Prescriptive Jurisdiction in Securities Regulations and ICOs (A further thought)

I presented a paper on the above theme at the conference “Recent Issues on Virtual Currency in the Financial Market” held at the Konkuk University (Seoul, South Korea). The program of the conference is attached below. Many thanks to Prof. Byoung Youn Kim for his invitation.

In the paper presented, I developed my thought which I had expressed in my article written last year (and published earlier this year: See this link for a summary.). I noted the decline in the number of ICOs and attributed it partially to the fragmentation of legal regimes. While the blockchain has technologically enabled borderless fundraising in the form of the ICO, the latter is not legally borderless. 

An idea of global unification of regulations should, however, be resisted because the optimal balance between the facilitation of fundraising and the protection of investors should be sought through regulatory competition. Attempts at the international level should instead be directed towards the coordination of different regulatory regimes. In this connection, whether the conduct test should be maintained is doubtful. It is a classic test for the territoriality principle. Yet, few would support it if asked whether regulations should be applied on the sole basis that the place of the relevant conduct is in the territory of the regulating State even if the conduct only targets foreign States. The effects test, on the other hand, has a good foundation as it allows the regulator to protect the interests affected. The coordination effort on the international level should also be directed towards developing a network of assistance in cross-border enforcement of regulations, especially those of the place of effects.  

For the enterprises wishing to conduct fundraising, the choice will be either to address the investors of the whole world save specific States to avoid being captured by the regulators of such States or to address the investors of the specific States by consciously complying with the regulations of such States. The latter may be called STO (security token offering).

The powerpoint slides used in the presentation are attached below.

“Prescriptive Jurisdiction in Securities Regulations and ICOs (Initial Coin Offerings)”

My article “Prescriptive Jurisdiction in Securities Regulations and ICOs (Initial Coin Offerings)” has been published ((2019) 117-4 Journal of International Law and Diplomacy pp. 1-25). It is based on my presentation in Japan and written in Japanese. The original title and citation are: 高橋宏司「証券関係法規の規律管轄権とICO (Initial Coin Offering)」国際法外交雑誌117巻4号(2019年) 1-25頁. Here is an English abstract.

The ICO is a new method of fund raising using the blockchain technology. It enables tokens to be issued on a blockchain in return for the contribution of funds in either fiat or crypto currencies. It is in vogue in recent years but has generated concern over fraud in a large number of cases. This has kindled the interests of regulators around the globe, who have been watching the space closely. While some countries have introduced an outright ban on ICOs, others have begun to see certain types of ICO tokens as securities with a view to protecting the investors. There is, however, much uncertainty as to the geographical reach of securities regulations as applicable to ICOs. As it is a question of prescriptive jurisdiction, this article begins by examining in the context of securities regulations the various principles underpinning prescriptive jurisdiction, such as the protective principle, universality principle, personality principle and territoriality principle. Since the territoriality principle is the cornerstone of prescriptive jurisdiction in securities regulations, this article proceeds to examine the various tests for the operation of the territoriality principle, such as the conduct and effects test and the transactional test to see how well they suit the regulation of securities of the traditional type. This article concludes by considering whether those tests are also fit to be applied to ICOs. Throughout this article, an intense analysis is conducted on the way the internet has affected the prescriptive jurisdiction in securities regulations and how the blockchain technology may affect it in the future.

