Individuals Should Not Rely on Insurance to Protect Their Cryptocurrency Holdings

Many individuals and businesses hold some amount of cryptocurrency. According to a recent survey, nearly 10 percent of Americans have invested in …

By Michael Menapace, Esq.

Michael Menapace

Many individuals and businesses hold some amount of cryptocurrency. According to a recent survey, nearly 10 percent of Americans have invested in cryptocurrency since the first Bitcoin was “mined” in 2009. And, along with the rise in prevalence of virtual currencies in recent years has come a surge in cryptocurrency theft, with one Ponzi scheme defrauding cryptocurrency investors out of $2.9 billion dollars in 2019. Those who invest in, use, and hold cryptocurrency should protect their assets. While individuals can purchase insurance to protect themselves if certain types of assets are destroyed or stolen, such as a house, car, or personal property, individuals may have difficulty obtaining coverage for their cryptocurrency.

Bitcoin is just one cryptocurrency built on the technology called the blockchain. Other virtual currencies include Ethereum, Ripple, Litecoin, Monero, and ZCash.

Homeowner’s insurance protects an insured against the loss of certain property. For example, if a thief breaks into your home and steals your television, that loss will likely be a covered loss of property under a standard homeowner’s policy. For an overview of what homeowners insurance typically covers, see here.

Is theft of cryptocurrency covered under homeowners insurance?

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But, is an owner of cryptocurrency insured if a thief hacks their computer and steals virtual currency? Part of the answer relates to the question – what is cryptocurrency? Are these virtual currencies a security, money, property, a commodity, or something else? As discussed below, it seems unlikely, and inappropriate, for the loss of cryptocurrency to be a covered loss under a homeowners policy.

The Securities and Exchange Commission takes the position that cryptocurrency is, or at least can be, a “security” and cautions that “issuers [of virtual currencies] cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token.” On the other hand, the IRS has issued Notice 2014-21, identifying cryptocurrency as “property” for federal income tax purposes. Still a third possibility is that cryptocurrency, which can be used to purchase goods and services, is properly classified as money.

As the above demonstrates, the same word, or virtual product, can have different meanings depending on the context. Here, we are considering how cryptocurrency is interpreted under an insurance policy. There does not seem to be any reason why cryptocurrency must be treated as the same thing by the SEC, IRS and insurers. Therefore, the pronouncements of the SEC or IRS should be only of limited assistance.

A common homeowners insurance policy states that the insurer will cover the loss of the insured’s dwelling, other structures, and personal property. Crytocurrency is clearly not a dwelling or structure, so the question is whether cryptocurrency is “property” in the general sense because homeowners policies often protect against the loss of property. Beyond the IRS guidance discussed above, there is authority for the position that cryptocurrency is property. For example, an Ohio state trial court held that cryptocurrency was property covered by a homeowners policy. That ruling is discussed further below.

Not all homeowners policies are the same

Even if cryptocurrency is property in a general way, however, the insurance analysis does not end there because not all property is treated equally under a homeowners policy. For example, coverage for the loss of personal property often has a $200 sublimit for “money, bank notes, bullion, gold and [other precious metals], coins, medals, scrip, stored value cards and smart cards.” Likewise, a homeowners policy may have a sublimit of $1,500 for “securities, accounts, deeds, letters, of credit, notes other than bank notes, . . . tickets and stamps.” When considering these common sublimits, is it more appropriate to apply the $200 limit for money or the $1,500 limit for those items akin to securities? At least for some cryptocurrencies, like Bitcoin, an analogy to money seems more appropriate because Bitcoin is specifically designed to be an alternative to traditional currency. Considering an individual’s ownership of Bitcoin a security does not seem to make sense. After all, when one thinks of a person owning a security, such as a share of stock in Acme Corp, the comparisons with Bitcoin are thin.

Beyond the issue of whether cryptocurrency is insured generic property, money, or a security, there is another fundamental issue to consider under a homeowners policy. The insuring agreement in many homeowners policies states that personal property is insured for “direct physical loss to the property described” such loss from vandalism or theft. Because cryptocurrency is a virtual currency, there is nothing to physically lose or destroy. What is lost or destroyed is the record of ownership or the “key” to demonstrate ownership of the currency. Cash can be burden by fire – not so for a currency that never exists physically. A policyholder would have a difficult time explaining how the plain meaning of “direct physical loss” is met when the virtual currency is stolen.

