So Long ICOs, Hello Airdrops: The Free Token Giveaway Craze Is Here

Imagine getting $1,000 just for joining a newsletter.

Well, that’s effectively what happened for those that subscribed to Onchain’s mailing list early on in the project’s lifecycle. The company, which is building a distributed network designed to connect real-world institutions, gave 1,000 of its “ONT” crypto tokens to people who signed up to receive its emails prior to a certain date.

Those crypto tokens were distributed earlier this month and are now trading for a little over $1 per coin, according to CoinMarketCap. As you may have noticed, there was no “sale” involved.

“Ontology just raised a private round and then didn’t need to do a [public] crowdsale, so they just airdropped to eager NEO hodlers,” Keld van Schreven, a partner at blockchain investment company Kryptonite1, told CoinDesk.

Van Schreven’s comment speaks to a broader trend among token issuers. More are raising the money they need in private initial coin offerings (ICOs) and then skipping the public sale for what’s being called an airdrop. Effectively, these are just token giveaways to broader interested community members

Justin Schmidt of Translunar VC told CoinDesk:

“As a non-accredited investor, it is proving to be very difficult to find public sales to participate in until the tokens are traded on an exchange.”

Whereas the idea around public sales was that the people who buy in are those that understand the platform’s value and will promote the token, airdrops look to accomplish a similar goal, yet expecting that if people hold tokens, they’ll be interested in seeing the network, and the token’s price, grow and promote the platform just the same.

An internet search for “airdrops” or “free tokens” yields lots of websites, subreddits and Telegram channels that people can follow to gather up crypto tokens. And there’s even a Pokemon Go imitator under development that would allow companies to distribute free tokens to people playing an augmented reality game.

But these airdrops might not only be about building a community, they likely also have something to do with an uncertain regulatory environment.

For instance, in the U.S., many ICO issuers and investors have become convinced that the Securities and Exchange Commission (SEC) will eventually declare that all crypto tokens are securities and as such, need to be registered under cumbersome laws.

But even outside the U.S., completing know-your-customer (KYC) and anti-money laundering (AML) compliance for public sales takes a substantial amount of work and time.

Speaking to token issuers stepping away from public sales, Minhui Chen, a partner at Global Blockchain Innovative Capital (GBIC) told CoinDesk, “Raising money from private sales is so easy.”

Tokens, away!

According to Althea Allen, ecosystem relations at payments startup OmiseGo, her company pioneered the airdrop concept on ethereum in August last year, after announcing it would airdrop its “OMG” tokens to every wallet that held more than 0.1 ETH.

OmiseGo decided to conduct an airdrop to raise awareness about the project, but Allen spoke to the broader benefits of the distribution model, saying, “The real value of ethereum projects doing airdrops to all ETH holders is that it’s a crypto economic mechanism designed to incentivize ethereum project communities to maintain alignment with the entire ethereum community.”

The OMG token’s price has since been volatile (many crypto tokens are), but it has trended up overall.

Yet because of the ease to airdrop, many, including van Schreven, think crypto wallets are starting to feel “like spam in email.”

Indeed, in China, many people refer to these offerings as “candy,” Chen said, continuing:

“Low-quality projects are taking advantage of airdrops to make a fake community.”

And Schmidt echoed that, saying, “Not having the choice to decline these airdrops can, in my opinion, cause some issues in the future.”

As such, many investors, who nonetheless support the larger phenomenon also believe the mechanism could be used more effectively.

Brayton Williams of Boost VC, a fund that favors crypto projects with a strong focus on community, thinks issuers could do a better job of targeting with airdrops. For example, he’d like to see issuers focus airdrops on people based on geography, demographics, etc. to cultivate the best market for the future platform.

Williams told CoinDesk:

“Airdrops combine the best of paid referral programs with stock options. Potential users get paid for joining or using the network and have the potential upside if the network increases in value.”

Some crypto companies are taking heed of this advice.