ICO (Initial Coin Offering) に対する証券関係法規の適用の国際的局面

　標記の題目で、国際法学会研究大会で報告した(2018年9月4日於札幌コンベンションセンター)。当日のレジュメ(改訂済み)を添付するとともに、以下に報告要旨を掲げる。
　ICOは、その件数の飛躍的な伸びに伴い、詐欺の疑われる案件が横行する事態となったため、各国の規制当局から注視されている。禁止する国々も現れる一方で、一定の要件を備えたICOトークンを証券であるとみなし、証券関係法規の適用によって、投資者保護を図る方向性を打ち出す国々も現れている。
しかし、各国の証券関係法規がICOに対して国際的にどのような範囲で適用されるかは、現時点では不明確である。例えば、米証券取引委員会(SEC)は、昨年7月公表のThe DAOに関する調査報告書(“Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO” Release No. 81207 (2017))において、発行体のウェブサイトが米国内の個人も含めて、一般にアクセス可能であったことを指摘しているが、それ以上具体的には、米国法が適用されると考える根拠を明らかにしていない。また、同委員会は、昨年末、ICOを行っていたPlexcorpsと呼ばれる団体およびその関係者を相手取り、ニューヨークの連邦地裁に訴えを提起した(Securities and Exchange Commission v. Plexcorps et al. District Court for the Eastern District of New York (Case 1:17-cv-07007))が、被告らは、自らがカナダを拠点としていること、そのICOトークンが米国外に所在するコンピュータから発行されたことなどを理由として、米国の連邦証券諸法の適用を争っている。
　ICOの強みは、ボーダレスなネットワーク上に流通する仮想通貨やトークンを用いて、世界中から円滑に資金を調達できることにある。しかし、各国の規制の国際的な適用範囲が不明確な状態が続くと、実務に萎縮効果も生じる。そこで、本報告では、まず、既存の証券について、米国法を中心に、証券関係法規の国際的適用範囲を決める基準を検討し、インターネットの普及の影響も分析した後、ICOに対して同じ基準を当てはめる場合の解釈論を検討した。
　証券関係法規の国際的適用範囲は、国際法上は規律管轄権の問題である。規律管轄権を基礎づける原理には、保護主義や普遍主義もあるが、証券関係法規はそれらの対象とはならないと考えられる。かつては米国法には属人主義の考え方も見られたが、現在では、属地主義が基本となっており、より具体的には、「行為地」、「効果発生地」、「取引地」を基準として、証券関係法規の国際的適用範囲が決定される。「効果発生地」を基準とする効果理論は、属地主義に対立する概念として捉えられることもあるが、自国内で行為や事実が生じたことを根拠として管轄権の行使を認める原理として属地主義を広く理解すると、効果理論は、属地主義の一態様であると見ることができる。「取引地」基準も、「行為地」や「効果発生地」の基準と同様、属地主義の一態様であると整理することが可能であろう。
　国境を越えた証券取引は、インターネットが普及する前から、機関投資家を中心に行われていたようである。しかし、一般投資家に対する投資勧誘は、証券会社の店頭や電話によるのが普通であったので、その効果は、通常、勧誘行為がなされた国で発生したものと推察される。したがって、法の国際的適用範囲も、属地主義によって決めると言っていれば通常は十分であり、あえて「行為地」と「効果発生地」とを分けて考える必要性は大きくなかったのではないかと考えられる。ところが、インターネットの普及により、一般投資家に対する国境を越えた勧誘が容易になったため、「効果発生地」を「行為地」とは別途に観念し、効果理論を受け入れる必要性が高まったものと思われる。さらには、「効果発生地」の基準をインターネットに則して具体化する必要も生じた。というのは、電話やファクスといった従来のメディアを使って投資勧誘を行う場合には、証券の発行者や仲介業者が対象国を自ら特定することになるのに対して、インターネットを使う場合、ウェブサイト上の情報は、世界中どこからでも閲覧できるので、投資勧誘の効果が発生しているとみなされるのがどのような状況かが自明ではないからである。
　インターネットの普及は、国境をまたぐ(cross-border)資金調達を容易にしたものの、法的には国境が意味を持つことに変わりはなく、証券関係法規の国際的適用範囲を画する基準として、「行為地」、「効果発生地」、および「取引地」がそれなりに機能してきた。これに対して、ブロックチェーン技術の登場は、いわば国境のない(borderless)資金調達を可能としたと言える。なぜなら、ICOにおいては、国境のないネットワーク上で流通する仮想通貨を資金として受け入れることができ、その見返りに付与されるトークンも、やはり国境のないネットワーク上で取引されるからである。とは言え、ICOの投資勧誘の方法は、従来の証券の投資勧誘をインターネットも活用しつつ行う場合と本質的に異ならない。したがって、ICOの投資勧誘に関しても「行為地」や「効果発生地」の基準が適用されるならば、それらの地の特定に、ICO特有の問題は生じないと思われる。これに対して、ICOトークンに「取引地」の基準が適用されたり、ICOトークンの相場操縦のように、不公正取引が市場に与える効果が問題となる場合において「効果発生地」の基準が適用されるならば、それらの地の特定には、ICO特有の問題が生じるように思われる。ICOトークンは、ボーダレスなネットワークにおいて取引され、グローバルな市場の一体感が強いからである。ICOトークンの発行および流通において、ポータルサイトや仮想通貨交換所が使われる場合であっても、それらの運営業者の所在地を「取引地」や「効果発生地」として観念するのが妥当かは疑問なしとしない。現段階では実務の蓄積も乏しいことから、指摘した問題についての確たる解答は用意できていないが、今後の検討に譲りたい。