A couple cautionary notes are required for this discussion. First, not all homeowners policies are the same. The terms and conditions of each policy will control; therefore, a generalized discussion about homeowners policies is just that – general. For example, some policies treat money and securities the same, which could change or eliminate the need for the above analysis.

Is cryptocurrency considered property under a homeowners policy

Second, individuals should not take too much comfort in the one reported decision on cryptocurrency as property under a homeowners policy. In the Kimmelman v. Wayne Insurance Group decision from an Ohio trial court, the court ruled that cryptocurrency was generic property, not money, and the policy’s $200 sublimit did not apply. Whether this decision is persuasive in other courts remains to be seen, but there are reasons why it should not. The Ohio court did not provide a fulsome analysis of the issues, which limits its usefulness. For example, there is no discussion on whether the policy’s submits for electronic funds or securities should apply. In addition, the policy language is at issue in that it was drafted in 1999, years before cryptocurrencies were invented. Newer policy language may not be the same. Finally, the court relied heavily on the IRS guidance mentioned above, which states that cryptocurrencies are treated as property. But that IRS guidance also states that cryptocurrency is treated as property “for income tax purposes.” While IRS guidance on tax issues is persuasive, that guidance should have no impact on how insurance contracts should be interpreted.

The court was also persuaded that Bitcoin was general property, not money, because it could be exchanged for money, i.e. it is a convertible virtual currency. But that rationale doesn’t explain that various forms of currency are converted to other kinds of currency all the time, e.g. Euros are converted into dollars. Indeed, Bitcoin was originally conceived as a currency “akin to cash” by Satoshi Nakkamoto in his whitepaper Bitcoin: A Peer-to-Peer Electronic Cash System. And outlets such as the Wall Street Journal report Bitcoin value under “Currencies” with the Euro, U.S. Dollar, the Japanese Yen, etc., not under Stocks, Bonds or Commodities. No one would argue that the Yen is not money but is property that can be converted into U.S. Dollars.

It also bears a mention that the focus on Bitcoin, even if the Ohio decision were correct, does not necessarily apply to other cryptocurrency platforms that have different purposes from Bitcoin. For example, Ethereum was created for a different purpose from Bitcoin. Ethereum, while it has a value associated with its coins/tokens, its original and fundamental purpose included providing a platform where one can build out new applications rather than simply being a substitute for traditional currency. (For an explanation of the different types of cryptocurrencies, see this tutorial (last updated Jan. 2020)). In all, I believe that Kimmelman was wrongly decided or, at least, of limited persuasive value that other courts should not find persuasive.

What Can Individuals Do?

The bottom line is that individuals should not rely on their homeowners policies to protect them from the loss of cryptocurrencies. Commercial entities, in contrast, can buy crime policies or cyber insurance policies, which are largely unavailable to private individuals. What can individuals do? They must take proactive steps to protect themselves rather than relying on someone compensate them if their assets are lost or stolen.

For example, if an individual is using “hot” storage for their Bitcoin, i.e. having the virtual currency accessible online, the currency is vulnerable to theft by hacking or ransomware attack. The owner might consider, therefore, having a commercial third party hold the virtual token or coin in its digital wallet for the individual. That commercial entity can be insured under a crime or cyber policy. If the individual is using “cold” storage, e.g. storing the currency offline on a flash drive, the cold storage is vulnerable to physical destruction or old-fashioned theft. In that case, the individual should secure the flash drive from theft and physical description by keeping it in a fire-proof safe. Frankly, these are precautions that individuals should be taking even if the risk of loss were covered by a homeowners policy. But, until coverage for cybercurrency for individuals is widely available under a homeowners policy, owners would be wise to take steps to protect their digital assets from bad actors and physical accidents.

Michael Menapace is a Non-Resident Scholar of the Insurance Information Institute, a partner at Wiggin and Dana LLP, and a professor of Insurance Law at the Quinnipiac University School of Law.

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A Beginners Guide to State-Issued Cryptocurrency and Central Bank Digital Currency (CBDC)

Over the past couple of years, there has been a lot being said about “cryptocurrencies” and “blockchain” being a game-changer. But the majority of the …

What are Cryptocurrencies?

Over the past couple of years, there has been a lot being said about “cryptocurrencies” and “blockchain” being a game-changer. But the majority of the common public today still has little to no knowledge about what these terms mean. According to Wikipedia, “A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to

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secure financial transactions, control the creation of additional units, and verify the transfer of assets”. In simpler terms, cryptocurrencies are a form of encrypted virtual currency where encryption helps provide more secure and faster transactions.

