J3 AG 04 Simon Polrot Panel managing legal risk in the blockchain space

hi hello everyone and welcome to this panel where we will discuss legal risks in the blockchain field so the objective of this panel is to go maybe a bit deeper than visual legal presentations about doctrine and legal risk and everything we will discuss with people who are actually working with companies that are facing the legal risks in the option field or people who are in-house in these in these companies so we will uncover maybe try to make a small overview of how in practice blockchain company can identify its legal risks and how we can manage it reducing them or eliminating them when possible just to introduce myself I'm a simple ho I was a lawyer for six years before I quit my job as a lawyer to join variable and which is actually a blockchain company so I have a vision of both sides of the of the way to look at the legal risks and I will be interrogating my fellow law practitioners yeah each of them will introduce themselves in in a few a few minutes and then we'll begin with the questions so first I have the chains not to be a practitioner Marissa had this analyst and most of my research is actually about the legal implications of blockchain technologies but in terms of what are the regulatory issues that it raised but also as to how we can actually use the technology as a form of regulatory technology in order to somehow achieve specific regulatory objectives for technological myths I'm an ogre antenna on the partner from filtration law firm in Paris I have a background of banking and regulatory matters in finance and I'm dealing for almost more than two years on cryptocurrencies issues in France for service provider and also for our cos under French law I'm a member from the Constitution work working group or blockchain and also from finance innovation on the matter hi everybody I'm Ryan Nixon I general counsel for my crypto I've been in the crypto space a couple of years maybe six months working with with my crypto initially was exposed to blockchain companies crypto companies working with boots PC my backgrounds in corporate law in the US and yeah right thank you guys for coming out I know it's late on a Saturday hi I'm Karen and I woke in consensus and stay for the variable project on also legal and compliance question and I have a background in financial and corporate law and I try to solve many problems we have regulations thank you all so I will begin with a maybe a general question with the people who are actually working in the house in train companies so what would you say what what matter for you the most significant that you have identified for your company and how if you have been able to do to do so how did you manage to cover them or mitigate yes so I came into contact with my crypto at an interesting time I came I met Taylor my boss right there the coolest CEO that's my mama right there I met her at a booth meet up I would have office hours working with you know startups I have a litany of questions and you know founder disputes protection of IP you know crypto and non crypto related and they had a particular issue they a founder dispute and well well Taylor may not be able to speak on it I can give some details but her company was growing you know very quickly and they had a little bit of an issue with with some some dead weight and a dispute and so my role upfront was to kind of figure out this complicated situation you know to free her from this company without you know any litigation so it was an interesting kind of jumping into the fire with my first company so to answer your question you know I think prophylactic measures are important but sometimes you just gotta get in the trenches and that's exactly what happened with the hard fork from my ether-wall that into my crypto I think it's very well enviable it's a bit different because when I joined the project it was just a research project and most of the startup in the blockchain ecosystem does not anticipate any legal risk or anything but they work on a financial project so with many regulation and in this blockchain ecosystem everything is free grazing because we don't know what other rules lots of the regulator or the lawmaker didn't make a decision yet so I think a way to process was to start to discuss with some external console furthering their opinion and try to talk also with regulators and lawmakers for maybe making some education first but what is blockchain and try to discuss with them what could be the rules and what could be the framework okay so we have maybe two very different approaches where maybe in one company we have like more legal debt managed when you arrived and then and then move forward as good as possible and and maybe inaudible was much more about it because as the company is dealing with financial projects maybe it was more obvious that the legal risk law was significant and I will ask maybe those who are not dealing directly with the business companies in your in your opinion have you seen that the companies are more likely to anticipate those risks and do they do this do they do they ask you questions too late or too early or do they want to discuss you are managing remember a few the Koala working groups on the legal issues about blockchain what's your general sentiment on this do do those people do the blockchain practitioner want to anticipate the risk before or do they just identify the risk by creating the product and then they try to manage it afterwards maybe that's my experience I can talk from two specific items which one is koala which is essentially and network community of researchers lawyers and entrepreneurs and engineers and the colonnades or actually we anticipate so we identify which one of the pressing issues that need to be resolved in order for companies or project to actually be able to operate in the existing legal framework and with hi in a collaborative manner to actually identify practical solution to that so in in the whole of koala we really I will say we are kind of like at the avant-garde we're identifying the problem and we're starting to think about it before this problem actually become a reality and ideally we have like a prototype of an answer that we can then propose to different people that might want to implement the systems and then from a more research perspective so we are also working with the blockchain Research Institute and this is not different because the members of this consortium are actually a company that more like the legacy company so that want to understand how to use the blockchain based systems but are not yet you know they are not yet implement indecent they're not yet experimenting with this technology so in this in this way it's actually more you can see that there is a lot of eagerness to understand what can be done and what cannot be done but my impression in this