Extra-territorial application of Japanese law to ICOs: Payment Services Act

Japanese law currently has no specific regulations for ICOs. But Japan’s financial watchdog, the FSA (Financial Services Agency) issued an open letter of warning, stating its view that “ICOs may fall within the scope of the Payment Services Act and/or the Financial Instruments and Exchange Act depending on how they are structured.” (October 27, 2017). Since we have examined the Financial Instruments and Exchange Act in the last post, we will now turn to the Payment Services Act to see the extent of its geographical outreach.

The Payment Services Act regulates the “exchange services of virtual currencies” by imposing registration and other requirements for providing the services (Article 63-2, etc.). It defines the concepts of “virtual currencies” (Article 2(5)) and “exchange services of virtual currencies” (Article 2(7)). At the time of writing, it is uncertain whether any tokens issued in ICOs are deemed to be “virtual currencies.” We will assume, for the sake of the following analysis, that some of them will be so deemed. The “exchange services of virtual currencies” signifies carrying out any of the conducts listed in Article 2(7) “in the course of trade”, a phrase which is usually interpreted as implying repeated and continuous conducts. The listed conducts include the sale and purchase of virtual currencies and exchanging between different virtual currencies. Thus, cryptocurrency exchanges, or entities so called, will generally be seen to be providing “exchange services of virtual currencies.” Some commentators seem to believe that the issuers of ICO tokens (if deemed to be “virtual currencies”), too, provide “exchange services of virtual currencies” on the basis that ICOs would involve the purchase of tokens (deemed ex hypothesi to be “virtual currencies”) or exchanging them with other virtual currencies. But I doubt the correctness of this interpretation since the issuance of ICO tokens can hardly be described as repeated and continuous conducts. The appropriateness of such interpretation is also doubtful since the issuer of ICO tokens, if treated as a provider of “exchange services of virtual currencies”, would be subject to disproportionately heavy duties of compliance. The Payment Services Act also contains the definition of “foreign provider of exchange services of virtual currencies”: it refers to any person who pursues the “exchange services of virtual currencies” in a foreign country who has effected registration of the same kind as required under Article 63-2 (or has received other similar administrative authorization such as a permission) pursuant to that country’s statutes or statutory instruments which are equivalent to the Act (Article 2(9)). Even if the words “other similar administrative authorization” are construed broadly, it would be rare for any ICO issuers operating from outside Japan to have received such authorization. It follows that although the following analysis – which concerns the “foreign provider of exchange services of virtual currencies” – will be relevant to some of the foreign cryptocurrency exchanges dealing in ICO tokens which are deemed to be “virtual currencies”, its relevance to the issuers of such ICO tokens operating from outside Japan is doubtful.

The Payment Services Act provides at Article 63-22:
The foreign providers of exchange services of virtual currencies who are not registered pursuant to Article 63-2 shall not make solicitations aimed at persons located in Japan with respect to any conducts listed in the sub-paragraphs of Article 2(7).
(Annotation: Article 63-2 prohibits any person to pursue the “exchange services of virtual currencies” without registration. Article 2(7) lists the conducts which, if carried out “in the course of trade”, would constitute the “exchange services of virtual currencies”.)

The FSA published “Administrative Guidelines” for the providers of “virtual currency exchange services”. It contains a sub-chapter concerning the treatment of the “foreign provider of exchange services of virtual currencies” (II-４: Framework of Analysis for Foreign Providers of Exchange Services of Virtual Currencies). So far as I am aware, the FSA has not published an English translation of those guidelines. For the convenience of foreign readers, I have translated the text (below).

—————————————-(Beginning of quote)——————————————–

II-4 Framework of Analysis for Foreign Providers of Exchange Services of Virtual Currencies

II-4-1 Prohibition Against Solicitation by Foreign Providers of Exchange Services of Virtual Currencies
Foreign providers of exchange services of virtual currencies (excluding those who have been registered pursuant to the applicable law. Ditto under II-4-2 below.) shall not make solicitations of transactions involving their services with persons located in Japan, save to the extent otherwise stipulated by statutes or statutory instruments.

