UNDERSTANDING DIGITAL TOKENS: Market Overviews and Proposed Guidelines for Policymakers and Practitioners PREPARED BY - TOKEN ALLIANCE AN INDUSTRY INITIATIVE OF THE CHAMBER OF DIGITAL COMMERCE CHAMBER OF DIGITAL COMMERCE The Chamber of Digital Commerce is the world’s largest trade association representing the blockchain industry. Our mission is to promote the acceptance and use of digital assets and blockchain technology. Through education, advocacy, and working closely with policymakers, regulatory agencies, and industry, our goal is to develop a pro-growth legal environment that fosters innovation, jobs, and investment. TOKEN ALLIANCE The Token Alliance is an industry-led initiative of the Chamber of Digital Commerce, developed to be a key resource for the emerging industry surrounding the generation and distribution of tokens using blockchain technology. Comprised of over 350 global industry participants, the Alliance includes blockchain and token experts, technologists, economists, former regulators, and practitioners from over 20 law firms. The Token Alliance develops community-driven guidelines for the responsible development of tokens. CHAMBER OF DIGITAL COMMERCE INDUSTRY INITIATIVES & WORKING GROUPS SMART CONTRACTS ALLIANCE GLOBAL BLOCKCHAIN FORUM Promotes real-world application Working with the world’s leading of smart contracts to enhance blockchain policy experts to the way business is conducted. develop industry best practices and help shape global regulatory interoperability. BLOCKCHAIN INTELLECTUAL BLOCKCHAIN ALLIANCE PROPERTY COUNCIL The public-private forum for Balancing the protection of the blockchain community and proprietary information with law enforcement to help the openness necessary for combat criminal activity. innovation. DIGITAL ASSETS STATE WORKING GROUP ACCOUNTING CONSORTIUM Engaging with state and local Developing accounting and governments on the regulation reporting standards for digital and implementation of assets and blockchain blockchain technology. technology. 2 | TOKEN ALLIANCE TABLE OF CONTENTS I. ACKNOWLEDGEMENTS 4 A. TOKEN ALLIANCE CO-CHAIRS 4 B. TOKEN ALLIANCE LEADERSHIP COMMITTEE 5 C. EXPERT CONTRIBUTORS 6 D. TOKEN ALLIANCE MEMBER PARTICIPANTS 8 II. FOREWORD - BY PAUL ATKINS AND JAMES NEWSOME 9 III. INTRODUCTION – THE CASE FOR DIGITAL TOKENS 12 IV. PART 1: REGULATORY OVERVIEW OF DIGITAL TOKEN MARKETS 16 A. UNITED STATES 16 B. CANADA 40 C. UNITED KINGDOM 52 D. AUSTRALIA 60 E. GIBRALTAR 71 V. PART 2: TOKEN PRINCIPLES AND GUIDELINES 80 A. TOKEN SPONSORS 80 B. TOKEN TRADING PLATFORMS 91 VI. PART 3: TOKEN ECONOMIC LANDSCAPE 95 VII. LOOKING AHEAD 107 UNDERSTANDING DIGITAL TOKENS: MARKET OVERVIEWS AND PROPOSED GUIDELINES FOR POLICYMAKERS AND PRACTIONERS | 3 I. ACKNOWLEDGEMENTS TOKEN ALLIANCE CO-CHAIRS PAUL ATKINS Chief Executive Officer, Patomak Global Partners Non-Executive Chairman, BATS Global Markets, Inc. (2012-2015) Commissioner, U.S. Securities and Exchange Commission (2002-2009) JAMES NEWSOME, PH.D. Founding Partner, Delta Strategy Group President & CEO, New York Mercantile Exchange (2004-2008) Chairman, U.S. Commodity Futures Trading Commission (2001-2004) Commissioner, U.S. Commodity Futures Trading Commission (1998-2001) 4 | TOKEN ALLIANCE TOKEN ALLIANCE LEADERSHIP COMMITTEE The Chamber of Digital Commerce would like to recognize the following individuals for their thought leadership, contributions and support to the Token Alliance in the production of this report. KEVIN BATTEH PERIANNE BORING JOE CUTLER ROBERT GREENE Partner, Delta Strategy Group Founder and President, Partner, Perkins Coie LLP Strategic Advisor, Chamber of Digital Commerce Patomak Global Partners DAX HANSEN CHRIS HOUSSER JONATHAN JOHNSON AMY DAVINE KIM Partner, Perkins Coie LLP Co-Founder, Polymath President, Medici Ventures Chief Policy Officer, Chamber of Digital Commerce KARI LARSEN BRIAN LIO MATTHEW ROSZAK BILL SHIHARA Counsel, Reed Smith LLP Chief Executive Officer, Chairman and Co-Founder, Chief Executive Officer, Smith + Crown Bloq Bittrex TOM SPORKIN JOSHUA STEIN RUMI MORALES COLLEEN SULLIVAN Partner, BuckleySandler LLP Chief Executive Officer, Partner, Outlier Ventures CEO, CMT Digital Strategic Advisor, Harbor Token Alliance UNDERSTANDING DIGITAL TOKENS: MARKET OVERVIEWS AND PROPOSED GUIDELINES FOR POLICYMAKERS AND PRACTIONERS | 5 EXPERT CONTRIBUTORS The