field is quite reticent to reluctant to actually experiment until an actual proper and definitive answer so until we figure this out it's much more difficult to jump in whereas within the koala network where we are actually in touch with a lot of blockchain based projects or startups that are actually inherently and born within the blockchain DNA they are actually much more eager to not just experiment but villages to deploy until the regulatory framework is not clear yet I have both experience because I've seen very serious people were coming in early stage because they want to sleep at night and then giving the uncertainties of the regulatory framework they want to be sure that there is no criminal offence or there is no bridge of any existing regulation the product met face and then they are going at very very early stage to try to mitigate their risk and operate properly giving the regulatory risk the consumer low risk legal risk technical risk when you are trying to to promote an ICO in France you are facing all the risk you have to discuss with the regulator only if you want to and then you you you need to have well you need to be confident with the with your legal background which is not very easy and then you can assist as a lawyer this kind of projects at early stage properly but you also have people coming and see you and saying okay I'm gonna finish my ICO next week okay and then okay what can I do okay then it is very difficult to give them and comfort for the past we try to organize them so that they comply with the best practice which exists in France for these kind of projects we are not going to find real solution and mitigate all the risks for the past but to try to to accompany them and and give them the maximum of control but it is it is not the best way to come at the end of the IC o---- saying oh perhaps I have a legal or regulatory constraints or perhaps my token will fall under regulated activity or a regulated product this is really something what about the advice internally or externally advisor you need to anticipate this and in general do your client actually follow your advice oh yes because we have very serious project no we there that the problem is given the regulatory in certainties you can have people seeing I'm not obliged to do that I don't have any regulatory framework saying that it is mandatory I said yes but if you do not follow the best practice the step to be compliant in the next future will be very difficult to manage and then even if you don't have any regulatory framework you have the legal liability or legal responsibility because you are going to sell something to someone and you have to take the Kryptos upper saver and then other rules may apply most of the time we have people who are very keen to follow these best practices when constraints are too strong they are reluctant to follow some of the rules or some of the guidance for example when you have a multi sig wallet and the best practice will be to provide a key to an external independent adviser who will provide with pistachio out it and then use the key if the project is rolling and deployed properly they are very reluctant to say I don't want to be the next teasers you know I don't want to be blocked because I have someone with one key but this is something we need to discuss because we are going to to run and the regulator is going to run more and more compliant than this so most of the time almost all the best practice are complied with well in the project I'm assisting and I'm not you know if it is not serious at all we're not that assisting them because if they do not understand that we have to protect the server's if you if they do not understand that they have to protect themselves we are not going that way and then it is the the better for everybody to follow the rules thank you very much yeah thank you very much maybe I'll follow up with there is there is a like a trend going on right now that were the regulators and the legislators in general more interested in cryptocurrency because of the ICO boom and the boom in currency cryptocurrency price in general and it's something that has began for certain amount of time in certain countries but is very new in other ones in general would you say that the regulators are really willing to understand what's going on or do they have in general an approach that is highly risk driven and which which is the antithesis of going into the into a very innovative space what's your general feeling about that yeah so I you know I think especially in the states you know the regulators are very interested in cryptocurrency and they're very interested in regulating it it's kind of a chaotic top when you know as Council we you you know what do businesses want they want some sort of predictability right like we have to give them some sort of assurance that they could set this out that they can issue an ICO that they can you know take on you know venture capital financing and there's no big liability hanging over their head and it's it's very challenging I think it's you know two things to stay on top of regulators see you know how that applies for example with my crypto the sec just issued you know you know news that like exchanges should be registered well is my Crypt own exchange no no we're not but I mean we do you know switch out for different you know cryptocurrency so does that warrant maybe a deeper look yeah I think so so it's it's kind of having to comply stay on top of regulators and at the same time not be a blocker you know because I mean we are a start-up at the end of the day and and my job is to always be on top without another way and that sometime it's a hard balancing act I think in France the regulator and the lawmaker is very interested by blockchain and all the way around it and with real intention to take care of these problems and all these questions creating like several department in different regulators to take care of these FinTech problems and also some information mission in the parliament I think there is two big blockers or the first one it's it's essentially a political political question so everybody a bit waiting for what will be the political position in these questions and the second one it's we part of the European Union and I think lawmakers are between the expectation of what could what position could be the one of the European Union and what could be the framework at the end made by the European Union and they know that even if they try to create some rules and some frameworks at the end everything the decision will come to the European Union I will say that working with the IMF and the part of the IMF so I'm not talking for them but working with the IMF there are quite balance because their role and duty is first to protect savers this is the mission however we are very open-minded on the matter because they need to understand