II-4-2 Cross-border Transactions Using Internet by Foreign Providers of Exchange Services of Virtual Currencies
Where a foreign provider of exchange services of virtual currencies posts on its website or elsewhere on the internet advertisements or other contents concerning transactions involving their services, it shall in principle be deemed to be a “solicitation.”
It shall, however, not be deemed to be a “solicitation” aimed at persons located in Japan if reasonable measures are taken to prevent the advertisement or other contents from resulting in transactions with such persons, the prime examples of such measures being those detailed below.

(1) Disclaimer
The disclaimer must clearly state that the exchange services are not targeted at persons located in Japan.
In judging whether the above measure is adequately taken, it is necessary to have regard to the following points:
(i) whether the disclaimer is legible simply by viewing the advertisement or other contents without any additional operations on the computer terminal required; and
(ii) whether the disclaimer is written in a language which it would be reasonable to expect the persons accessing the website in Japan to understand.

(2) Measures to Prevent Transactions
These are measures implemented to avoid concluding transactions involving the exchange services of virtual currencies with persons located in Japan.
In judging whether such measures are adequately taken, it is necessary to have regard to the following points:
(i) whether a procedure is put in place whereby the whereabouts of the users can be checked at the time of transactions by requiring them to present their details such as their place of domicile, postal address, e-mail address and their chosen method of payment;
(ii) whether care is taken to avoid accepting orders for transactions involving the exchange services of virtual currencies where there are reasonable grounds to believe that they have been obviously sent from persons located in Japan; and
(iii) whether care is taken to avoid inducing persons located in Japan to engage in transactions involving the exchange services of virtual currencies by, for example, refraining from establishing in Japan a call center for users or creating links from web pages which are targeted at persons located in Japan.
The above-mentioned measures are illustrative only. If measures which are equivalent or more effective are implemented, the posting of advertisements or other contents shall not be deemed to be a “solicitation” aimed at persons located in Japan.

(3) It should be noted that where reasonable measures, such as those detailed above, are not implemented, the posting of advertisements or other contents on the internet is highly likely to constitute a “solicitation” of transactions involving the exchange services of virtual currencies aimed at persons located in Japan. Such being the case, the foreign provider of exchange services of virtual currencies should prove that it is not engaged, by way of solicitations, in transactions involving the exchange services of virtual currencies with persons located in Japan.

—————————————–(End of quote)————————————————–

What is stated under II-4-1 is only a reiteration of Article 63-22 of the Payment Services Act (See above). It is worth noting that what foreign providers are prohibited to do is the solicitation of transactions aimed at persons located in Japan: Concluding unsolicited transactions with such persons is not prohibited unless it is done “in the course of business” (hence repeatedly and continuously) in violation of Article 63-2. However, II-4-2 gives a broad interpretation to the notion of “solicitation aimed at persons located in Japan” as it states that the posting of an advertisement on the internet is highly likely to constitute such a solicitation unless reasonable measures are implemented to prevent transactions with persons located in Japan. Moreover, it places the onus on foreign providers to prove that they are not engaged in such solicitations.

Extra-territorial application of Japanese law to ICOs: Financial Instruments and Exchange Act

Japanese law currently has no specific regulations for ICOs. But Japan’s financial watchdog, the FSA (Financial Services Agency) issued an open letter of warning, stating its view that “ICOs may fall within the scope of the Payment Services Act and/or the Financial Instruments and Exchange Act depending on how they are structured.” (October 27, 2017).

Thus, where an ICO scheme is deemed to be a “collective investment scheme” as defined (without using that expression) by Article 2(2)(v) of the Financial Instruments and Exchange Act, the ICO issuer would be subject to the registration and other requirements under the Act (Article 29, etc.). Leaving aside the question what types of ICO schemes are so deemed, we will focus in this post on the transnational reach of the Financial Instruments and Exchange Act (We will turn to the Payment Services Act in the next post). A question of particular significance is how far that Act is applicable to ICO issuers operating from outside Japan.