The technology on which this currency is based is called blockchain technology. Blockchain is a chain of encrypted units called blocks. These blocks store all the records of all the programs or transactions that are executed using the blockchain.

The credit for the first blockchain and cryptocurrency goes to Satoshi Nakamoto, a pseudonym for a single or a group of developers responsible for creation on Bitcoin. Bitcoin was the first cryptocurrency created and as a part of its implementation, the first blockchain was also created.

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Pros And Cons of Cryptocurrencies

Ever since Bitcoin was released, there has been the release of a lot more variants of cryptocurrencies and blockchains which has led to an increasing call for these cryptocurrencies replacing the fiat currency due to the numerous advantages they offer over the existing system like:

  • Decentralized systems increase privacy and safety.
  • Decentralized systems also reduce the control of any single entity like a government or a central bank can have over the currency.
  • The transaction records made using cryptocurrency are stored in the blockchain and are immutable.
  • The transactions are quicker and much more efficient compared to traditional banking transactions.
  • Cross-border transactions are a lot easier due to lower charges and instantaneous transactions from yours to the other persons’ wallet.

However, this system also has its own set of disadvantages like:

  • The value of cryptocurrency is volatile and can be influenced very easily if a small number of people hold a large number of tokens of the currency. They can

pump-and-dump causing a crash in the value of the currency.

  • The lack of regulations in the use of currency makes it difficult to be used as a reliable currency.
  • Cryptocurrencies cannot be used as legal tender in most countries.
  • The amount of knowledge the people have about cryptocurrency is nowhere close to optimal which makes them wary of using or trading in cryptocurrencies.
  • Government policies in many countries discourage people from considering cryptocurrencies as a viable investment.
  • If the blockchain on which the cryptocurrency is implemented is deleted due to a malfunction, everything on it, including the currency, will be erased.
  • If you lose your private key, you will not be able to access your wallet and lose your cryptocurrency.

State-Issued Cryptocurrency and Central Bank Digital Currency (CBDC)

CBDC is a form of a digital currency issued by the government and is a recognized legal tender. It was initially proposed by The Bank Of England to be used in the case that for some reason, cash is no longer available.

There can be two types of CBDC- Digital form of fiat currency and State-Issued Cryptocurrency. A digital form of fiat currency is not encrypted and does not use blockchain as its underlying technology. State-Issued cryptocurrency is a form of cryptocurrency issued by the Government. It is similar to the other private cryptocurrencies available in the market.

Pros And Cons for CBDC

There are quite a few countries that are planning to adopt CBDCs. There are reports of quite a few pilot programs and some countries have already released their forms of CBDCs to the public. This concept has many advantages like:

  • CBDCs will help facilitate easier and quicker cross border transactions helping in improving the process of foreign exchange.
  • It will reduce the cost of production of money by a huge factor as maintaining and printing cash takes a lot of resources.
  • It is a great means of providing a better system of payments to unbanked individuals.
  • It creates a more stable digital payment system when compared to the ones available in the market.
  • It provides immutable transaction records making it easier for the government to track money and reducing money laundering and crime funding.
  • If the CBDC performs well in the foreign markets, it provides a boost to the countries economy and helps reduce the national debt.

However, this concept also has some major cons:

  • If people decide to hold more CBDCs, it will reduce the deposits in commercial banks.

This will, in turn, make the banks increase the interest on deposits and on the loans to maintain their margins. This will create a huge competition between banks which might result in huge losses for the banks.

  • The core principle of decentralization behind cryptocurrencies will be compromised in CBDCs. Since the issuing and distribution are controlled by the government, decentralization cannot be achieved.
  • It reduces the anonymity and freedom of transactions that other cryptocurrencies provide.

Countries Using CBDC

There are a few countries that are taking a step in this direction and are introducing their cryptocurrencies as a form of legal tender. They are:

  1. Dubai: Dubai announced in 2017 that it will be releasing a digital currency known as Emcash.This is a government-backed, official digital currency pegged to the Dinar. I was created to increase the ease of transactions in both local and foreign markets.
  2. Venezuela: Venezuela introduced the Petro, its official cryptocurrency pegged to its petroleum and other natural resources. It was introduced to help in reducing the huge amount of national debt but it was rejected worldwide and failed to make an impact on the national economy. The value of one Petro is equal to the value of one barrel of petroleum. Recently, the government of Venezuela announced that it will accept payments for petroleum products in Petro making it the official commercial currency.
  3. Senegal: Senegal released the CFA, a CBDC regulated by the Central bank of West
  4. Africa. It is majorly used in West Afican countries and holds the same value as the fiat currency CFA Franc. It is a legal tender and used as a digital version of CFA Franc.
  5. The Marshall Islands: The Marshall Islands was the first country to make cryptocurrency a legal tender. It is used as a mainstream currency along with the USD which is the official fiat currency of the island nation. This currency is called Sovereign (SOV). This step was taken to introduce a local currency and reduce the dependency on USD.
  6. Russia: Russia recently announced that it was developing its CBDC called the Cryptoruble. This Cryptoruble will be the digital form of the Ruble and will mirror its value. This currency is still in its development phase.
  7. Sweden: Sweden is also in the process of developing its form of CBDC called the E-krona. This currency is still early in its development and is being researched for the Swedish market.
  8. China: China recently announced that its process of creating a state-issued cryptocurrency is being expedited to compete with Libra, the cryptocurrency proposed by Facebook. This currency has no official name yet but it is reported to be backed by the Yuan.
  9. Tunisia: Tunisia has recently announced that they are considering different alternatives for an official cryptocurrency. They are in the early stages of development and have not yet announced any official name for the currency.
  10. Japan: Japan has released the -coin a digital currency created to increase the ease of transactions. This is just a digital form of the fiat currency, Yen and not a blockchain-based cryptocurrency.
  11. Estonia: Estonia had proposed the Estcoin, a nationalized cryptocurrency but the project was later canceled by the government.

There are a few more countries like Saudi Arabia, Singapore, etc, considering making their version of cryptocurrency which is a very promising development.

The concept of nationalized cryptocurrency is great in theory, but the results so far have not been very promising. The Marshall Islands’ SOV is the only major success providing proof of concept on a small scale.

For better results, countries need to improve the execution of their plans. They need to retain the basic core principles of cryptocurrency and find ways to ensure that the ones issued by them are accepted worldwide and not rejected as in the case of Venezuela’s Petro.

The International Monetary Fund is also assisting countries in this field. They are helping the countries with policies, pilot programs and investigating alternate payment options. Its teams are already working towards modernizing payment systems and in researching the implications of CBDCs on the international market and the country’s economy.

Views Worldwide

While many countries are showing an inclination towards CBDCs, some countries are still rigid in their views. They believe that the disadvantages and dangers of adopting digital currencies outweigh the positives. They have made it illegal to use any form of digital currency- crypto or otherwise- as a form of money. In these countries, only peer-to-peer and broker-to-peer trading is the only use for digital currencies. However, any countries are adopting the blockchain technology in their operations. The use of this technology has the potential to increase efficiency and speed of operations. The immutable and decentralized property of the blocks has inspired a lot of countries and organizations as a distributed ledger to store records of their operations.

Some countries are also planning to release payment gateways and wallets using bitcoin technology to be able to track the transactions. These systems are also increasing the transparency in organizations since anyone on the blockchain network being used, can access the records.

The Answer?

While there is still a long way to go, the recent developments are very encouraging from the consumers’ point of view. The transactions are getting faster, safer and easier, and the data is getting decentralized. But it will still be years before we achieve the perfect system, combining the best of the past with the promise of the future.

The increased use of blockchain technology across various fields like payments, social media, real estate, and currencies has the potential to pave the way for mass adoption. If the consumers gradually shift towards products and services using blockchain technology, organizations and governments too, are likely to start integrating it into their systems. For example, the thought of sending money to any part of the world by just having someone’s email id was unfathomable before PayPal came in and changed the game. Similarly Amazon, Uber, and Netflix caused seismic shifts in their respective markets.

Cryptocurrency too does have the potential and promise to impact such a change. But before we move towards a system purely based on cryptocurrencies, we need to go through a transition phase where we maintain a balance between new and conventional. To achieve that balance, state-issued cryptocurrencies may not be such a bad idea. With the right amount of regulations and freedom and the right execution, these currencies can help achieve that balance and pave the way for a more transparent and efficient banking system.

Summary
A Beginners Guide to State-Issued Cryptocurrency and Central Bank Digital Currency (CBDC)
Article Name
A Beginners Guide to State-Issued Cryptocurrency and Central Bank Digital Currency (CBDC)
Description
Cryptocurrency and Central Bank Digital Currency (CBDC) is a form of a digital currency issued by the government and is a recognized legal tender. It was initially proposed by The Bank Of England to be used in the case that for some reason, cash is no longer available.
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Namit Pandey
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Coingape
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Coingape is committed to following the highest standards of journalism, and therefore, it abides by a strict editorial policy. While CoinGape takes all the measures to ensure that the facts presented in its news articles are accurate.

