With technology continuing to evolve and mesmerize at lightening speeds, it can be difficult to keep up with all the new developments and innovations. Especially with things like cryptocurrency and blockchain, an everchanging field where new trends and methods are, at least as I understand it, being developed on the daily.
Blockchain Technology forms the building blocks of our future, making it imperative that one gets a solid education in the medium sooner rather than later. Wednesday’s Black Sea Blockchain Summit, organized by Spotcoin and hosted by Fabrika, brought a one-of-a-kind interactive experience to Tbilisi. The innovative event was organized by Spotcoin, a pioneering company building a platform to connect Georgia and the region to the new smart economy. The summit showcased distributed ledger technology, its impact on FinTech, and how it is creating new business opportunities in the Black Sea region.
Six target objectives guided this incredibly educational and mind-opening summit:
• Enhance understanding of the value of blockchain technology and digital currency
• Explore the disruptive effects and opportunities
• Identify and source blockchain projects and partnerships
• Discuss regulatory issues and solutions in a cross-functional atmosphere
• Understand the demand crisis and how to bridge gaps in blockchain knowledge and skills
• Establish networks, public-private partnerships, and strategic alliances
The summit united industry leaders, market makers, educators, government representatives and tech entrepreneurs to learn, to educate, and to network around this dynamic new technology. A host of international experts and entrepreneurs in the field, from individuals to government representatives and businesses convened to explore opportunities, constraints, advantages, and knowledge gaps in order to enrich the digital asset landscape. 15 international and Georgian speakers from nine countries (Georgia, Ireland, USA, Poland, Armenia, Moldova, the Netherlands, Ukraine and China) presented to a captivated audience, including Keynote speeches from Nikoloz Khundzakishvili (CORA Director, Efes Brewery), Jorgen Welsink (ICO Advisor, Strategist & Investor – Blockchain Consultant – Blockchain Educator Cryptocurrency Academy), and Margaryta Sivakova (Attorney, Juscutum), punctuated by panel discussions and face-to-face meetings with the presenters.
“This is a first-of-its-kind event for Georgia, and the Black Sea Region,” said Spotcoin’s Chief Strategy Officer, Sean Mulcahey. “It’s a great opportunity to explore the disruptive effects of blockchain, and discuss opportunities to address the challenges within the emerging regulatory environment. Attendees had the opportunity to identify potential blockchain projects and form new strategic partnerships.”
To mere mortals whose relationship with computers and technology effectively consists of a social media addiction and the odd video game binge, all this talk of cryptocurrency and blockchain technology can be, well, rather cryptic (if you’ll excuse the attempt at wordplay). Yet, the legal issues that come with setting up businesses is something that most, if not us all of us, can relate to. As such, GEORGIA TODAY sat down down with Margarita Sivakova, a lawyer at Juscutum Attorneys Association in Kyiv, who deals with business that operate with virtual currencies and use blockchain.
Tell us about your company and the services it provides
Juscutum Attorneys Association is a Kyiv-based law firm providing legal services to businesses that are doing ICOs, this includes start-ups and already established companies which want to innovate their business. We also deal with different crypto companies, from crypto exchanges to payment systems.
Tell us about the legal services. Is it different than what a standard lawyer would do ?
To a certain extent. Of course, you have to have a legal background, but the services are quite innovative and this is why I love this field. Because a lot of tasks that standard lawyers are doing are new and interesting at the beginning but then get boring and repetitive, here, things change every day. So, as you probably heard from my speech, it is a very dynamic industry and this opens up an opportunity to become a market maker. So, for instance, maybe you heard about a document called SAFT (Simple Agreement for Future Tokens), which I briefly mentioned during my presentation. Using this document, the issuer company can sell their Tokens to investors before they are actually issued, the promise to sell those tokens at a later date is what lies at heart of this document. I won’t burden you with too much detail- I’ll skip to the interesting part, as it was developed by the American law firm Cooley using standard Simple Agreement for Future Equity. After this event, the price of lawyer services per hour has gone up from around USD 400 to USD 1000. You can read in your free time about Marco Santori who developed this document.
Juscutum has provided legal services to quite a few ICO projects and we usually start with a discussion about the project when we meet the project representatives. We ask them about their business model, about their Tokenomics etc. After that, we send them a follow-up letter in which we list our services and ask them to send their Whitepaper, so that we can more deeply analyze the project. The typical legal service we provide involves first choosing the jurisdiction most appropriate for the ICO in question, because there are different jurisdictions for different business models. In order to constantly keep track of developments in various jurisdictions, we often go to conferences and speak directly to the financial regulators to get interesting insights on their approach to crypto companies. This is another interesting part of the job, because you are not just sitting at the office; you have to communicate, you have to be active, you have to present at the conferences and you are constantly going on different business trips.