The FSA published “Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.”, of which the latest version is dated April 2018. It contains a sub-chapter concerning the treatment of foreign securities companies (X-1: Basic Concept for Foreign Securities Companies). There is an English translation by the FSA of the February 2017 version of the Guidelines. No difference exist in substance between the two versions, so far as the sub-chapter on the treatment of foreign securities companies is concerned.

Is this sub-chapter relevant to ICOs? Under the Financial Instruments and Exchange Act, “foreign securities companies” are persons who, in accordance with foreign statutes or statutory instruments, pursue the securities services in a foreign country. (Article 58). Under the same statute, the “securities services” are defined (in Article 28(8)) to include the handling of a public offering of securities but does not include a public offering per se (See sub-paragraph (viii) of Article 28(8)). It follows that even if some ICO schemes were deemed to be securities, the issuers of such ICOs would not be subject to the aforementioned sub-chapter on the treatment of foreign securities companies. Consequently, we are devoid of guidelines directly applicable to ICO issuers with respect to the geographical outreach of the Financial Instruments and Exchange Act. The sub-chapter, however, will be relevant to the “securities services” concerning ICO tokens, such as the handling of an ICO, the secondary distribution of ICO tokens and the handling of the secondary distribution.

Private actions under the federal securities Acts of the United States: Availability in cross-border ICO cases

We have examined the registration requirement in a previous post and the anti-fraud provisions as enforced publicly by the SEC or DOJ in the last post. In this post, we will turn to private rights of action (e.g. sections 11, 12, 15 and (impliedly) 17(a) of the Securities Act 1933 and (impliedly) section 10(b) and section 18 of the Securities Exchange Act 1934) to examine whether they are available in cross-border ICO cases.

The Supreme Court’s ruling in Morrison v. National Australia Bank 561 U.S. 247 (2010) controls in private actions since the amendments introduced by the Dodd-Frank Act only concern public enforcement. The Supreme Court adopted the “transactional” test according to which section 10(b) of the Securities Exchange Act 1934 was only applicable to transactions in securities listed on domestic exchanges or domestic transactions in other securities.

It is a bright-line test so far as it relates to transactions on exchanges. But clarity is lacking with respect to off-exchange transactions. The Second Circuit subsequently held that a transaction was domestic where irrevocable liability was incurred or title passed within the United States. Concerning irrevocable liability, the Court found it sufficient if “the purchaser incurred irrevocable liability within the United States to take and pay for a security, or that the seller incurred irrevocable liability within the United States to deliver a security”: Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 68 (2d Cir. 2012).

How will the Morrison test be applied to the transactions of ICO tokens? Since ICO tokens are traded on a borderless network, the place where title in them passes seems incapable of being localized in any specific jurisdiction. Then, where would parties incur irrevocable liability? In SEC v. PlexCorps (No. 17 Civ. 7007), responding to the defendants’ motion which relied on the Morrison test, the SEC noted that the investors were irrevocably committed to purchase the ICO tokens by sending electronic communications into the defendants’ automated system for the sales of tokens. The SEC further observed that those communications were deemed to have been sent from the investors’ place of business pursuant to section 15(d) of the Uniform Electronic Transactions Act. This provision reads:

§15 TIME AND PLACE OF SENDING AND RECEIPT.
(d) Unless otherwise expressly provided in the electronic record or agreed between the sender and the recipient, an electronic record is deemed to be sent from the sender’s place of business and to be received at the recipient’s place of business. For purposes of this subsection, the following rules apply:
(1) If the sender or recipient has more than one place of business, the place of business of that person is the place having the closest relationship to the underlying transaction.
(2) If the sender or the recipient does not have a place of business, the place of business is the sender’s or recipient’s residence, as the case may be.

If the SEC’s reasoning is accepted, ICOs would be deemed to take place within the United States for the purpose of the Morrison test where either the investors have their residence or the ICO issuer has its place of business within the United States at the time when the electronic communications are sent by the investors and received by the ICO issuer’s automated system. The result would be like coming full circle to the “conduct” test after performing a lot of conceptual gymnastics. Let us wait and see what the court has to say.

