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Blockchain technology has the potential to give an impetus to the development of an entire range of new industries. Therefore, companies seeking to engage in cryptocurrency business in the US (and worldwide) are increasingly viewing it as an exceptionally useful and versatile tool which can make a world of difference in their day-to-day operations.

What makes investing in blockchain in the US particularly attractive to them is that advances in blockchain technology go hand in hand with amendments in respective legislation, thus making it a perfectly legitimate instrument in the hands of experienced financiers.

The three key areas where blockchain technology can bring about a veritable revolution and help devise radically new approaches include:

  • asset management 
  • banking 
  • payment

Investing in cryptocurrencies in North America is becoming a fashionable but profitable trend. One of the most recent examples of that is Facebook’s proposal for the creation of a radically new type of cryptocurrency referred to as Libra.

Also, a large number of projects involving blockchain technology are getting launched in a whole spectrum of industries ranging from retail consumer products to electricity and pharmaceuticals to global shipping. 

However, where blockchain technology and cryptocurrencies have the most chances of succeeding is in the sector of financial services. It is their intrinsic ability to facilitate CSMs and near real-time messaging that makes them especially appealing to those seeking to launch a cryptocurrency business in the US.

And that does not only apply to Bitcoin (although it has long been associated with the world of cryptocurrencies and everything to do with it) which, like so many other cryptocurrencies, belongs to a highly specific category of assets. The wonderful thing about investing in DLT and blockchain is that they provide companies specializing in financial services with absolutely new and unexpected ways of doing things.

DLT was originally meant to be a mechanism enabling payments to be decentralized. However, following Bitcoin’s becoming an asset of speculative investment, DLT ceased to be viewed as a primary payment tool.

And that is precisely why recent years have seen the emergence of a large number of stablecoins, such as:

  • Libra in the retail consumer sector 
  • JPM in the banking and commercial sector 

This has caused global financial regulators to consider launching their own digital currencies in the US even earlier than they had initially envisaged.

Coupled with DLT & blockchain, smart contracts provide financial companies seeking to launch a cryptocurrency exchange in America with an opportunity to deliver their services more effectively. However, smart contracts, which stand for a piece of computer-generated code that self-executes itself, are not to be confused with smart legal contracts that represent an agreement involving two parties and concluded for the purpose of facilitating performance of specific contractual parts by means of a computer-generated code.

The former can be thought of as a digital third party that helps hold all agreement-related assets in trust until its successful conclusion. When it comes to legal agreements of a much broader scope, smart contracts can execute functions bestowed on them for the duration of the agreement.

The important thing thing here is to make sure that the computer code will be used in a manner upon which the parties agreed prior to concluding the agreement. Only then will registering a cryptocurrency company in America or elsewhere will make sense.

At the moment, ISDA is working on creating a contract that will be based on its CDM or a digital blueprint of events taking place throughout the lifecycle of derivatives & processes. It is also planning on streamlining legislation regulating obtaining a cryptocurrency licence in California. Even such unlikely countries as North Korea are considering launching cryptocurrency exchanges.  

Regulatory Mechanisms

Quite a few financial regulators have published their own sets of regulations regarding launching cryptocurrency exchanges over the last several years. January 2019 saw the FCA release its Consultation Paper which was based on the practical advice provided by the UK-based Cryptocurrencies Taskforce.

UK regulators divide crypto assets into 3 categories, namely:

  • tokens used for exchange & investment purposes & not issued by a centralized banking/financial institution
  • tokens used for a specific investment allowed by respective regulations
  • tokens used for purchasing products or services

The reason for that is to provide companies with a reliable way of determining whether a cryptocurrency is governed by this or that regulatory framework.

UK Treasure came up with its own document providing its own interpretation of MLD5. It is currently working on developing a comprehensive statement in which it will focus on the status of cryptocurrencies in the UK.

Hopefully, the statement will provide all interested parties with more insights into whether cryptocurrencies can be considered property and under what circumstances smart legal contracts can be enforced.

Companies considering investing in cryptocurrencies in the US or launching a blockchain project in America should keep in mind the UK FCA requires their senior officers were involved in making the decision to start a project like this and that they are prepared to invest in this kind of assets. Also, their legal staff will need to be sufficiently knowledgeable about this field.

Need legal advice on registering a cryptocurrency exchange in the US? Considering applying for a cryptocurrency license in North America? IQ Decision UK can help you with that and a lot more.