So, after we check all the project documents and decide on the most suitable jurisdiction, we usually check the projects Whitepaper to see if all the correct disclaimers are in place. After that we look at the Token legal design. Token legal design means what kind of a rights attach to the Token i.e. what investors can expect to get from purchasing the token. Broadly, the market has developed two key types of tokens: utility and security. Each type entails various rules and procedures, which the project will have to comply with and it is crucial to establish it at the very beginning. After we finish all of the above-mentioned steps, we start two processes in parallel: our company’s team, which deals with the process of company incorporation, begins the process of company incorporation, bank account opening etc. in the jurisdiction that the project has chosen after our recommendation. At the same time, the blockchain practice, starts developing all the needed agreements for the project such as the Token Sale Agreement, which defines obligations of the company, which issues Tokens and the rights it gives to the Token-owner. We also develop Privacy and AML/KYC policies. AML/KYC policy sets out how the company will verify its investors. Privacy Policy defines how the data requested by the company to verify investors is processed and stored. This is a very interesting area now, because you may have heard about the GDPR which will come into force on May 26 this year and all the companies that process the data of EU citizens will have to ensure that they comply with this Directive. This gives us extra new work when it comes to developing the Privacy Policies of the companies.
So, after all the documents are complete, certain projects do the private placement and if they are doing that we develop SAFT and help them with the process of filing Form D (if US investors are involved.) We have a whole set of instructions on how to go through this process. If there are any questions, we always try and help the projects as fast as we can, we are quite flexible in this regard, we are ready to communicate and reply promptly, without delay. We understand the strict deadlines that the projects often have as you have to move quite quickly in this industry. After the project launches the ICO, we help with post-ICO work, which is probably one of the most important parts. Many people think that ICO is the most important, but no. After you raise the capital, this is when the hard part kicks in as you have to implement what you have promised to do, and this usually involves obtaining all the necessary authorizations, licenses, in order to start operating. We also help our clients with the post-ICO legal matters.
The people you provide services for, are they from a wide range of industries?
Clients come from various industries. Many industries are becoming interested in blockchain. So, we have quite varied projects and requests, starting from fashion coin, finishing with auctions on the blockchain. I, however, think that the best projects are technological, which have the goal of solving problems in the industry. Real sector ICOs are, however, also becoming quite interesting and I believe we will soon see the rise of security tokens. I think that the traditional sector sees it as an opportunity to innovate itself and to attract new capital. We now have some projects which have already raised money in the IPOs, but now they want to do an ICO and, for me, that is a sign that the ICO process is gaining more trust and credibility.
What legal advice would you give to people looking to get involved with cryptocurrency; are there any specific guidelines?
It is very different depending on the type of business people are attempting to start. What I would definitely advise is getting legal advice. If you’re doing an ICO, you need a lawyer to structure it correctly. If you are thinking of establishing a crypto exchange, you need a lawyer to advise on any licenses that may be needed and on the AML/KYC process.
It is also important for investors to understand the risks and the rights they have when investing into crypto projects. For this purpose, we have developed a Scam Test. Investors can check the reliability of the project via this test. This industry is unregulated to an extent that investors have sometimes essentially no rights, so it is crucial to check everything in advance before committing to an investment.
If you are considering investing in a project, we always advise you first look at the team behind the project. If they have a good background, and their trying to develop the product and the business has some history, that’s a good sign. But again, it’s always better to check everything carefully and maybe seek some legal advice. This is because Whitepapers simply outline the project and it usually includes a lot of forward-looking statements which might not materialize. But I am not giving any investment or legal advice now.
What are some of the biggest challenges you have faced as lawyers in this industry?
Personally, I think unstable regulation poses the biggest challenge. However, at the same time, it is also the biggest interest. It is always new and interesting and you can make projections as well. I remember once I did analytics for one project and in the consultation said that a token might have signs of a CFD (contract for difference) instrument. Only a few months later, FCA (UK financial regulator) came up with the same sort of statement claiming that certain cryptocurrencies might have CFD signs and should be regulated.
With regards to your professional relationship with Spotcoin, have you been able to gain any insight into the cryptocurrency network in Georgia?
Through my work with Spotcoin, and from attending this event, I am able to see that it is very developed in Georgia. I believe this a jurisdiction which might soon become the place where lots of ICOs will be conducted. Georgia definitely has a lot of potential in terms of attracting good business into its jurisdiction.
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Spotcoin’s vision is to make digital currencies work for everyone. Based in Tbilisi, Georgia, with a team of 30 people, it offers quick access and simple liquidity through its over-the-counter clearing house. It is also launching an ICO on May 1 to develop a global, digital exchange platform and grow its sustainable mining operation. Restrictions apply to residents and citizens of China, South Korea, and the United States. More information is available on their website.
You can contact Ms Sivakova at:
margaryta.sivakova@juscutum.com;
www.linkedin.com/in/margaryta-sivakova/
By Máté Földi
