Why a correct KYC process is crucial for an ICO and why we can still protect privacy
From a legal point of view, an ICO is a contract about a tradable token or coin (and much more). To describe the legal framework in depth, you need to keep every jurisdiction in view that is responsible for the buyer of the tokens or coins.
So far we simply do not have a global law that could cover something as global as Bitcoin, Ethereum or any other Blockchain project from the legal point of view. As every country has it’s own rules and european legislative is pretty slow, we end up with a huge uncertainty for those who raise an ICO and for those that want to invest.
So what are the different motivations to go into this investment class?
- I earned so many crypto-coins from my ICO, my investments or my mining that I need to do something with it.
- I need to wash my fiat currency money in order to hide it from tax and law of the official institutions.
- I am attracted by the possible outcome and want to get a piece of the cake. My former investments are ok, but the race about ICOs attract me much more.
- I simply want to participate as everybody is talking about ICOs and I see a chance to invest with a very small amount of money and still can talk like the big guys.
- I do not care about the name of it, all I am interested in is profit.
- I am managing investments for others and use ICOs to expand my portfolio. I am an institutional investor.
So every user except the ones from the second point on the list is following a legally correct intention. But right now even those attempts could lead to an illegal way of dealing with the law in the given country.
On the other hand we have ICO projects that are nothing else but scam and some naive users need to be protected. In germany we have the small investor protection law that is seen very controversial. Some say that it blocks the investment culture that we simply do not have in Germany, others say it prevents innovation in the crowd invest sector. At least it has a reasonable background even if the way it is implemented patronize the small investors too much.
So we got a conflict between the freedom and anonymity on the one hand and the regulation and jurisdiction on the other. And we need to keep in mind that money laundering is nothing else but crime and everybody that helps doing so aids to fraud. So a good approach in that situation is to look what the established players are doing to protect themselves. And here we are in the middle of a KYC (Know Your Customer) process. We need to have at least the possibility to know certain information about either side.
The case from pincoin https://pincoin.io/ shows us what the faith in an anonymous address can lead to. 660 Mio. USD were lost for the investors.
So we have trading parties with a legitimate interest to know certain information about the other side in order to fulfill the necessary contract (no matter how smart this one might be). Because we are dealing with highly sensitive personal data, we need to act strictly confidential and without the so often declared transparency.
To achieve that, our offer with HELIX Orange — Generation ICO (ico.helix-orange.com) is to introduce a Digital Identity Platform that meets the requirements of the most strict data protection and regulatory rules. The German way of dealing with private data is the world’s most strict international standard. The commandments from GDPR, PSD2, regulation and law concerning Digital Identity protects the end user at least theoretically the most. In combination with Blockchain Technology and a high secure App, the user can control who has access to a certain amount of personal or administrative information from him- or herself. So he remains as private as possible. No third party is included.
In combination with the need of security and trust, this a true added value. I cannot go deep into the technology, but feel welcome to discuss with us.
We can give ICOs a legal framework for that part of the process. Cooperation is always welcome.
The true power of Bitcoin are the enthusiasts and true believers in grassroots democracy and alternative government. And the discussion about segwit or the halving shows the conflict potential and the seriousness the players are dealing with these decisions. The introduction of Digital Identities in another independent system that do not interfere with Bitcoin or Ethereum directly is a true solution and can act business critical and trustful and this is what is needed urgently if ICOs should have a future.
About the author
This article is written by Oliver Naegele, Mastermind of HELIX Orange and Founder & CEO of Blockchain HELIX AG. Oliver is one of the world’s authorities in the aspects of Digital Idenity, Blockchain and KYC. He has acquired a deep understanding for digital authority management during his 15-year-long career in IT security. He is the initiator of the Blockchain Frankfurt MeetUp and of the German wide network FinTech Headquarter. He is also one of the founding members of the Germany Blockchain Federal Association.
Disclaimer
There might be a conflict of interest, as the author of this article is also a team member of HELIX Orange. Moreover, the author might be invested into the project himself. This article is not meant and shall not be used as an investment advice, but shall only reflect the personal opinion of the author. Everybody who is interested in investing in one of the aforementioned projects or any other projects should undertake his or her own effort in investigating the respective project. Investments in Initial Coin Offerings are very risky and there is a high chance of losing part of or the entire investment.
The contents of this article are merely the opinions of the author, and not investment, legal or tax advice. This publication has the sole purpose of addressing specific topics. The publication makes no claim to completeness.
Do you want to know more about HELIX Orange? Please read the whitepaper at ico.helix-orange.com and join the HELIX Orange Telegram community https://t.me/helixorange for insights.
