Has any official guidance concerning the use of blockchain technology been published in your jurisdiction?
In March 2017, ASIC released an information sheet (INFO 219 Evaluating distributed ledger technology) outlining its approach to the regulatory issues that may arise through the implementation of blockchain technology and solutions. In it, ASIC has reinforced its technology neutral approach to regulation and has re-asserted that businesses considering operating market infrastructure or providing financial or consumer credit services using blockchain will still be subject to the compliance requirements that currently exist under the applicable licensing regimes. This includes the requirement to have the necessary organisational competence, adequate technological resources, and risk-management plans in place. ASIC has provided businesses with the following six questions by which to evaluate whether to use blockchain having regard to those requirements:
1. How will blockchain be used?
2. What blockchain platform is being used?
3. How is blockchain using data?
4. How is blockchain run?
5. How does blockchain work under law?
6. How does blockchain affect others?
While the existing regulatory framework is sufficient to accommodate current implementations of blockchain, as the technology matures, and more case studies emerge in the market, additional regulatory considerations may arise.
The CNIL (French data protection authority) has published in November 2018 guidelines in respect of the conformity of blockchain technology with the prescriptions of the European General Data Protection Regulation (GDPR). Further to the loi PACTE, the French regulators (AMF and the Banking regulator, the ACPR) are developing the regulatory framework for the licensing applications of providers of crypto-services or “digital assets service providers” (PSAN).
The German Federal Office for Information Security (Bundesamt für Sicherheit in der Informationstechnik, “BSI”) has published a guideline in March 2019. In this guideline, the BSI covers its opinion on many topics regarding the Blockchain technology, reaching from data protection to legal aspects to practical applications of the Blockchain.
The guideline is primarily aimed at potential users who are considering the use of the Blockchain technology and have basic technical knowledge. The aim is to provide a structured and comprehensive overview, particularly of those aspects of the topic that are related to IT security.
In addition to the Discussion Paper, several government departments and agencies have published guidance related to the use of blockchain and cryptocurrencies in Ireland, including the CBI and the CCPC (as noted in question 4) and Revenue.
To date, no official national guidelines on blockchain have been published. However, in the next few months the Agency for Digital Italy (AgID) is expected to implement the technical standards needed to provide the DLT requirements to ensure transactions using blockchain have legal effect.
No official guidance concerning the use of blockchain technology has been published in Japan so far.
As mentioned above, the FMA has issued certain fact sheets related to cryptocurrencies and blockchain technology. Additionally, the Blockchain Act is accompanied by a government consultation report spanning over 200 pages that explains the goals of the legislation.
A concrete example on the guidance provided by the FMA is given through its guidance with respect to the issuance of security tokens. Security token offerings are gaining in traction as a mode for companies to finance themselves. As such, the FMA indicates that the security prospectus regulatory regime is applicable, if tokens meet the three criteria which make up securities, namely transferability, standardisation, and tradability. It is thus considered, whether the design of the tokens is compatible with the securities prospectus jurisdictional framework, particularly the EU Regulation 2017/1129 on securities prospectuses. The same process as for traditional securities is thus followed by the FMA with regards to security token offerings, as the FMA has to accept securities prospectuses, and examines each for completeness, consistency, and comprehensibility. In practice, the FMA first approved a prospectus in the summer of 2018, for the sale of a security token in Liechtenstein. The official guidance published by the FMA was thus already applied in practice.
As far as we are aware, no official blockchain-specific guidance has been published in our jurisdiction. However, as existing official guidance is, in principle, technology-neutral, it may still apply for blockchain applications (for example, the DNB's guidance on outsourcing by financial institutions). Guidance has been published on specific topics (for example, on ICOs and cryptocurrency).
The Central Bank of the Russian Federation is the body which periodically publishes such guidances concerning financial technologies, including blockchain.
One of the reviews named “Technology development of the distributed ledgers” (published in December 2017) defines basic concepts in this sphere, advantages of the technology and possible fields of its application: local and cross-border payments, securities transactions, as well as the exchange of information.
There has been no official guidance from the Korean regulatory authorities on the general use of blockchain technology. The official guidelines from the authorities are limited in scope to cryptocurrency and anti-money laundering.
To our knowledge, no official guidance has been published concerning the general use of blockchain technology per se. Whatever guidances have been published so far mainly concern the use of cryptocurrencies. One such has been published by the Swedish Tax Authority, for instance.
In recent years, the Swiss Financial Market Supervisory Authority FINMA issued several pieces of guidance regarding the use of blockchain in financial services. These set out FINMA's interpretation of the law when reviewing business models relating to digital assets or otherwise making use of blockchain technology and provide guidelines to interested parties wishing to submit their project for review by FINMA prior to launch, often with the goal of being provided with a so-called "no-action letter" or to ascertain applicable licence requirements.
In particular, relevant guidance issued by FINMA includes the FINMA guidance 04/2017 on the regulatory treatment of initial coin offerings (ICOs) dated 29 September 2017, the FINMA guidelines for enquiries regarding the regulatory framework for ICOs dated 16 February 2018, an update and supplement to said guidelines focusing on issuances of "stable coins" dated 11 September 2019 and the FINMA guidance 02/2019 regarding payments on the blockchain dated 26 August 2019.