Swarm, a blockchain for tokenizing private equity, just announced a few airdrop promotions, two of which encourage referrals, although by far the largest token sale on the platform is one that just drops tokens to existing cryptocurrency holders.

And Earn.com (formerly 21.co) has offered a standalone product for startups to distribute tokens directly to its members since the end of January. Startups that want access to Earn.com members pay small amounts of bitcoin to get users to sign up. But many are willing to pay a fee since the company validates every member, linking a wallet to one distinct person.

“The unique thing that Earn.com offers really is the validation side of things,” Dave Bean, from Earn.com’s sales team, told CoinDesk.

He added that while many platforms that allow token issuers to airdrop might have a lot of email addresses, many individuals could be gaming the system by signing up multiple times with different addresses.

Firewall USA

That said, issuers in the U.S. are still skittish about doing airdrops to promote platforms.

Stream, a blockchain-based video streaming platform, has delayed its airdrop indefinitely because of concern that airdrops could also be in violation of securities law.

“We can’t be sure,” said Todd Kornfeldt, counsel at the law firm Pepper Hamilton LLP, pointing to SEC actions from 1999 which targeted companies giving away free traditional equity.

“Perhaps the SEC thought there was some kind of quid pro quo in giving those securities away and that resulted in a benefit to the issuer,” Kornfeldt said. “And that fact pattern is similar to the fact pattern of an airdrop.”

This will definitely affect token issuers since the U.S. is the largest market both for investment and technology users.

But until the regulatory environment in the U.S. becomes more clear, token issuers may experience far less hindrance in the rest of the world.

Although some aren’t letting the regulatory environment hold them back. For instance, Onchain isn’t done using airdrops to promote its platform.

“The next community reward opportunity will be for active participation in Ontology after the release of the mainnet in Q2 2018,” Daniel Assab, a spokesperson for the company, said. “It won’t be for anything like a newsletter subscription, but no further details for now.”

Still many advise against airdrops for now.

According to Chen, “We advise [token issuers]: Don’t do airdrops. Please do public sales.”

In his mind, public sales actually engender a more authentic community. In other words, it brings in people who understand the project well enough that they’re likely to actually hold some of the tokens they buy to use in the future, instead of just dumping them on price rises.

Schmidt tends to agree, but hedges saying:

“It’s very early to see how this trend will result, but I do believe you need the actual users to have access to the tokens.”

Balloons photo via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Crypto Escapes Scrutiny at Annual China Investor Event

Cryptocurrencies were not brought up for criticism at an annual Chinese consumer protection event, despite rumors to the effect.

Multiple sources had shared rumors with CoinDesk in early March that major policy changes would be announced on Mar. 15 night during a national TV program to curb cryptocurrency activities in China, such as trading and disguised initial coin offerings (ICOs).

The annual show is hosted by China Central Television, the country’s official broadcast mouthpiece, in celebration of the World Consumer Rights Day, during which questionable company conducts are exposed for the sake of public safety.

It is further co-hosted by major Chinese government agencies including the Ministry of Industry and Information Technology, Ministry of Public Security, Supreme People’s Court and Supreme People’s Procuratorate.

The rumors had suggested that the program would expose initial coin offerings that still exist in China, some of which may operate so that certain people with access to ICOs would act as agents to invest on behalf of other Chinese investors.

“Every one was waiting to see what would happen during the night,” one source commented.

Indeed, the rumors appeared to have sparked uncertainty within the cryptocurrency community in China, which had already started circulating a leaked rehearsal list of the program prior to the event, in bid to spread an assurance that no discussion of ICOs was on the list.

In the event, the absence of cryptocurrency or ICO related topics promptly killed the talk of further crypto scrutiny for now, yet it still remains to be seen whether China will move to enforce further regulatory measures on cryptocurrency activities, following its existing oversight efforts.

As reported before, while China’s police force has been expanding its internet monitoring work to cover overseas cryptocurrency activities, regulators have also moved to reportedly block the domestic accounts of cryptocurrency exchanges on social media channels.

