By Alexandra Levin Kramer and Marina Fyrigou-Koulouri
During the week ending December 22, 2017, the blockchain industry faced new legal actions and statements globally.
On December 19th, a class action lawsuit alleging fraudulent issuance of securities and violations of securities laws was filed in the U.S. District Court in Florida. The complaint was filed by five plaintiffs (collectively, the “Plaintiffs”) and on behalf of the relevant class (the “Class Members”) against Monkey Capital LLC., a Delaware limited liability company, Monkey Capital Ink., a foreign corporation, and Daniel Harrison (collectively, the “Defendants”), who were planning to develop “a private cryptocurrency exchange and decentralized hedge fund.”
The Plaintiffs and Class Members allegedly contributed “more than $5 million worth of cryptocurrency” during a pre-sale offering prior to the scheduled July 2017 Token Sale (“TS”). They purchased a “Coeval”, cryptocurrency options that would be exchanged for “Monkey Coins” at the TS. However, the TS never took place and, instead, the Defendants’ fundraising website disappeared.
The complaint claims that “the thing for which Plaintiffs and each Class Member invested his/her/its valuable assets looks like a security, functions like a security, and fits the definition of a security.” Accordingly, the Plaintiffs argue that the Defendants violated securities laws by offering and selling unregistered securities. The claim alleges that the Plaintiffs and the Class Members “relied on, and are dependent upon, the expertise and efforts of Defendants for their investment returns” and “expected that they would receive profits from their investments in Defendants’ efforts.”  Thus, claim the Plaintiffs, the “Coeval and Monkey Coins constitute investment contracts” subject to securities laws.
Additionally, the Plaintiffs allege that the Defendants’ conduct was based on “a scheme to defraud” as they acted “knowingly or with reckless disregard for the truth” and “made false and misleading statements of material fact and omitted to state material facts to investors.” 
The Plaintiffs ask for rescission of their investment, restoration and return of “all cryptocurrency or fiat currency paid to Defendants” as well as damages.
On December 19th, the Monetary Authority of Singapore (the “MAS”) issued a statement advising the public “to act with extreme caution and understand the significant risks that they take on if they choose to invest in cryptocurrencies.” MAS underlines that cryptocurrencies are “not legal tender” and they are not backed by any government, asset or issuer. Additionally, their prices are driven by speculation and “there is no regulatory safeguard” for such investments. “MAS does not regulate cryptocurrencies” and there are no regulations ensuring “the safety and soundness of cryptocurrency intermediaries or the proper processing of cryptocurrency transactions.” Moreover, the MAS believes that the anonymity of cryptocurrencies makes them vulnerable to fraudulent and unlawful uses and warns that “[m]embers of the public who lose money from investing in cryptocurrencies will not be able to rely on any protection afforded under legislation administered by MAS.”
On December 20th, during a speech at the British Parliament, Mark Carney, head of the Bank of England (the “BoE”) addressed the issue of financial stability of cryptocurrencies as well as problems regarding central-bank issued cryptocurrencies. To begin with, Carney stated that, despite the extreme volatility in the value of bitcoin, it does not constitute “a threat to global financial stability” as it is “more like an equity-type risk.” Additionally, concerning digital currencies issued by central banks, Carney finds “fundamental problems.” Although blockchain technology could improve transactions “between financial institutions,” a cryptocurrency for the general public could potentially create financial stability risks as it might create “credit allocation across the entire economy.” According to Carney, “there are some fundamental problems if you push the retail design all the way down, unless you restrict the amount of people that have it.”
On December 19th, Kaspar Korjus, managing director of Estonia’s e-Residency initiative, announced in his blog the launch of estcoin, the Estonia’s own “crypto token.” According to Korjus, the purpose of estcoin is to provide funds and support from around the world for the development of the country as a digital nation and its e-resident community and “to increase the number of companies started in Estonia through e-Residency.” The ultimate vision is to “make e-Residency the best option globally for launching a trusted [TS].”
Korjus presents three reasons for the creation of the country’s digital token. First, the “community estcoin” supports the growth of Estonia’s digital nation through a network effect “by incentivizing more people around the world to apply for and make greater use of e-Residency” and “encouraging investors and entrepreneurs to use e-Residency as their platform for trusted [TS] activity.” Second, the “identity estcoin” promotes “a secure, government-issued digital identity” that would enable greater transparency in the business environment as well as lower costs and higher efficiency by conducting “almost anything online.” “In this model, estcoins would be the blockchain-based tokens used for activities within our digital society, such as digitally signing documents, logging into services or enforcing smart contracts.” Finally, the “euro estcoin” would link the value of the digital token to the euro. Korjus states that, although Estonia “would never provide an alternative currency to the euro…it’s possible…[to] combine some of the decentralised advantages of crypto with the stability and trust of fiat currency and then limit its use within the e-resident community.”
Finally, Korjus believes that Estonia should support trusted TS via e-Residence, amend laws and find solutions to the existing complexities on the national as well as the EU level.
On December 22nd, Belarus President Alexander Lukashenko approved a law entitled, “On the Development of a Digital Economy,” that aims to “liberalise the business environment for the innovative and high-tech sector” while offering tax incentives and benefits aiming to attract and stimulate business activity in the field.
One section of the law focuses on cryptocurrencies and tokens and establishes a regulatory environment for the circulation of cryptocurrencies and tokens. Accordingly, “[l]egal entities are entitled to possess tokens, create and list their own tokens…buy and exchange tokens, and perform other operations using tokens only through the cryptocurrency exchanges and cryptocurrency exchange operators [whereas] [i]ndividuals are entitled to possess tokens, perform mining, exchange tokens, buy and sell them for Belarusian rubles, foreign currency and e-money, as well as to present and bequeath tokens.” Additionally, mining and trading of tokens are “not …considered entrepreneurial activity” and “[t]okens and revenues from operations with them shall not be subject to [income tax] declaration by the individuals.”  Finally, all relevant activities are exempt from taxation for the next five years as “[t]urnovers, profits (income, proceeds) from various operations with tokens are not recognized as taxable items until January 2023.”
Please contact Alexandra Levin Kramer, the Chair of CKR Law’s Blockchain Technology & Digital Currency practice group if you have any questions. She can be reached at email@example.com or +1 (212) 259-7300.
 Summary of the Law “On the Development of a Digital Economy,” https://media.dev.by/decree_media_kit_en.pdf