Anti-fraud provisions of the federal securities laws of the United States: ICOs and extra-territorial jurisdiction

Having examined the registration requirement in the last post, we will now turn to the anti-fraud provisions (e.g. section 17(a) of the Securities Act 1933, section 10(b) of the Securities Exchange Act 1934 and Rule 10b-5 thereunder (17 CFR 240.10b-5), and section 206 of the Investment Advisers Act 1940). The SEC has started to invoke such provisions in ICO fraud cases (e.g. SEC v. PlexCorps, et al., No. 17 Civ. 7007).

Each of the above-mentioned Acts contains provisions which set forth the extra-territorial jurisdiction of the U.S. courts in cases involving the violation of the anti-fraud provisions. They are to be found in section 22(c) of the Securities Act 1933, section 27 of the Securities Exchange Act 1934, and section 214(b) of the Investment Advisers Act 1940. They commonly provide for jurisdiction over proceedings involving:

(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States (Note by the present author: The wording is different here in the Investment Advisers Act 1940 which reads “the violation is committed by a foreign adviser”) and involves only foreign investors; or
(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.

Those provisions were all inserted by the Dodd-Frank Act in 2010 which purported to restore the “conduct” and “effects” tests so far as the SEC or DOJ (Department of Justice) enforcement actions are concerned. The “conduct” and “effects” tests had earlier been rejected by the Supreme Court in Morrison v. National Australia Bank 561 U.S. 247 (2010) as being difficult to administer.

As formulated in those provisions, the first prong adopts a conduct test, while the second prong an effects test. The first prong will often be easy to apply but the second prong would require elaboration. In the particular context of ICOs, when will the effects within the United States be deemed foreseeable? Would it be necessary and/or sufficient for the ICO issuers to use non-English language in their ICO white papers or to block access from the IP addresses of the United States?

It is interesting to see whether any clarification will result from SEC v. PlexCorps. In this case, the SEC argued that the test was satisfied on its alleged facts because over 1,500 transactions had been concluded with investors located in the United States and because the defendants had purposefully directed their activities to investors in the United States by advertising their ICO tokens through social media and websites available throughout the United States, by using various U.S. based entities to obtain and process payments,and by marketing and selling their tokens in U.S. Dollars.

Registration requirement under the U.S. Securities Act 1933: Exemption for ICO offers made outside the United States

Since the publication of the DAO report (“Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO” (Release No. 81207)) last summer, the U.S. Securities and Exchange Commission (SEC) has been flexing its muscles to ensure that the securities regulations of the United States will not be flouted by ICOs (Initial Coin Offerings).

If an ICO issuer wants to avoid the registration requirement under section 5 of the Securities Act 1933, it has to come within one or more of the stipulated exemptions, one of which concerns offers and sales made outside the United States (Regulation S: 17 CFR 230.901 et seq). The making of Reg S in 1990 preceded the age of internet trading. In 1998, with the growing use of the internet, the SEC issued a note on interpretation (Interpretation Re: Use of Internet Web Sites To Offer Securities, Solicit Securities Transactions, or Advertise Investment Services Offshore). It purports to clarify when the posting of offering or solicitation materials on Internet Web sites would not be considered activity taking place “in the United States”.

With the increasing activism of the SEC in the ICO sphere, clarifying its geographical outreach has become important. Reg S read in conjunction with the 1998 Interpretation, however, begs a number of questions as to how they are to be applied to ICOs. I have noted some such questions in the attached document here.

Many of these questions would equally arise in crowdfunding without blockchain tokens. But if the internet has increased the risk that foreign securities will flow back into the United States, the ICO tokens will aggravate the problem with their high mobility and anonymity in trading.

Activity-based Classification of Blockchain Regulatory Issues

In this blog, I have been primarily discussing private-law issues. But regulatory issues are no less important.

As public blockchains are borderless, activities on them may have to comply with regulations of multiple jurisdictions. The task is often difficult because of the diversity of regulatory approaches. One way to streamline and rationalize the regulations would be to move away from entity-based regulations (regulations based on the types of entities regulated) to activity-based regulations.

Here is my tentative compilation of blockchain regulatory issues classified according to the types of activities. It is not intended to be exhaustive. The lending and deposit-taking of cryptocurrencies, for example, are not included. An ICO (Initial Coin Offering) will involve both (1) Exchange with other tokens or fiat currencies and (5) Crowdfunding. (7) The trading of CBDC (Central Bank Digital Currencies) is not yet a reality but may come about at some point in the future.