DisclaimerThe views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
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Blockchain in Digital Rights Management (DRM) Market 2020 Global Analysis, Opportunities And …

Blockchain in Digital Rights Management (DRM) Market 2020 Global Analysis, … Blockchain, also known as distributed ledger technology, acts as the …
“Blockchain in Digital Rights Management (DRM) Market”
Wiseguyreports.Com Adds “Blockchain in Digital Rights Management (DRM) -Market Demand, Growth, Opportunities and Analysis Of Top Key Player Forecast To 2025” To Its Research Database

Blockchain in Digital Rights Management (DRM) Industry

Description

Blockchain, also known as distributed ledger technology, acts as the backbone for the exchange of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). However, the technology has been proposed for wider applications, such as smart contracts, legal asset trades, and as a means to streamline Know Your Customer (KYC) processes between US banks.

Starting from the vital facts, the record tends of consisting of the industry through the view of the profile of the market. The fact also depicts the approximate generation of key production and the programs that help in the describing of the increase of the market of Blockchain in Digital Rights Management (DRM). On the idea of such type of information, the market has been primarily segmented into several segments that also depict the maximum proportion of the market during the period of the forecast.

This report focuses on the global Blockchain in Digital Rights Management (DRM) status, future forecast, growth opportunity, key market and key players. The study objectives are to present the Blockchain in Digital Rights Management (DRM) development in United States, Europe and China.

The key players covered in this study

Sony

Binded,Inc

Custos Media Technologies

Scenarex

Publica

Mediachain

Pixsy

Gilgamesh

RecordsKeeper

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Market segment by Type, the product can be split into

Rights Management

Royalty Processing

Token Distribution

Other

Market segment by Application, split into

B2B

B2C

Regional Description

In order to understand the different consumers in the global market, this study analyzed and compared the different key players in the global space. It classified the apparent consumption of the product/services in various regions across the globe such as North America, Europe, Latin America, Asia Pacific and the Middle East and Africa. This report extrapolated the data and reported threats and opportunities which will prevail in the industry in the upcoming years. Furthermore, this report profiled each of the key players in the above-mentioned regions based on their growth rate, production capacity and revenue generation.

Methodology of Research

The report helps in the providing of a wider introduction of the market and also helps in the dealing with the detailed methodology of research for the calculation of the size and forecasts of the market. The sources of secondary data are used and the primary inputs that are taken for the validation of data. This section also helps in the outlines of the several segments that have also been covered as being a part of the report. Additionally the reviews tend of providing of the calculation for the determining of the inclinations of the global market.

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Table of Contents

1 Report Overview

1.1 Study Scope

1.2 Key Market Segments

1.3 Players Covered

1.4 Market Analysis by Type

1.4.1 Global Blockchain in Digital Rights Management (DRM) Market Size Growth Rate by Type (2014-2025)

1.4.2 Rights Management

1.4.3 Royalty Processing

1.4.4 Token Distribution

1.4.5 Other

1.5 Market by Application

1.5.1 Global Blockchain in Digital Rights Management (DRM) Market Share by Application (2014-2025)

1.5.2 B2B

1.5.3 B2C

1.6 Study Objectives

1.7 Years Considered

2 Global Growth Trends

2.1 Blockchain in Digital Rights Management (DRM) Market Size

2.2 Blockchain in Digital Rights Management (DRM) Growth Trends by Regions

2.2.1 Blockchain in Digital Rights Management (DRM) Market Size by Regions (2014-2025)

2.2.2 Blockchain in Digital Rights Management (DRM) Market Share by Regions (2014-2019)

2.3 Industry Trends

2.3.1 Market Top Trends

2.3.2 Market Drivers

2.3.3 Market Challenges

2.3.4 Porter’s Five Forces Analysis

….

12 International Players Profiles

12.1 Sony

12.1.1 Sony Company Details

12.1.2 Company Description and Business Overview

12.1.3 Blockchain in Digital Rights Management (DRM) Introduction

12.1.4 Sony Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.1.5 Sony Recent Development

12.2 Binded,Inc

12.2.1 Binded,Inc Company Details

12.2.2 Company Description and Business Overview

12.2.3 Blockchain in Digital Rights Management (DRM) Introduction

12.2.4 Binded,Inc Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.2.5 Binded,Inc Recent Development

12.3 Custos Media Technologies

12.3.1 Custos Media Technologies Company Details

12.3.2 Company Description and Business Overview

12.3.3 Blockchain in Digital Rights Management (DRM) Introduction

12.3.4 Custos Media Technologies Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.3.5 Custos Media Technologies Recent Development