what you are doing and because they need to understand what your Bini are doing their door is open you can present and your project you can have meetings explaining what you are doing they are very keen to understand they make their own knowledge on this are in engineers working with technical groups and when we see the potential regulation which could be implemented in France it is not a ban of crypto of IC o---- like we have in other countries we don't have any kind of very strict are we tests like we have in the United States where 99% of the talk and call the security we we have their kind of tests but which is I will say more balanced and the the contemplated rate framework and regulation which could be potentially in the future if it is voted could be obtaining a kind of approval for ice use which will comply with the best practice but not necessarily make a ban on the others simply saying for the others there is no approval from the IMF and then there will be a warning on this that it will be but potentially possible to subscribe in France and for the others it will be a good marketing arguments to say I am compliance with the IMF requirements and then I'm following the rules you could be more confidence on my project which I think it is a very good if if it is confirmed it is very good balanced position where it is not so straight you can either in France the best projects and it is not a ban like we have in other countries yeah so make sense I actually yeah I think the regulator have actually quite open to understand and time regulation I think the problem is especially in the case of of I SEOs is that it's this is a really delicate situation in which on the one hand I need to regulate something that is an innovation and to understand how to actually promote those new possibilities that emerge while at the same time I also need to deal with the thousands of scams that are actually happening on top of this and it's really difficult because obviously you need to focus on the scan fast and then it becomes really dungeon also dedicated to actually create a regulation that promote this technology without actually covering all the possible negative effect that comes from the people that are trying to abuse this regulation and from the from talking with with various regulators but in Europe and in the u.s. oftentimes they actually just literally say you know the it's really difficult it's much easier to just stay within the existing status quo because then no one really can't blame you that you know you didn't do a mistake you just didn't really change and you think whereas actually providing a change and then seeing that this change which maybe was very well substantiated but then is gonna be abused because people will figure out how what was the loophole or how to actually direct it in order to then use it in order to do some scam of some thoughts then they are actually putting themselves on this very delicate situation in which they are they wanted hope of this change so there is this there is this kind of inertia towards trying to change as little as possible and just trying to cover the potential damage that is emerging but that's not from a negative standpoint it's small I think it's more based on like being very careful as regulators in order to preserve your job and in order to protect the so there's a balance between actually trying to protect the investor and doing it the right way so you need to take a time to really understand what what's this new technology and what's going on exactly there is a last thing when when when you are going in front of the IMF for example when you are explaining your project and the structure of the iséyou you would like to launch you can obtain the kind of advice on these best practice with a regulator it's just nuts okay it is your own liability take care it is if you want to discuss about volatility if you want to discuss about liquidity of the token if you want to discuss about the art cap the soft cap if you want to discuss with the functionality and this kind of French or we test we can have you can have this discussion with them which is I think a very good idea not to obtain a kind of approval because there is no approval so far but just for you to see where you are under a French regulation and the best practice on the matter which is for me a kind of open-minded of the regulator and maybe have a question for you have you already had a client that was building a completely decentralized system or is it always clients that have you know an IC o---- is fairly easy to locate and the place for the ACO is conducted either people live or the company is implemented but sorry have you already faced projects where is actually very difficult to see if there is a way to identify a risk for a regulator and if so where it where it is located full decentralized at early stage it is always a kind of a RC 20 on the atrium after it there is a fork and potentially fully centralized this is on the second stage this is not the kind of discussion we could have this is something which will be discussed but there are more focusing on the way the talkin are going to be offered because the protection of the savory is linked to the purchasing of this and O it is chartered and what will be information provided after all in some exchange you have discussion about are you facing regulated I will say traditional activity and there you could open another discussion saying when your exchange will exists if it is fully socialized okay are we dealing with a banking operation the banking transaction can we say that the implementation of such innovation of these new techniques will fall within a classical investment service for example because we try to categorize people saying okay what do we know where are they going do they fall within something which is already known or do we have something so new that potentially we will have to create set up a new regulation sometimes it happens but it's quite unusual okay variable variable parts yeah variable isn't it there is one example which has happened which was the Dow which indeed qualified according to SEC as securities but then the question is who was the issue of the securities so of course we can claim that a lot was responsible for this but if you design the model and in fact the Dow was deployed anonymously so nobody know who actually deployed it so we can actually imagine potentially deploying a noxious math contract that will create his own issuance of token and those tokens might or might not qualify as securities but even if they do qualify as securities then the question will become who is actually to be held responsible for the issuing of those tokens so in the case of the of the Dow it was there was obviously a clear correlation between this lucky that developed everything but if we really imagine a more open source system where there