CCTV headquarters in Beijing via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

If Crypto Exchanges and ICO Teams Only Had a Brain…

David Silver is the founder of Silver Miller, a plaintiffs’ law firm that represents investors in cases against cryptocurrency exchanges and investment offerings.  The views expressed here are his alone.

You can reach him at DSilver@SilverMillerLaw.com or @dcsilver on Twitter.


While there are many different interpretations of The Wizard of Oz, I see a new one as it relates to the world of cryptocurrency and blockchain.

Dorothy represents the early adopters and believers. The Tin Man represents the Baby Boomer generation, designed for a different era, and slowly getting rusty. The Cowardly Lion represents both the economically depressed working man, weighed down with debt and mortgages, and a monetary system clinging to the industrial economy and hesitant to change.  

And the Scarecrow . . . well, I’ll get to him in a minute.  

But as Dorothy sings, “somewhere over the rainbow” there is a better place, and for us that is the blockchain:

Before you can get there, though, you have to go through the Wizard in Oz. And in this parable, the Wizard is the almighty government. In a slight departure from L. Frank Baum’s tale, this Wizard is every bit as powerful as he appears. But he’s still nothing to be scared of, as long as you’re doing the right thing. 

Because the obstacles that exist in Oz are a fabrication – an unnecessary layer of contradiction. Dorothy and her companions simply needed to look inward, and all the traits they needed to overcome the obstacles holding them back were inside them all along.  

The same could be said of cryptocurrency and blockchain.  

There is nothing that governments, including the U.S. government – whether it be Congress, the SEC, CFTC, FinCEN, or state regulators – can do to stop the growth and development of blockchain technology, provided that blockchain innovators are transparent, act responsibly, and stand accountable for their actions.  

But just like in The Wizard of Oz, you need to take the journey to complete self-discovery and realize those abilities are already within you.  

The regulators are coming, and so too is regulation.  Therefore, to be prepared for the Wizard, one has to understand what regulators are thinking and how to prepare for the next phase of the blockchain.

Scarecrow #1: Exchanges

On March 7, the SEC released a statement on potentially unlawful online platforms for trading digital assets. One group of Scarecrows in the space misinterpreted it badly.

Foolishly clinging to the notion that they are better and smarter than government regulators (if only you had a brain, you’d realize you are not as smart as you think), these Scarecrows concluded the SEC’s statement was limited to exchanges that trade ICO tokens.  

Look at the statement. Read it carefully. The SEC is coming after U.S.-based exchanges without such limitations:

Online trading platforms have become a popular way investors can buy and sell digital assets, including coins and tokens offered and sold in so-called Initial Coin Offerings (“ICOs”).  The platforms often claim to give investors the ability to quickly buy and sell digital assets.  Many of these platforms bring buyers and sellers together in one place and offer investors access to automated systems that display priced orders, execute trades, and provide transaction data. [Emphasis added]

There is only one smart way for exchanges like Coinbase, Kraken, Bittrex, Poloniex, Gemini, and HitBTC to react to this: put your money where your mouth is and demonstrate that you are accountable, transparent, and responsible for what happens on your platform.  

I have my doubts about certain exchanges, and recently, the lawsuits have been piling up. Whether they be the ones filed by my firm or others, the U.S.-based exchanges are being exposed for what they are: startups that were unprepared for the inflow of customers when fear of missing out (FOMO) hit the average user.  

Coinbase CEO Brian Armstrong and Kraken CEO Jesse Powell have both been extensively quoted about their inability to handle the influx of new users. Both are working to right the ship.  

Now that the SEC is knocking on the door, the companies that can demonstrate that their systems are compliant will be the survivors and leaders in the next phase of this revolution.

While some exchanges have been claiming for years that they have a professional quality protocol, 2017 proved that to be false. Those that adapt, adjust, and comply with state and federal regulations will dominate.