12.4 Scenarex

12.4.1 Scenarex Company Details

12.4.2 Company Description and Business Overview

12.4.3 Blockchain in Digital Rights Management (DRM) Introduction

12.4.4 Scenarex Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.4.5 Scenarex Recent Development

12.5 Publica

12.5.1 Publica Company Details

12.5.2 Company Description and Business Overview

12.5.3 Blockchain in Digital Rights Management (DRM) Introduction

12.5.4 Publica Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.5.5 Publica Recent Development

12.6 Mediachain

12.6.1 Mediachain Company Details

12.6.2 Company Description and Business Overview

12.6.3 Blockchain in Digital Rights Management (DRM) Introduction

12.6.4 Mediachain Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.6.5 Mediachain Recent Development

12.7 Pixsy

12.7.1 Pixsy Company Details

12.7.2 Company Description and Business Overview

12.7.3 Blockchain in Digital Rights Management (DRM) Introduction

12.7.4 Pixsy Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.7.5 Pixsy Recent Development

12.8 Gilgamesh

12.8.1 Gilgamesh Company Details

12.8.2 Company Description and Business Overview

12.8.3 Blockchain in Digital Rights Management (DRM) Introduction

12.8.4 Gilgamesh Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.8.5 Gilgamesh Recent Development

12.9 RecordsKeeper

12.9.1 RecordsKeeper Company Details

12.9.2 Company Description and Business Overview

12.9.3 Blockchain in Digital Rights Management (DRM) Introduction

12.9.4 RecordsKeeper Revenue in Blockchain in Digital Rights Management (DRM) Business (2014-2019)

12.9.5 RecordsKeeper Recent Development

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Bitcoin SV and information asymmetry

You are into cryptocurrencies, but not interested in Bitcoin SV? Let me … Bitcoin SV follows economics and enables growth, while BTC and other …

You are into cryptocurrencies, but not interested in Bitcoin SV? Let me kindly diagnose you with a severe case of information asymmetry.

Explaining the obvious is no fun at all: A has all information, B has none—who wins?

The crypto sphere is one of a kind when it comes to information asymmetry. Especially since Bitcoin SV came to life, information asymmetry has reached a ludicrous level to be astonished about. There are tons of false information on the one hand, and wild efforts made to hide true information on the other hand.

Whether you are an investor, a developer or a user of cryptocurrencies: you do not want to get hit by information asymmetry. It is devastating.

Let us face the current information asymmetry in the crypto sphere

Most people involved in cryptocurrencies gather information from crypto media outlets and crypto influencers. They do not put any effort in source based research themselves.

How come these kinds of people get punished by the market in the end? It is because they serve no function in the market. If they would actually do source based research, they would contribute to the finding of true information, even if they would not share their findings with the public. However, as they only follow the easily available mass media information, the market treats them as leeches and shakes them off eventually—just as nature does.

What can we do about information asymmetry? Use it for our own benefit, or help people to get out of it?

It depends. Sometimes I wander on “crypto Twitter” like a lost soul. If someone wants to know the truth about Bitcoin SV, I am honored to deliver true information. However, if someone only wants confirmation for an already set believe system, I do not deliver true information. I let this person crawl deeper into the freely chosen information asymmetry. Sounds cruel? If there is no longing for truth in a person, I feel no empathy.

Overlooked facts concerning the Bitcoin SV

The crypto sphere does not recognize cryptocurrencies as economics, but as politics or even religion. Bitcoin SV follows economics and enables growth, while BTC and other cryptocurrencies follow social media.

Let me introduce you to some facts that are overlooked by the vast majority of the crypto community:

Bitcoin SV uses a stable protocol. With a stable protocol that no developer or influential person can mess with, Bitcoin SV establishes a sound foundation for growth. Just like constitutional rights, which cannot or at least should not be subject to discussion in order to enable a functional rule of law for the rest of one’s lifetime, a stable protocol in economic terms makes long-term investments and planning easy for everyone. This is why already successful applications like Twetch, Peergame and Cryptofights chose to build on Bitcoin SV, because they are economically safe to do so by not having to fear any protocol changes in the future.

Bitcoin SV enables true peer-to-peer transactions by SPV as described in the whitepaper. SPV allows secure, efficient and fast payment—unlike other transactional models such as Lightning Network, where there is no peer-to-peer transacting, but peer-to-miner-to-lightning-to-miner-to-peer transacting only.