is not one single entity that is really promoting and that is like contributing in the development at least of the of the structure then we actually have this quite interesting question we might have the issuance of securities but it might be very difficult to pinpoint exactly who are the actors that might be considered to be the issuance of those securities so I find it incorrectly most of the clients that go and see the actual lawyers and practitioners they have already a risk identified and well they they are actually developing an activity by themself and they don't consider themselves deploying a service on the ethereum blockchain and then just it's completely centralized I'm not responsible for this day there then they won't look for a lawyer if they do if they do this that they will just do it and and see what happens and the clients you have the type of the typology of clients you have it's more people who expose themselves in some way by deploying an ICO most of the times it's a nice view an exchange or something like that where you could you can easily identify so maybe I was searching more practical questions like that's a very broad question have you identified a general trend in the the projects you've seen or in your own projects we're a country our group of country would be like the place to be to deploy a blockchain project is there a trend going through a country in particular or the problem is often it is not only legal and regulatory issues a lot of project acts driven and we must had me that friends is not the paradise in France in terms of tax and when you have to apply v80 and some other tax you say okay I have 50% of what again during the launch is going to fly away we this is the kind of question we're facing it is because we can deal with the legal issue also we have some in certainties on the consumer code where you have to deal with withdrawal right of the clients when you have to deal with pre-conceptual contractual information when you have to deal with jurisdiction rules concerning the regulatory constraints there is no one so far there will be in the future but this is something which can be managed if someone with the project said okay French is great on a regulatory or legal point of view but on tax my new view it's not very attractive but we cannot do we cannot fight against that we can transfer message forward message try to do lobbying saying we could be more attractive on these tax issues we know that all the countries are much more attractive on the tax issue but less potentially on the regulatory one or they are considered not so secured we know that Switzerland is very very attractive because of the tax issues and because also because of the regulatory framework they already have something the film is very act is very proactive on this we I don't know I could say friends is attractive but someone who's going to say to me yes but tax is so so painful that's why I try to sell friends you know I do my best yeah and you know I I think um you know Singapore with their kind of like sandbox you know where Singapore has this framework where you can you know release a product in this like sandbox experimental kind of relaxing of regulations or lessening of them to see you know like what works if something should you know does work and based on whatever that the results of that experiment you know that may impact you know legislation reducing a law you know taking a lot like some regulations away and I think at least in my opinion you know blockchain was very fast legislators move very slow and you know I I mean until you know the space is becomes a little more mature I think it's it's it's hard you know case-by-case basis to follow what you just say I think there is many small countries where it's easy to speak with the regulator to some country like she brought down already have some regulated framework and I think many small country Estonia it's easier to find compromise and find a framework and it could be attractive but of course for a reputation question it's may be friends yeah and just to piggyback off that like I you know I've done a little you know I see what advisory stuff and you know people come to me last minute and say oh you know here's the this aft and here's our you know white paper and all that here you know we're doing it next week like literally they've had a similar situation and I politely declined that one but you know at least on on my side you know you can i co and you know or you know the British burns Virgin Isles but like you you you know are you building a business are you just trying to ICO and money grab and and get out of there you know I mean people of you like London Bridge is falling down you know like I mean so I think that that's another thing that startups need to consider you you if you do an ICO there I mean what what are your partnerships gonna look like everybody's gonna question where you set up you know where you launched it thank you um I finished with one last question and maybe we can ask question in the public um one last question given the unclear nature of the regulation right now and the fact that the regulator's you decided just before slower to move forward and the actual projects what would you recommend which would you recommend that you need a formal validation for the regulator and this postponed pursuant postpone your launch or would you just recommend to do the best you can to be compliant in some way without having the stamp of the regulator and then move forward it's a complicated question right because you know blockchain technology you know visualizing of any asset that's that can be better that's it you know that could be you know a non physical asset can be anything it could be water could be you know gold and I think going back to what I said before it could be like a case-by-case basis you know going to back to your point I think it's best practices at the same time I think as counsel we have to be aware that speed is key with with you know with our companies like they move fast there there's trying to you know build out things fast scale fast so I recommend best practices it takes a lot of you know thinking beforehand and and trying to anticipate what the next move in you know the company you work with you know what's the next step how can I you know jump in there and and race you know raise these flags and have some sort of a solution yeah in my view I think the problem is that in spite of the best intentions of the regulator so not they will have a hard time figuring out the right way one because they first need to understand technology two because they have a lot of political issues to deal with at the same time and all this I think one interesting approach will actually to God home of industrial kind of conduct and actually identify what are the ways in which we can design those ideas and potentially how