In June 2017, when former federal prosecutor Kathryn Haun (whose amazing 2016 TedX talk inspired me to do what I do – protect investors from cryptocurrency-related fraud) joined Coinbase’s board, the company stated that it was the safest, most trusted exchange on which to buy digital currencies, citing a commitment to regulations and compliance.  

The question is whether Coinbase and its brethren have lived up to that standard.  Private lawsuits and government regulators are going to provide those answers in 2018 and beyond.

As recently reported, the SEC has issued a blitzkrieg of subpoenas on exchanges, ICO promoters, attorneys, and other crypto professionals who aroused the wrath of the great and powerful Oz.  The silence from the recipients of those subpoenas, as well as in response to the SEC statement on exchanges, has been deafening.  

Kudos to Bittrex, the fourth largest exchange by profit (almost $2 million a day, according to Bloomberg) for being one of the few to pipe up. The company claimed that as a U.S.-based digital currency exchange, Bittrex uses a robust digital token review process to ensure the tokens it lists are complaint with U.S. law and are not considered securities.

But as in most statements written by corporate lawyers, look for the wiggle room. Bittrex goes on to say that it requires outside counsel for the issuers, not counsel for Bittrex, to determine that the tokens are not securities.  

So when the inevitable happens – and the SEC determines the tokens Bittrex has been selling are unregistered securities that Bittrex was never licensed or legally authorized to sell – Bittrex will blame the companies and their outside lawyers for the issues, not itself.

Scarecrow #2: ICO teams

In a short amount of time, companies who thought they were going with the safer, more conservative route – utilizing the Simple Agreement for Future Tokens (SAFT), which was endorsed by several high profile lawyers and law firms – are now concerned that the SEC has placed a target on their backs.  

Likewise, they are feeling the heat from the U.S. Treasury Department, whose FinCEN division recently declared that any developer that sells convertible virtual currency, including in the form of ICO coins or tokens, in exchange for another type of value that substitutes for currency is a “money transmitter” subject to proper registration with the Treasury Department, anti-money-laundering rules, and other regulatory and licensing requirements — requirements that, if not satisfied, could result in imprisonment.  

In a call-out to the second group of Scarecrows, those who thought they were clever enough to sidestep government regulations by using a SAFT, a highly-regarded lawyer at the Posinelli law firm recently made a concise statement to the crowd at a New York conference: SAFTs “are garbage.”  

While I happen to agree with that assessment, a SAFT by definition isn’t a thing.  Each and every SAFT is unique and written differently.

Just because everyone else did one, however, does not mean it is legal or responsible for attorneys to endorse or ICO promoters to rely upon.  The SEC and IRS will have to examine each and every ICO that utilized the generic SAFT framework and determine the regulatory compliance of each issuer.

And regardless of what the SAFT looks like, the SEC in particular is also going to be looking at the marketing used to promote the ICO and what investors were led to believe to procure their funds.  We all know that in the frothy ICO market of 2017, investors were led to believe they were going to be rich.

The SEC and IRS are also likely looking at how the ICO-enabling lawyers, accountants, and advisors were paid.  Did they accept tokens as a form of payment?

Quite tellingly, many of the law firms that embraced the SAFT have recently taken a step back and acknowledged that the pre-sale of a tokenized service needs to be done in compliance with securities laws even though those lawyers previously advised their clients that was not the case.  While most people do not believe that investors have a target on their backs, everyone else who worked on ICOs that utilized the SAFT should be concerned.

Back to the Wizard of Oz: In the book, Dorothy’s slippers are not ruby red as in the film; they are silver (my favorite color). It turns out that all she needed to get to the comfort and security of home was the help of these silver shoes.  

While achieving compliance with the law may not be as simple as tapping your heels together three times, it’s certainly within the industry’s power. Try it, and you might find there’s no place like home.

