Proposal “Dash_Embassy_Legal_Q2_2020“ (Active)Back

Title:Legal opinion and regulatory classification for Germany and European Union (Step 1)
Owner:DASH_Embassy_DACH
One-time payment: 79 DASH (5969 USD)
Completed payments: no payments occurred yet (1 month remaining)
Payment start/end: 2020-05-15 / 2020-06-14 (added on 2020-05-22)
Votes: 634 Yes / 70 No / 0 Abstain
Will be funded: Yes
Manually vote on this proposal (DashCore - Tools - Debugconsole):
gobject vote-many bb5fa9e76068307e7c1df138d18f3fc149367aa6ff8cd695f295d93a96276125 funding yes

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Proposal description

Legal opinion and regulatory classification for Germany and European Union (Step 1)


Our past activities in the area of legal and compliance

As stated in our Q4 2019 proposal we wanted to get legal opinions and regulatory classifications from the German and the Swiss regulator to address potential regulatory threats caused by PrivateSend. In collaboration with DCG we managed to receive a legal opinion from a Swiss law firm. You can find the proof in the DW-report from November 2019: https://reports.dashwatch.org/NOV19/Embassy-DACH.pdf

As a board member of the blockchain working group of Bitkom (https://www.bitkom.org/Bitkom/Organisation/Gremien/Blockchain.html) Jan Heinrich Meyer has been invited to take part in a consultation for crypto regulation of the European Commission. Together with DCG we took part in that consultation during January and February of 2020 https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/2019-crypto-assets-consultation-document_en.pdf


Nevertheless Dash still is

  1. classified as “anonymous” by European parliament according to a study from 2018  (thanks to @DeepBlue for the hint) https://www.europarl.europa.eu/cmsdata/150761/TAX3%20Study%20on%20cryptocurrencies%20and%20blockchain.pdf (e.g. page 51)

  1. classified as “privacy/anonymity-enhancing”  by European parliament according to a study from April 2020  https://www.europarl.europa.eu/RegData/etudes/STUD/2020/648779/IPOL_STU(2020)648779_EN.pdf (e.g. page 25)


Upcoming threats if the classification remains the same

Until today these classifications did not really have an impact on Dash. But right now the European Parliament is working on a new regulatory framework for crypto assets, which will result in applicable law expected for autumn 2020. Depending on this new legal framework the classifications mentioned above could have a negative impact on the regulatory classification of Dash on an EU wide level in future. 

If this would be the case it means that Dash will be struggling to keep listings on exchanges and integrations into payment solutions. To avoid this we need to start efforts to get a regulatory classification that will protect Dash from the threats just mentioned. As there is no final regulatory framework on EU level yet, we want to get a statement from the regulator of the most regulated market for cryptocurrencies in the EU, which is Germany. We are hoping that the decisions made for this jurisdiction will take influence of the EU regulators in future.  In other words: a legal opinion from a German law firm is now needed more than ever before. 

Due to a lack of budget we have not been able to move on with the German law firm which we had already been in talks with. We hoped that the price of Dash would increase again, so that we could cover the legal costs out of our regular budget, but this did not happen. As we are still not able to cover the total costs for the law firm out of our regular budget we ask for additional funding that will top up our reserves for legal activities and will exclusively be used for paying the law firm we want to move forward with.


What will you get from this proposal (Step 1):

  1. Legal opinion on Dash from a German law firm (German and English)

  2. A lawyer approaching BaFin (German regulator) to receive a regulatory classification


Of course we can not guarantee that approaching the regulator will result in our desired outcome of Dash being classified the same as Bitcoin. However we are certain that inaction will result in a negative outcome for Dash in the new regulatory framework.


Step 2

As soon as the legal framework for the EU is becoming applicable law we will begin to reach out to the EU regulators to receive positive feedback for Dash’s classification. Hopefully with a positive precedent from Germany. Glenn Austin (CFO @ DCG) assured us his support during this process and we will reach out to him when it becomes necessary. We hope that we will be able to finalize Phase 2 without any additional funding.


Budget breakdown

We ask for 79 Dash, which will be used to top up our remaining budget for legal expenses. With the resulting balance we will be able to pay the offer we received from the law firm, which is estimated at about 7,500 EUR. 

We hope for your vote and support.

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Discussion: Should we fund this proposal?