we implement specific like technical devices that might actually comply with specific regulatory objectives and actually have these bottom-up self-government structure that comes from the industry because the the players are the best one to actually if people understand the regulation and we understand what is the objective what was the intention of a particular rule and if we can figure out how we can actually design the ICO and how we can design the structure around it so that we can actually protect the investors so that we can actually comply with the values in intentionality of the of the regulatory framework then it's actually providing a way for the regulator to look at this and actually see well this seems to be working and then perhaps we can more easily and those those particular practices or perhaps we can inspire the regulation to say well if you do actually implement those specific technical guarantees or the specific models into the ICO design then perhaps you might not be required to comply with all the formalities that are usually to be complied with and therefore you as the regulator you can actually kind of open the open the door and actually invite people to come up with innovative solutions that will come will eventually achieve the same objectives and providing the incentives for people to find those solutions because it's gonna reduce the regulatory burden that they will be otherwise subject as I said earlier us as long as the objectives also to mitigate your risk it is it is better to go if you have a doubt if you are in kind of area where there is gray zone especially in the financial matter it is always better to see the regulator because if you at the end if there is a decision or if there is a position that you are regulated and if you do not comply with the rules if you launch a project and then after there is some more requirements you are not complying with the regulator will not seen you the same way if you anticipate or if you go afterwards and there is no issue about discussing the regulator then obtaining kind of comfort if you are not so far so good and if you are you have to comply with some rules so if you want to sleep at night go to the regulator thank you all and the toilet for my questions I know if we have some questions I just say one thing - if there's one thing I've learned from my experience and we just like to impress upon all of you you know from experience you know my crypto was a you know not not this case because they had counsel it wasn't a good fit you know I think you think with my company there's a certain pace that you need to stay with them we we move fast we we are we're always working you know but seek counsel early don't come last minute and don't come you know lawyers a lot of times we clean up the mess and while there was but you know a mess when I got into it it wasn't you know their fault come early and you know see if you have an issue I from my experience I don't know the rest of the panel but I really loved the crypto clean aetherium community but there's a little bit of like oh you know the lawyer it's gonna slow it down we have this you know great idea you know what we're not that you know we're you know we're here to do our best to give you that predictability we're here to do that but we want you guys you know to have an an awesome company a billion-dollar company more than just an ICO like what you know it all the talk is ICICI but but what happens next you know like so the sooner you you speak to us the better thank you thank you so I wanted to to share my thoughts about looking at how this is working and I'm feeling that first of all when we're talking about regulation about ICO it seems that by default the first thing that you want to avoid is looking like a security right so in fact the game is do not look like security and everything revolves around that and I wonder if this is no not something which is restricting innovation in the way we can fund project or economy because we want to avoid that and I think that no regulator is looking at why those people do not want to play with the security walls is indeed another set of lower constraint about securities that could be applied to this kind of project so I think that right now if I'm losing $10,000 through utility token or through security token I lost $10,000 and I think that I have more guarantee if it's like a security than like it's a utility any reaction didn't yeah you're right but the constraints the initial constraint are not the same if you are showing a talkin which is not a security you have a regulatory framework you do not have to comply with we have only best practice if you're falling within security definition then you are falling within the classical regulation and the investments and the way you have to structure to issue this security is much more complicated and potentially you will not be subscribed the same way because you are at the very very early stage of your project and venture capital potentially will not look at you yes I agree but that's the the thing is that right now the constraint are too high so people are trying to go on the side of the system so isn't it time to eventually say hey maybe we need to have less constraint on some projects and having kind of I don't know how to name it but as kind of security bit but with less rows on it like for the SEO because at the end it's public money going to entrepreneur or to a community so the risk is there the question is what what are the rights granted to the token in fact if you are security you will have a vote right a vote you will have to provide dividends and you will have to fall down within a regulation when you will have a reporting when you have to comply with a set of rules which are much more painful than if you have a utility talking without complying with all the security rules and then you have a promise of offering a service or a product without an obligation of results you will not have potentially to redeem if you do not come to the hand of the project which is if you are not deploying the protocol or the application or your platform and then you are your constraints are less with token than with the security and your liability is less - I'm just a quick add to that I mean at least in you know in the US you know I mean you could say almost any utility is is a security if there's it some sort of investment you know if you're trying to trade that on an exchange if you you know like let's be real you know like I mean most of the time people are trying to get on these token instruments so they can pick it up to make some sort of profit so if if there's even a little bit that it's a security you know so I mean I I think a you know maybe a lesser constraint framework would be great I mean it's not gonna happen anytime soon I don't think so if I cannot do this I think that it's actually the