“Wizard of Oz” street art image via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Royal Bank of Canada Explores Blockchain to Automate Credit Scores

The Royal Bank of Canada may be interested in putting credit scores on a blockchain.

In a patent application released Thursday, the bank outlines a platform built on a blockchain that would automatically generate credit ratings using a borrower’s historical and predictive data. The application as described proposes a system that would utilize more data sources than existing credit rating systems, improving the loan process while creating an immutable record.

Notably, the RBC patent application indicates that it would redesign the credit rating system to provide more transparency for users to understand how their scores are calculated. Further, adding this new level of transparency would help users improve their scores more quickly than is possible at present, according to the filing.

One way the system could work is by using marketplace information to analyze loan offers based on existing credit histories.

The application explains:

“In another aspect there is provided a system for credit and digital identity records with a distributed ledger of a plurality of nodes, each node including at least a computing device, and the distributed ledger having a plurality of blocks, each block comprising identification data linked to a set of identifiers for an individual, transaction data, a timestamp indicating when the block was created, and a hash reference for the distributed ledger.”

If a loan application is submitted, the system would automatically determine what sort of loan and creditor would be appropriate before generating a unique smart contract that contains the terms of the loan.

In other words, the blockchain-based system would automate every step of the credit rating process through a more transparent system, according to the filing.

At press time, it’s unclear if the system would use one single blockchain or multiple networks, or whether RBC would be ready to build the system if the patent is granted.

RBC image via Shutterstock

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The Crown Prince of Liechtenstein Wants to Invest in Crypto

There may be a literal “crypto-king” one day in the not-so-distant future. The Crown Prince of Liechtenstein said last Friday that his family is considering investing some of their $5 billion fortune in cryptocurrencies.

Crown Prince Alois Philipp Maria told CNBC that investing in cryptocurrencies can help bolster the royal family’s fortune, which, though it is sizeable now, was much reduced after World War II.

“Particularly this whole new digital economy, it is something to look into more into the future,” he said.

Despite this interest, the Crown Prince went on to say that his family currently lacks “the internal expertise” to invest directly in crypto, and that he was unsure about the future of cryptocurrencies in general, explaining:

“I think we would rather do that or are currently doing that through our general exposure via private equity, venture capital funds where we are investing. Where cryptocurrency will move to, I think that’s very open still. So I think one has to really see that it’s a very risky asset class.”

As for blockchain, Alois is more bullish.

“I think particularly the whole blockchain technology is very interesting … blockchain will change a lot of areas, a lot of businesses in the future.”

He also suggested that his government could potentially utilize the technology, saying that “I think the attractive elements of blockchain technology could be used to make the state more efficient in the way it’s administered.”

The royal family is not the only party in Liechtenstein, a small country situated between Austria and Switzerland best known for its low corporate tax rates, to be interested in cryptocurrencies and blockchain.

Bank Frick, a family-run institution located in the town of Balzers, announced in early March that it now allows clients to invest directly in cryptocurrencies including bitcoin, bitcoin cash, litecoin, XRP and ether. The bank’s announcement cited demand from companies across Europe as the impetus for its decision.

Liechtenstein flag image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

G20 Reveals Names and Dates for Coming Crypto Talks

The G20 is set to hold two separate discussions on cryptocurrencies next week in an effort to seek what representatives call a “common response” on regulation.

A media representative for next week’s summit, to be hosted by Argentina, which currently holds the G20 presidency, said that the first meeting will take place Monday. The talks will feature Argentina Treasury Minister Nicolás Dujovne and Organisation for Economic Co-operation and Development (OECD) Secretary-General José Angel Gurría, among other stakeholders.

A second discussion will happen on Tuesday, the rep told CoinDesk.

The agenda and talking points for the two discussions have not been released. However, a public document indicates that the discussions will revolve around the implications of cryptocurrencies and the potential applications of its underlying technology.

“The issue is an important item on the meeting agenda; delegates will consider a common response that would mitigate the risks without discouraging innovation,” it argues.