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5 points,3 days ago
This post is on behalf of Omar Hamwi with Dash Core Group, he is unable to leave a comment on his own: "We at DCG do confirm that we are working with DACH on the regulatory front in Europe. The German legal opinion will likely have the added benefit of being applicable in multiple countries in the EU and likely a pre-requisite for continued or new listings with various partners of both DACH and DCG operating in Europe (as has been the case in other nations such as Singapore). DCG will be supporting DACH in their activities and conversations with regulators. "
Reply
1 point,3 days ago
Yes from me, good luck.
Reply
3 points,4 days ago
Voting yes for now but a few questions as well:

1) Have there been any legal arguments that have worked successfully in the past for Dash regarding privacy/anonymity regulatory rulings? For example in Japan?

2) Let's say BaFin gives Dash the classification that we seek and then the EU doesn't follow Germany's precedence in Step 2, what would happen?
Reply
0 points,4 days ago
Hello hilawe,

I'm not aware of the current situation in Japan as I'm not involved in that jurisdiction. What I can tell is that the legal opinion we received from the swiss law firm already helped us in past conversations with exchanges, payment companies and financial institutions. We are even using that legal opinion at the DIF now.

According to the German law firm we are in contact with, it would be possible to object the decision made by EU, if we need to. This would create additional costs. In general it seems smarter to reach out to them before they make their decision. Not only because it can save us money, but also because a proactive approach shows good will for collaboration. If the proactive approach does not work and if the EU classifies Dash as kind of illegal and we are not able to change that, we will get a serious problem.

I hope I was able to answer your questions.

Best regards,

Jan
Reply
0 points,4 days ago
Makes sense, thanks Jan.
Reply
3 points,4 days ago
I think it is very important to clarify this now and not to wait. clear yes in the interest of all of us.
Reply
0 points,6 days ago
Im not sure I support this proposal, please correct me if im wrong.

1) recent AML5D has created alot of uncertainty around KYC process and reporting in the EU region ( which may mean more exchanges going offshore ) e.g eu regs dont apply
2) exchanges such as deribit have moved offshore from places such as NL to Panama
3) exchanges such as Binance are not HQ in Malta and such also are exempt and do not process fiat

I am not sure spending 7500€ currently, in this uncertain market is worth it. Look forward to your response @esra
Reply
1 point,4 days ago
Hello Realmrhack,

I agree that due to AML5 and the currently not finalized legal framework for crypto assets in the EU there is some regulatory arbitrage happening right now. This is a fact. However at the same time leading companies from the crypto industry, financial industry and media industry are operating or preparing to operate in the EU to offer their crypto related services. For example:

1) BitGo Expands Global Presence with Regulated Custody in Switzerland and Germany - https://www.bitgo.com/company/press/switzerland-and-germany

2) Börse Stuttgart (regular stock echange) launched their own exchange for cryptocurrencies based and regulated in Germany - https://www.bsdex.de/en/

As you can see at the bottom of the BSDEX website two major media companies are partnering with BSDEX. Partnering in this case means that they are invested in the project. The media companies are:

a) https://www.finanzen.net/ which according to similarweb has over 35,000,000 visitors per month (https://www.similarweb.com/website/finanzen.net#overview) and by that is the leading media platform for financial news in the EU. They even added a link to BSDEX to their main menu on their website.

b) https://www.axelspringer.com/en/ which is the largest digital media publishing company in Europe (https://en.wikipedia.org/wiki/Axel_Springer_SE) - they will heavily promote BSDEX.

What am I trying to say? In fact some companies are leaving the EU because they are afraid of the current uncertainty and the upcoming regulations. This means that they will not be able to legally operate in the European market anymore. At the same time other companies are taking advantage of the European market. If we want Dash to also benefit from this market, a legal opinion for Dash is needed to get a regulatory classification that will be in favour for Dash.

I hope I was able to address your concerns.

Have a great start to the week,

Jan (essra)
Reply
4 points,3 days ago
Sure does, your explanation is very credible based on my research as well, voting yes good luck

Thank you for your response
Reply
0 points,7 days ago
Is this enough money to secure the legal opinion? Seems a little low for legal stuff of this scope.
Reply
1 point,6 days ago
Hello agnew,

as described in the budget breakdown the funds we are asking for would be used to top up our reserves for legal expenses. By doing so we would have enough money to pay the offer we received from the law firm. The offer is at about 7.5k EUR.

Have a great weekend,

Jan
Reply
0 points,3 days ago
Thanks essra,

I reread the proposal, it makes a lot more sense now, best of luck, I voted yes.
Reply