Economist that because people are trying to escape from the qualification of a security they're actually stripping down pretty much every utility to the token so you just end up having like these empty utility talking whether it is actually quite artificial and because anyhow you're selling it as part of an investment contract it's still gonna be a security so you just end up having like this really useless utility talk and that nonetheless qualified security so the incentives are actually quite misguided like the older startups all the project are are trying to escape from something but by the mere fact of trying to escape they are actually reducing completely the utility of the of the platform or the token and because of that they are falling back into the security anyhow so I think the main issue and especially from the US perspective because in the opposite slightly different but the problem is that if you're sending a token before the platform exists no matter what you are actually doing an investment contract so either you have to postpone the IC o---- after the platform has been built and therefore these because even the utility is not sufficient having a utility token that is not yet functional will not actually be sufficient so I can design the best utility model for my talking but if the platform has not yet been built it's still not gonna qualify I mean it still gonna qualify as a security so I can have a perfect little token which also have the characteristic of an investment and in that case yeah so I think at the moment in the u.s. unless you have an existing platform whatever talkin you can Excel is gonna fall within the hallway test I have a question here in France there is some kind of entity called soceity cooperative is kick I think and it seems to fit quite nicely with the like community character of blockchain communities I know if that's that could be a solution for illegal incorporation this is specific type of company akiko system is the first word is the last the only one in France I kind of cooperated but it can work because it is not a pure business project you know and when you have a kind of happen source code when you try to provide your your your to say that you are offering the services to a lot of people without the the main objective is not to make money and you have a kind of specific status but which is set up like commercial company but specific governance rules specific organization which is not adapted to all the projects it is not an association association it is not a foundation it is a commercial company but with a very specific set up with a very specific organization which is not adapted to everything so it is really a part it is a good process for a cooperative open-minded and non full business completely well I'm not I've not been very clear about this very specific process so maybe the most important thing with the this kick is that it's a cooperative structure so you have this thing where every everyone has an equal voice in the governance if he's an investor and yeah there is also the Avatar project which is into the best kicker structure insurance saying that all utility tokens sold before the platform exists a security seems very broad we already have presale type things in the real world like pre-ordering a book and so on what distinguishes those from a security if utility tokens sold before the platform existed securities so there's some expectation of profit right like if you if you buy a token and it didn't change us in price and you know there's anything of expectation arey you know arguably to it it's a security you know so that seems to be the general expectation of people now but at least originally the idea was well you're actually just buying gas to use in the system once it's out not you know and you're you're helping us with a Kickstarter type you know it's a investment in the acknowledgement that you get some of the proceeds are fixed around to the proceeds and so if that's honestly your intent does that still make a security in so what would you consider is the intention of the purchaser at the point in which his passions in the talkin so for instance and teases are open and unresolved question is in the case of the shaft right so those those these artists you sell you sell an actual investment contract so the shaft is defined as an investment contract and these is a promise that you will actually obtain the talkin when the talkin will be issued right and the the the thinking behind it is that in that case the talkin at the time of issuance will not be a security because the talkin will only be issued when the platform exists and this is an interesting model now there is a lot of controversy around it on the fact that can you actually just artificially create these two step process and pretend that what I purchased event or departure the object of the investment contract was the talkin and therefore claim that just because I'm waiting before issuing the talkin the at the time in which I purchased the shaft did I not actually have in mind to actually purchase the talkin and so of course we don't know because there hasn't been no decision at the moment but he is a huge amount of controversy and a lot of lawyers in the US and abroad that claim that there is no way the SEC will actually consider the shaft not to somehow contaminate the talkin that will be issued at the time because I purchased the talk and toda shaft so the shaft is just the medium by which I actually obtained at the talkin and that doesn't actually protect the talkin from not being a security so what what you really need to look at is not necessarily when is the talk and being issue it is what what was the intention of the purchaser went I actually made the transaction so if I parted this stuff to die because I'm expecting to gain whatever profits expectation of profit on the talkin the the investment contract of the shaft will contaminate potentially we don't know but that's that's a possible maybe likely outcome thank you the other issue is linked to the fact also that the talkin as to functions you you have the the use in the platform will be set up which is quite the reason why potentially you could have invested but at the same time it is listed and 80 percent or 90 percent during at the first stage early stage of the IC o---- people are subscribing to trade and and try to optimize when this trade is not I didn't purchase to talking to use it when the platform will exist only for trading on the exchange two seconds after the subscription and there it is very difficult to say it's not security in this in this situation but in France it is quite different because the old test is not based on the same criteria it's not so restrictive so although it did talk and are not potentially securities there's been quite a few FEI SEOs and even in in France and I was wondering whether you