The document notes that blockchain “has the potential to promote financial inclusion.” However, it goes on to argue that “it is important to analyze its implications to financial stability, tax evasion and financial illegal activities.”

Finance officials from the U.S., Germany, France and Japan have all called for the discussions to take place in the months leading up to the G20 summit.

U.S. Treasury Secretary Steven Mnuchin said his concerns revolve around the use of cryptocurrencies in illegal activities like money laundering, while French and German finance officials co-wrote a letter in February that sounded the alarm on potential risks to investors.

G20 flag image via railway fx / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

French Regulator Blacklists 15 Crypto Investment Websites

France’s stock market regulator announced on Thursday that it has blacklisted 15 cryptocurrency and crypto-asset investment websites.

The Autorite des Marches Financiers (AMF) will add the offending platforms to its existing “liste noir,” which already includes businesses that unlawfully offer investments in commodities like diamonds, rare earth metals and wine.

The announcement explained:

“Companies in France offering the purchase of rights over goods promoting the possibility of a yield or its economic equivalent are subject to the regulation of diverse goods and as such their offer must have a registration number provided by the AMF.”

The announcement goes on to list the websites of fifteen companies who have been alerted by the AMF of their regulatory violations but continue to operate. The majority of those on the list claim to be located in the U.K.

Among them is AKJ Crypto, which claims to provide a variety of services ranging from asset storage to account management. Another, Crypteo, is a purported cryptocurrency marketplace.

The AMF’s statement cautioned investors that “no sales pitch should make one forget that there are no high returns without high risks.” Likewise, it advised them to perform due diligence on the investments they’re considering and to weigh the criteria used to establish a product’s price.

The regulator also said that investors should consider the means by which a product can be resold and the deadlines which may correspond to this.

“Don’t invest in that which you don’t understand,” the Authority cautioned.

This is not the first time the AMF has involved itself in the affairs of the crypto industry. In February, it released a statement positing that trading platforms should not be allowed to market cryptocurrency derivative products electronically because they fall within the realm of the MiFID 2 and Sapin 2 laws, the latter of which bans advertisements for certain financial contracts.

Likewise, the Authority launched the Universal Node to ICO Research Network (UNICORN) in October of 2017. At the time, it described the program as providing a framework that would allow ICO issuers to develop their operations while ensuring the protection of would-be investors.

Bitcoin, law and justice image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Gibraltar Plans to Regulate ICO Tokens as Commercial Products

Gibraltar’s government provided new details about its plan to regulate initial coin offerings in a white paper published on Tuesday.

Notably, the paper states that most tokens are not considered securities under either Gibraltar or EU law. The classification of tokens and ICOs has troubled regulators and government watchdogs, leading some countries – most notably China – to ban the blockchain use case entirely.

Indeed, the paper notes that “in many cases, [tokens] represent the advance sale of products that entitle holders to access future networks or consume future services.” In other words, tokens are commercial products, not securities, the document argues.

The white paper also outlined an authorized sponsors regime, which would require every ICO issuer selling or distributing tokens in Gibraltar to appoint an individual to supervise the sale and ensure that it complies with regulations.

The release comes amid a long-running process of establishing regulatory boundaries for the use of blockchain tech within the U.K. crown dependency.

Officials from the Gibraltar Finance Centre and the Gibraltar Financial Services Commission told CoinDesk in February that the implementation of the sponsorship regime was part of their market-driven approach to ICO regulation, an attempt to avoid a one-size-fits-all approach. The regime would mean the market, not regulators, could determine what a “good” token sale looks like, according to the document.

Legislators in Gibraltar passed a blockchain-focused bill in December, and previously laid the groundwork for an ICO bill when it published an advisory back in September.

The white paper also states that the Gibraltar Financial Services Commission (GFSC) will “authorise and supervise secondary token market operators” and will establish “a public register of such operators.” Additionally, the government will regulate token-related investment advice, including “generic advice,” “product-related advice” and “personal recommendations.”