Bitcoin SV scales massively to meet the demand of the upcoming informational capitalistic driven society. Other cryptocurrencies are busy preparing anti-scaling efforts to prevent any use case at all—it makes no economic sense!

Bitcoin SV is secured by a patent fortress. This forces developers to build their applications that need a scalable blockchain exclusively on Bitcoin SV. Furthermore, patenting blockchain solutions puts pressure on competitors to invent creative ways in order to prevent licensing fees.

Bitcoin SV rejects the idea of an anonymous transactional system. In Bitcoin SV, you have and will have even more privacy in the future, but privacy does not equal anonymity. Any anonymous coin has no future due to anti-money laundering regulation. Regulatory friendliness is a true USP of Bitcoin SV.

There is much more to know about Bitcoin SV. Start reading CoinGeek.com and work yourself into source based research in order to prevent suffering from information asymmetry. If you need help or have any questions, there are literally thousands of Bitcoin SV proponents out there happy to hear from you.

Information asymmetry by choice and by force

All of the points mentioned above are free information, easy to be gathered. There is no hidden agenda in Bitcoin SV and the only reason why people do not take a closer look is due to their own choice for information asymmetry.

Instead of looking out for economic reasons behind this or that coin, they seek confirmation of their emotions and beliefs—yet they call themselves investors, developers and influencers. On the one hand, they suffer from information asymmetry already, and on the other hand they perpetuate information asymmetry for others and themselves. It is a deadly cycle. They deserve all of its consequences.

Information asymmetry can be used as a tool. In political terms, dictatorship governments make sure real information does not hit the public. In economic terms, information asymmetry is a competitive advantage or disadvantage. In legal terms, information asymmetry can turn around court cases apart from the actual substantive legal situation. One could go on and on with examples.

It is obvious that influential crypto personalities and crypto enterprises nowadays do not suffer from information asymmetry themselves—they are well aware of the points mentioned above. Yet, they decide to force information asymmetry on their followers and customers in order to prevent them from having a reasonable look into Bitcoin SV.

Getting hit by information asymmetry

If you are on the wrong side of information asymmetry, life is paradise for a while, because you are not aware of the fact that you are actually on the wrong side. You get annihilated eventually, but hey, it takes its time.

If you are on the right side of information asymmetry though, life is hell for a while, because you wait and wait for information asymmetry to finally crush your opponents. Unfortunately, this also takes its time and in the meanwhile, you may very well lose your mind.

In an informational asymmetric environment, at least one party gets devastated in the end. When information asymmetry finally dissolves, it hits hard and fast.

Emotions and beliefs do not play any role in information asymmetry. You do not like Dr. Craig Wright? Does not matter. You think transaction volume is irrelevant for cryptocurrencies? Does not matter. You hate patents? You hate big blocks? You hate a set in stone protocol? You think it is clever to “verify the blockchain” on your pocket calculator from 1990?

Bitcoin is economics. Economics is true information. Whether you are an investor, a developer or a user of cryptocurrencies: seek true information.

The real world—businesses and businesses and businesses—is very well aware of any danger coming from information asymmetry. They are incentivized to seek truth. You should be, too.

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

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Singapore Budget 2020 measures needed to boost adoption of blockchain technology

Some of the greatest use cases of distributed ledger technology (DLT)—of which blockchain is only one type—are in the financial services (FS) sector, …

Blockchain has been one of the most talked about technologies in recent years. Though blockchain has not reached its full potential, respondents to Deloitte’s 2019 global blockchain survey reported a shift in focus from cryptocurrency applications towards other applications.

Some of the greatest use cases of distributed ledger technology (DLT)—of which blockchain is only one type—are in the financial services (FS) sector, as DLT can be used to automate and securely settle complex transactions without trust, which has traditionally only vested in regulated financial institutions.

As a leading global financial centre, Singapore has been at the centre of DLT developments in FS within Asia and more widely. As we approach Budget 2020, this article considers tax measures that could further enhance Singapore’s position in the FS and fintech ecosystems.

Recent developments

DLT was first proposed in 2008 as the basis for developing a decentralised financial system. However, subsequent development of functions and additional infrastructure built on base-layer DLT architecture facilitates a much greater variety of applications.

Much of the initial development of DLT occurred in the context of cryptocurrencies, and by start-ups rather than existing financial institutions (whose stock in trade has been fiat currency—the direct competitor to cryptocurrencies).

Unencumbered by existing operating models and legacy systems concerns, some small and medium-sized enterprises engaged in DLT development have moved away from fintech proper into the realm of FS, leading to the emergence of challenger operating models across FS subsectors.