guys see a trend towards a professionalization of the investment into tokens and now like professionals in that kind of investment activity and with maybe terms and conditions that we that you know there are starting to become usual in that kind of activity are there already in the landscape hue like investment funds that are specialized or that I actually do perform decimal to my she owes you big you begin to have some bridges between this innovative innovation will and the classical one you have some investment service providers or you have some asset managers were looking very closely to set they are advising I SEOs or they want to set up specific fence regulator or not in which they could invest in i ciose and the the classical word is now looking more closely to this and there is a professionalism with this you I would say wave that you still have some icy owes on the process which which are not performed with the classical legal documentation which is needed so you have everything that normalization will be much more helpful for everybody as far as you have classical players who are regulated and you are interested in because if you have asset managers who are regulated that's submitted to a specific regulation interested in it means that they are going to be more professional and that it means that the players who are not very serious will disappear we remain only the most serious one which is I think a good thing if you want to make these growths in a legal environment you have venture capital who began to say I'm interested and then we need to focus on how we can read this type of model of investments which was not possible in the few in in the past because at this so early stage of financing last year for example the venture capital we're not looking at this saying oh can I read this I don't have any shares I don't have any receivable I don't have any claim if there is no lunch of the platform if they're closing just at 30 I co have no right and then what can I justify my investment in this kind of project now it's a little bit different so it is more professionalism okay so I understand this room for my next question which is basically if there are a few professionals in the landscape already then III assumed are starting to organize the investment and to secure it and because what bugs my mind was this CEO thing is that when a few professional make an investment into an IC o---- then they're gonna be willing to make something like it's some kind of shareholder agreement to you know to regain the kind of protection that you gain through that into but but can you see this coming and we read actually is it possible to do that when you're talking about sure that I agreement it is because you can't see the security is an equally talking and you add the rights of share which is not the case for most of the project well let's assume that it is sometimes we you have a kind of professionalism because you have passed ICO out it when you can organize the fact that you can secure the project by avoiding the tech the money and ran by implementing some compliance process to give more confort and visibility on oh it's going to be deployed our defense will be used or we can report on this but there is no shelter agreement as far as there is no security you are not taking a part of the issuer I would also add that it's actually even - it's the same player they are actually not necessarily playing the same game and most of the investors that are actually going into icos they are actually not at all interested in getting anything close to equity quite to the contrary they actually want just a token that is super liquid and that they can resell very soon and in fact we can actually see some investor that like some venture capital that invested into some early blockchain startup that now are actually asking them to do an IC o---- just because that's the very easy way to liquid to to get the liquidity event which is much faster and much more liquid than any kind of equity event so the the traditional investment player they really it's not as I'm investing in a startup and then I'm gonna help it and I have this more long-term vision of the startup growing and scaling up and then eventually going public it's actually just I think this might be an interesting investment in the short term and I'm just gonna purchase token and I don't want the equity that goes along with that just because I want to sell the talking on the secondary market maybe you want one last question because we already I've heard a few times in this talk that basically France or X country has more lacks regulations on icos than the US why do you think that's gonna matter when you're selling your tokens to general public in the US the u.

s. is like a very good habit of coming after companies in other countries like why do you think it's gonna matter like what protections do you think through these companies are gonna have because they set up somewhere else and then sell in a different country like why why if you set up in the in in France they have moral act as lacks laws for the eye cos yes so your company's a little bit protective because you set up here but why when you set up you send your IC o---- like blockchains global anyone can get into these i cos why is it going to matter when you have a class-action lawsuit that's launched out of the u.s. against the french company like the u.s.

loves to go after other companies I mean must I see you actually block day yes well block you're excluded you're excluded offering of this of the talkin for US citizen in the United States and there is no promotion there is no nothing in the u.s. because also of the risk of extraterritoriality of the US alone so how do you how you advise the company to block that but it's like the way the VPNs work and like basically I can live in France and live in the u.s. like Jewish over it so far so far we well in the legal documentation you have some wording saying that it is not dedicated for US citizens and you have other countries like this for example last September you could have South Korea where they say we are going to ban I she owes you have also China but it's not sufficient you also advise on the fact that they do not have to answer a question from your cities and either want to subscribe they have to exclude yes citizen even if we know that technically speaking you can I up to exactly and and but but you do your best you do your best to show to the regulator and with the legal environment that you are excluding the US citizen and you are not promoting in the US you are not doing meet up in the US you are not offering and advertising in the US with all of that you try to have a kind of secure environment for this yeah and I mean to add to that I you know I think it this is where you know the crypto community you guys can get around these things you know at the end