Technological talents have been working for the financial industry over the past few decades. Step by step, they have computerized, automated, and networked the businesses, and eventually set up the service of Internet banking. Though many banks are downsizing today, they are using algorithms to recommend financial products and services for customers online. The core framework of finance has not changed at this stage, and the role of lawyers is ensuring compliance with regulations. The technology of blockchain and cryptocurrency became more popular by the day, we noticed that technological talents were now dominating and defining financial fields. With the variety of business, lawyers’ knowledge needs to be reformed as well.
In 2017, Enlighten Law Group took over the first ICO (Initial Coin Offering) case in Taiwan. Everfountain issued the token “Bean”, which can be used by subscribers to purchase coffee. Everfountain has accomplished the first phase of ICO, and their next step is fundraising for a mechanical arm that can automatically brew coffee. Enlighten Law Group has been regarded as the most experienced firm in cryptocurrency cases in Taiwan in the past year.
What are the similarities and differences between ICO(Initial Coin Offering) and IPO(Initial Public Offering) in traditional financial circles?
It’s unfavorable for start-ups to raise funds from the public in the past because the procedure of IPO includes large institutional investors and strict regulations.
The ICO fundraising is mainly for the virtual currency community. They are familiar with blockchain technology and related business operations. Thus, if the program is well planned, and It’s possible to attract their investment.
Another huge difference in stock issue is that fundraisers have to spend a long time negotiating with investors and sign an investment agreement to set rights and obligations finally. But in ICO cases, project originators will draw up rights and obligations in the white paper at the beginning, therefore, it works under a very different legal structure.
/Opportunities and risks/
There are various ways of virtual currency issuance. Some are similar to equity but some are only tokens. Some currency can be traded in the exchange but some can’t. You can do anything as long as it’s not illegal.
Laws concerning virtual currency are in the process of formation, so the current regulations are relatively more lenient. However, the legal environment is changing rapidly. Thus, the innovation of virtual currency brings fortune, but it is still risky legally.
Though some investors and fundraisers have technical expertise they are not familiar with financial regulations. And people with financial backgrounds know little about science and technology.
There are frauds and scams in the field of virtual currency. For instance, some originators or fundraisers claimed that they had business plans but it’s not true. Hence, lawyers must conduct background checks and field surveys while working on the case.
Besides, even if there is a business plan, it’s possible to fail. It’s necessary to arrange a suitable withdrawal mechanism at that time. Investors need to prevent virtual currency issuers from over issuing or disposing of them since that would decrease the value of the currency. All these are matters that attorneys should analyze and organize for their clients.
/Conditions and responsibilities/
To provide complete counseling assistance to clients in virtual currency-related cases, lawyers have to be knowledgeable in many fields:
- virtual currency and the communities behind it;
- financial and business experience;
- long-term tracking of the development of national regulatory policies;
- erudite knowledge of financial laws, especially in the following legal fields: Banking Law, Securities Exchange Law, Money-Laundering Control Act.
With the knowledge and experience, lawyers can identify risky matters, properly help project originators decide whether to adopt the ICO in raising funds and reduce commercial and legal risks through setting project details rationally.
Our attorneys have researched and taken part in the above-mentioned fields for a long time and were invited by the Shanghai and the Australian Stock Exchanges as legal counsels to verify the legitimacy of listing a coin. Enlighten Law Group has also worked with large private equity funds and provided the assistance of reviewing contracts and SAFT(Simple Agreement for Future Token). By May 2018, our firm has participated in counseling five ICO fund-raising cases, three of which are overseas and two are in Taiwan.
Enlighten Law Group has substantial experience in cooperation and service with traditional banks and various roles in financial technology such as exchanges, ICO issuers, investors.