-fledged digital securities.

CEO, Lisa Fall, currently oversees company operations.

In Other News

Whether it be through the backing of others, or through their own endeavours, tZERO remains hard at work, establishing the digital securities sector.

We were recently fortunate enough to have interviewed tZERO CEO, Saum Noursaheli. In this exclusive interview we discuss past and future events pertaining to the company. Make sure to check out the following interview to learn more!

Interview Series – Saum Noursaheli, CEO of tZERO

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