According to the white paper, Gibraltar intends to wrap up its blockchain-related regulatory push by the end of this year.

“A draft Bill is expected to be ready by the end of March 2018. Draft Regulations for the promotion, sale and distribution of tokens should be ready in May 2018. The last of the three Regulations should be completed by the end of October 2018,” the paper says.

Gibraltar on a map image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

American Express Patent Filing Touts Blockchain for Faster Payments

Global payment giant American Express may be looking into using blockchain to boost the speed of transactions.

In a patent application released by the U.S. Patent and Trademark Office on Thursday, the credit card company’s travel arm – the American Express Travel Related Services Company – describes using the tech to facilitate payments between two parties by using transaction requests as a proxy.

As described, a request for payment would be sent to the blockchain-based system, which would either be approved or rejected based on various factors, including a risk analysis. If the request for payment is approved, the system would automatically process the transaction, adjusting accounts held by both the payer and the receiver.

In order to access the system, parties conducting a transaction must create digital wallets on the blockchain. As a result, the payments are conducted directly through the blockchain, rather than through a third-party banking institution.

The patent filing references peer-to-peer payments using a blockchain, although it also cites bitcoin’s price volatility and the fact that it is a public ledger as reasons why that network would not be suitable for American Express’s requirements.

Notably, the company further suggests that a blockchain system could improve upon current card payments networks, writing:

“A payment network based on peer-to-peer payments may be used to facilitate most functions of traditional card payment networks and to enable additional services and functionality.”

This is not the first time American Express’ travel and merchant unit has expressed interest in blockchain applications.

A patent application released last October, but initially filed in April, discussed using a blockchain as part of a customer rewards program. As reported at the time, the filing touted the tech’s security characteristics as potential boons for a rewards system.

American Express card image via nikos sotirakos / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

US Government to Submit ‘Oversized’ Argument in ICO Fraud Case

U.S. prosecutors are planning an “oversized” response to a motion to dismiss in an ongoing – and potentially precedent-setting – initial coin offering (ICO) fraud lawsuit.

As previously reported by CoinDesk, Maksim Zaslavskiy has been accused of committing securities fraud in connection with two ICOs, RECoin and Diamond Reserve Club World. In September of last year, the U.S. Securities and Exchange Commission (SEC) filed suit, and in November Zaslavskiy was arrested and charged by the Department of Justice (DOJ). That move led to the SEC suit being stayed pending the outcome of the DOJ action, and Zaslavskiy has pled not guilty to the allegations.

Now, Zaslavskiy is seeking to have the lawsuit dismissed on the argument that tokens sold through an ICO aren’t considered securities. The SEC has said differently, and the case has set the stage for a U.S. federal court to weigh in on the question of whether token sales can be considered securities offerings.

Ahead of that decision, the Department of Justice is set to submit a memorandum of law that is expected to rebut the defense’s claim.

According to a letter dated March 14, that filing is expected to exceed the maximum size allowed by the court for such arguments, necessitating a request for an exception. While the letter from U.S. Attorney Richard Donoghue doesn’t offer any clues as to the exact details of the government’s argument, the move signals that the filing in question will be a significant one.

“The defendant raises a number of arguments in his brief regarding the dismissal of the indictment,” Donoghue wrote, explaining:

“The government does not have the benefit of a reply and intends to provide the Court with a complete picture of the facts that are directly relevant to both, the facial attack on the indictment and to constitutional vagueness.”

Donoghue asked for permission to file as many as 40 pages, though he said that the department would aim to keep the filing – which Zaslavskiy has consented to – beneath that limit.

The deadline for the DOJ’s filing is Monday, March 19.

Justice statue image via Shutterstock

Read the letter here:

Letter for Exemption by CoinDesk on Scribd

Read Zaslavskiy’s Motion to Dismiss here:

Motion to Dismiss by CoinDesk on Scribd

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.