of the day we do our best to provide as much protection and show you know in good faith we're doing the right thing you know sometimes you can by the way it was a great great question Kevin who's president of my crook day hi yeah I'm I'm a teacher of legal English down at the University of Bordeaux so I'm just wanting to know what sort of advice would you have for people for future lawyers who want to get into the crypto space want to know it's very interesting because I think it is better to know the regulation when you want to go after word in the noon regulated environment it is much more easier because you have I think some reflects if you are not if you do not know this regulation you do not know how to manage the absence of regulation if you are from the pure non regulated activity you want to do some crypto what will be they your your your I would like to know the regulatory environment your potentially will face in the future so it is better to be a regulatory lawyer and then not applying a kind of regulation instead of not knowing a regulation and you are in the complete blind people in fact for this and just a quick add to that you know I think you know teller says the best like nobody you know studied this right now right like it you know we all got into it some way or another and I think just being very interested in in the space I think having the security background is you know would be an excellent first step you know but I mean just two people need to she she calls her falling down the rabbit hole like find that thing that sends you down the rabbit hole and gets you deep and gets you into the details of this space because I mean I I truly believe there's something that appeals to everybody in the space you know so I think it's just fighting that incentive last month I I had an associate will potentially deal with these kind of issues and these kind of clients and I receive about 20 Seavey's resumes of people seeing I had a wallet and very crypto friendly and I have my nano I bought that later and that I'm very very interested because I have a turbid cone ripple and all of this thing I said yes okay and what about the real life and the regulation and on the other side I have two or three people seeing I come from asset management environments I came from banking regulatory environments I know that it's not regulated but it's going to be regulated then I prefer to have this kind of profile also the crypto community guys who can dare say okay it's very interesting but it's very dangerous too I think we closed just one on one occasion in for one more so the first one is do regulators try to build a new framework for snow cones I'll try to fit those token inside existing frameworks and the second is about compliance issues so you I think you advise i ciose to do qic but are there any also base purchased such would advise them to follow we I think we understand the first question but not the second one we a second here with compliance issues so qac is mandatory but are there any other best practice that you tend to throw you you had a consultation paper from the IMF who has lunch in last October with and who was closed last December end of December and then you have a regulation which is under preparation we have no certainties and I think we are not at the place of the regulator for this but as I said earlier one of the option could be okay to officialized the best practice which are used so far in this eyes--you environment in France and then get a specific approval a stamp of visa from the IMF for the project we comply with this but there will be no potentially ban of the project we will not comply with this from vile act Asst this is something which is under discussion there will be in the future but actually before the summer political I will say discussion which could completely change this kind of projects they will be potentially also the setting up of new players with a specific agreement specifically terrorization as far as they are offering they are acting as intermediary and offering a kind of economical rights in the future or but estimates and there you have several options we do not know so far what will be the results at the ends there are a lot of discussion you have a lot of working group in professional association trying to lobbying trying to establish and publish report on the matter to inform the regulator properly but potentially it will be done before summer after all I am NOT the regulator I don't speak for them and this is just under process the second point was about qi Sein and comparing components advices sorry compliance advices kyc is a really shoe in France a real really shoe because [Music] there is a submission to money laundering regulation when you when you're talking about a she owes you have to take your crypto you have to put them in an exchange to a translator to change into Fiat and you have to go down with the Fiat individual account of the company and the service provider dealing with GRC process for ICO do not potentially collect the appropriate information or do not have the technical means to collect the proprietary permission will which we comply with a kyc process of the banks and then for most all of the ICO and my sister there is always an issue with the bank when you are come down in Fiat in the account of the company they are all blocking or closing the accounts are saying no we will not let you do because the qia is not satisfied in addition there is also a lake of information from the exchange to the banks because the nature of the information which is collected by the exchange is not provided to the bank when there is the need for the bank to comply with their own qrc process and then this is a case of case by case basis when you have to negotiate with the banks in Luke have done this qyc process i'm we try to satisfy and what i'm trying to do but it's not very easy because compliance of classical banks are not very keen to share on this is to try to implement at the ICO level the qrc process which will be needed by the banks so that you have a smooth relationship from the top of the ICO to down in the bank but it's not easy because for most of the bank when you take a selfie with your ID it is not a document which is a tip the Box in the compliance book of the bank for some of the banks you can use that for others and for many others it is not possible and then you have a really shoes because all the project if they do not collect shots during the ico they do not know easily how to transform that and to run a company properly paying people in dev being renting it's very difficult to manage afterwards and I don't have solution can I ask like one one last question before we will leave sorry right now just maybe just meet the speakers afterwards so again just we have technical team there so and then if - it's the end of the day thank you very much