To date, DLT has made remarkable impact in the FS sector, including the creation of new asset classes (e.g. cryptocurrencies and utility tokens), disintermediation and greater automation of supply chains (e.g. decentralised finance) and optimisation of real-world activities (e.g. in trade financing).

Whilst the potential of DLT is exciting, how can FS stakeholders in Singapore benefit from the adoption of DLT? The upcoming Budget 2020 can help to address some of these opportunities for Singapore.

Potential income tax measures

The MAS presently offers grants relating to fintech and innovation, and certain direct tax incentives are also available to encourage FS activity, including the Financial Sector Incentives (FSI) and tax exemption of qualifying income of Singapore managed investment funds (the Funds Exemptions). Whilst existing grants frameworks may facilitate development of challenger operating models, modification of direct tax incentives could stimulate activity vis-à-vis new asset classes.

The FSI provide incentivised income tax rates to income derived by approved persons from specified activities pertaining to prescribed asset classes. Such asset classes often include derivatives (which may capture security tokens), but they do not currently include income derived from (other types of) DLT-based assets. Consequently, the existing FSI likely currently applies to a very limited number of DLT- and/or cryptocurrency-related investment activities. Similarly, the Funds Exemptions—which also apply only with respect to prescribed assets—do not provide for exemption of qualifying funds’ income derived from DLT-based assets.

Internationally mobile stakeholders are increasingly seeking a suitable location from which to engage in investment business and/or fund management activities in respect of top market capitalisation DLT-based assets; and, presently, the conclusion typically reached is that activities should be located outside Singapore because of inefficiencies that arise from the non application of the existing incentives to DLT-based assets and/or related activities.

Updating what comprises qualifying income for the purposes of both the FSI and Funds Exemptions to capture income derived from tokenised and DLT based assets could add to the breadth of the country’s FS sector and would also enhance the liquidity of the new asset classes in a way that is likely to produce other positive economic spin-off benefits. In principle, related risks could be managed through existing regulatory frameworks.

Potential GST measures

A source of consternation amongst DLT stakeholders has been Singapore’s position of treating supplies of tokens as supplies of services, with supplies in exchange for goods or services thus triggering a need to account for Goods and Services Tax (GST) as a barter transaction. Such treatment complicated value transfers and dematerialisation of securities outside of listed environments, but exemption for supplies of Digital Payment Tokens (defined in conformity with the new Payment Service Act) effective from 28 January 2020 helps address such concerns; as does IRAS’s confirmation that exemption provisions applicable to derivatives may apply to transfers of security tokens. Furthermore, IRAS’s recent publication of its willingness to extend the GST treatment of vouchers to utility tokens is also positive.

Other indirect tax concerns amongst DLT stakeholders include differing treatments (of potentially infinite varieties) of tokens, thereby placing exchanges and over-the-counter (OTC) dealers under significant administrative burdens to determine the extent to which they may recover input tax. Another notable concern is the lack of an interrelationship between the statutory definition of Digital Payment Token and IRAS’s definition of utility token for the purposes of applying the voucher rules, meaning that certain tokens may fall between those two sets of rules and so by default continue to give rise to barter transactions.

To address the operational problems such issues cause, the GST treatment of tokens could be streamlined by exempting supplies of all tokens not subject to the voucher rules (i.e. tokens principally designed to be redeemed by the issuer or a related party for a related supply of goods or services). In addition, input tax recovery could be simplified by enabling stakeholders who make exempt supplies of tokens to recover tax with reference to a fixed recovery rate—a method already made available to banks. Such change would significantly streamline administrative burdens for stakeholders dealing in tokens, particularly exchanges and OTC dealers.

Potential stamp duty measures

A number of tokenised asset trading platforms have been developed in Singapore to facilitate trading of interests in a wide variety of assets, much like the SGX facilitates the transfer of listed public companies’ shares.

Regarding dematerialised shares specifically, an exemption currently exists which excludes transfers executed on SGX from the charge to stamp duty. However, as that exemption has a limited scope, it would not apply to transfers of tokenised shares on other locally-developed platforms. To encourage the growth of Singapore’s private markets, extending the scope of the stamp duty exemption to designated private markets could be considered.

Conclusion

Singapore has built a strong and conducive business environment to support the pursuit of innovative business models that leverage DLT, including in the FS sector. Additional tax measures to support such growth could further enhance Singapore’s ability to attract incremental economic activity in the FS sector, which few other countries are presently capable of realising.

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