The various guidance papers published by FINMA generally emphasise the technology-neutral and principle-based nature of Swiss financial regulation. This provides leeway for the realisation of innovative business models, but requires that projects are reviewed and evaluated on a case-by-case basis, often in a dialogue with the regulator. As far as projects relate to the issuance, trading, custody or other activities relating to blockchain tokens, FINMA has provided a general classification into three categories or "buckets" – taking a substance-over-form approach – to enable a structured analysis of the relevant business model under applicable financial regulation. Specifically, FINMA distinguishes between payment tokens (crypto currencies), utility tokens and asset tokens, acknowledging that hybrid forms and transformations from one category into another along the timeline are possible.
In addition to direct guidance, the FINMA annual report as well as the FINMA enforcement report (also published annually) are sources of indirect guidance in that the provide an overview of FINMA's activities in the area of blockchain financial services and in particular summaries of enforcement proceedings. Likewise, the reports issued by the Swiss federal government on crypto currencies and the use of blockchain technology in the financial sector provide guidance on the interpretation and development of the Swiss legal framework in this regard (see question 6).
There has not yet been any official guidance on blockchain use in Uganda. Positions have only related to cryptocurrency.
In June 2018, the PRA wrote to CEOs of banks, insurance companies and designated investment firms to emphasise the risks associated with cryptoassets—namely high price volatility, relative illiquidity, and concerns related to misconduct and market integrity—and set out those risk strategies and management systems that the PRA considers most appropriate to cryptoassets. These include firms considering the risks relating to crypto-exposures in their capital and solvency assessments, and ensuring they have an appropriate risk management approach.
In December 2018 Her Majesty’s Revenue and Customs (“HMRC”), the UK’s tax authority, published guidance on the tax treatment of cryptoassets for individuals, updating its Capital Gains Manual accordingly in July 2019. HMRC does not consider any cryptocurrency to be money or currency, but rather assets that can be invested or traded. As a result, transactions in cryptocurrency by an individual will normally be an investment activity and subject to capital gains tax (“CGT”). HMRC also published guidance on the VAT treatment of cryptocurrencies in its VAT Manual in April 2016, stating that VAT will be due in the normal way on any goods or services sold in exchange for Bitcoin or other similar cryptocurrency. We go into further detail on the tax treatment of cryptocurrencies at question 8, below.
This guidance is in addition the FCA’s Policy Statement 19/22, referenced above, and to EU guidance which—until the UK leaves the European Union—will be relevant to UK market participants and which may continue to be helpful even after this date. The European Banking Authority (“EBA”) has published a number of useful reports including, an assessment of the applicability and suitability of EU law to crypto-assets (January 2019), and an opinion on virtual currencies (July 2014). The European Securities and Markets Authority (“ESMA”) has published helpful advice on ICOs and Crypto-Assets (January 2019). In June 2019 the Financial Action Taskforce (“FATF”)—the global standard setting body responsible for measures to combat money laundering and terrorist financing—adopted binding global standards for the regulation of virtual asset financial activities and virtual asset service providers, which cover transfers of virtual assets, safekeeping and administration of virtual assets and ICO issuances.
At the federal level, agency guidance is thus far the best insight provided into the application of the legal framework to blockchain. With the rise of ICOs in 2016 and 2017, the SEC issued various statements to investors warning about the risks and potential of fraud when investing in ICOs. To complement these initial releases, in April 2019, the SEC also published specific regulatory guidance for token issuers that outlines when these may fall under securities classifications. The SEC is not the only agency to become involved, and as early as 2014, the CFTC found Bitcoin to be a commodity, subject to sales regulations, but stopped short of expanding the commodity designation to other crypto assets and would be deciding individual crypto asset designations on a case-by-case basis. The Internal Revenue Service (“IRS”) also released guidance regarding the tax implications of transactions involving virtual currencies. The guidance on virtual currencies is a bit dated, going back to March 2014 and treats virtual currencies as property for US federal tax purposes without a de minimis exemption. This was followed in July 2018 by a virtual currency compliance campaign and in 2019, the IRS started sending letters to tax payers regarding reporting past virtual currency transactions.
A common thread with regard to the various official guidance is that it mainly related to the application of blockchain to crypto assets, rather than the overarching technology of blockchain, for which the US has yet to see any detailed guidance.
There is no official guidance on the use of blockchain technology specifically.
As noted in the responses above, the SFC has issued a number of statements and circulars concerning cryptocurrencies and other virtual assets, the primary focus of which has been to warn investors of the risks inherent in investing in such assets. These are discussed further in the responses to questions 8-15 below.
The key substantive guidance published by the SFC in this area came in the form of a statement and a circular issued on 1 November 2018. Taken together, they set out a new regulatory approach for virtual assets, through the regulation of the management and distribution of virtual asset funds, such that investors’ interests are protected at either the fund management level or distribution level or both. The measures do not amend the law or the definitions of “securities” or “futures contracts”, but instead clarify existing requirements and impose new requirements primarily in the form of licensing conditions on intermediaries.
The SFC statement also set out details of a conceptual framework to explore the voluntary regulation of virtual asset trading platform operators, which was followed by the publication on 6 November 2019 of a position paper setting out a new regulatory framework for virtual asset trading platforms.
The SFC statement, circular and position paper are discussed further in the responses to questions 8-15 below.