Chamber of Digital Commerce would like to thank the following individuals and organizations for their valuable contributions to the Token Alliance in the production of this report. THOMAS AHMADIFAR KWON PARK Associate, Perkins Coie LLP Director of Business Development, Bittrex STEVE BUNNELL Chief Legal Officer, Bittrex SCOTT PARSONS Managing Principal, Delta Strategy MATT CHWIERUT Group Research Director, Smith + Crown KIRAN RAJ LEWIS COHEN Chief Strategy Officer, Bittrex Lawyer, DLx Law LLP ANDRE REINA MICHAEL DIDIUK Product Manager, Elliptic Partner, Perkins Coie LLP ERIC SIBBITT FREDERICK FEDYNYSHYN Partner, O’Melveny & Myers LLP Senior Counsel, Perkins Coie LLP JAMES SISNEROS DROR FUTTER Founder and CEO, Zaahah Partner, Rimon Law, P.C. JAMES SMITH PARITOSH GAMBHIR Chief Executive Officer, Elliptic Partner, KPMG J. GRAY SASSER GREGORY GROVE Attorney, Frost Brown Todd Principal, Much Shelist, P.C. STEVEN SPRAGUE KATE GUIMBELLOT CEO and Co-Founder, Rivetz Executive Director, TravelCoin Foundation QUAN TRINH Co-Founder, Secure Identity SHARON HAVERLAH Ledger Corporation IT Research and Innovation Technology Leader, USAA SARDORBEK UMAROV Co-Founder, BookLocal RAMON LAFEE Chief Executive Officer, G Coin JASON WEINSTEIN Partner, Steptoe STEPHEN KEEN Senior Counsel, Perkins Coie LLP LES WILKINSON Chief Development Officer, KIRAN NAGARAJ Hashed Health Managing Director, KPMG JAY NATARAJAN Senior Global Solutions Architect, Microsoft LINDSAY NELSON Research, Smith and Crown 6 | TOKEN ALLIANCE GLOBAL SUBJECT MATTER EXPERTS The Chamber of Digital Commerce would like to express its gratitude to the following firms and individuals for authoring the country specific Sections contained in this report. UNITED STATES: Paul Atkins, Chief Executive Officer, Patomak Global Partners John Cobb, Associate, Steptoe Matthew Comstock, Partner, Murphy & McGonigle, P.C. Michael Fletcher, Partner, RSM Robert Greene, Strategic Advisor, Patomak Global Partners Amy Davine Kim, Chief Policy Officer, Chamber of Digital Commerce Kari Larsen, Counsel, Reed Smith LLP Chelsea Parker, Blockchain Industry Analyst, Steptoe Michael Selig, Associate, Perkins Coie LLP Lisa Zarlenga, Partner, Steptoe CANADA: Paritosh Gambhir, Partner, KPMG Ross McKee, Partner, Blakes Stefania Zilinskas, Associate, Blakes UNITED KINGDOM: Tim Dolan, Partner, Reed Smith LLP Claude Brown, Partner, Reed Smith LLP Karen Butler, Senior Associate, Reed Smith LLP AUSTRALIA: Alex Cook, Lecturer, University of Western Australia Law School Nick Giurietto, CEO and Managing Director, Australian Digital Commerce Association Ivan Oshry, Head of Corporate, Kemp Strang Ronald Tucker, Founder and President of the Board, Australian Digital Commerce Association Michael Zheng, Senior Associate, Maddocks GIBRALTAR: Joey Garcia, Partner, ISOLAS LLP Jonathan Garcia, Partner, ISOLAS LLP UNDERSTANDING DIGITAL TOKENS: MARKET OVERVIEWS AND PROPOSED GUIDELINES FOR POLICYMAKERS AND PRACTIONERS | 7 TOKEN ALLIANCE MEMBER PARTICIPANTS The Chamber of Digital Commerce would like to thank the following companies for their support of and participation in the Token Alliance. Accenture Doc.ai Microsoft Softthink Solutions AlphaPoint Dragonchain Milligan Partners SpaceChain Ant Financial Element Group MPEG LA Spera Aperture Elliptic Much Shelist PC Strategic Coin Argon Group ERC dEX Multicoin Capital Stronghold Australian Digital Commerce eToro Murphy and McGonigle PC Symbiont Association Exchange Union Nasdaq Tally Capital B3i Fairfax County Economic Nelson Mullins Riley and The Depository Trust and Bittrex Development Authority Scarborough LLP Clearing Corporation Bitwage Fidelity Labs Netki TMX Black Square Capital Frost Brown Todd LLC New Alchemy TravelCoin Foundation Blakes Fundopolis Norton Rose Fulbright tZERO Block Collider G Coin NuID USAA BlockIDE Gem OTCXN Vardavas and Concannon, PA Blockmason Global Blockchain Technologies Outlier Ventures Vertex Corporation BlockMedx O’Melveny & Myers LLP Votem Go Coin Parsons and Whittemore Bloq Wanchain Golem Patomak Global Partners BNP Paribas Wipfli, LLP Grupo Cimcorp PeerStream BNY Mellon Wyrick Robbins Yates and Harbor Ponton LLP Bonner and Partners Perkins Coie LLP HashChain Zaahah BPM Accounting Pillar Project Hashed Health Bright Matter Advisory PokitDok Zen Blockchain Foundation HCM Capital, Foxconn Buckley Sandler LLP Technology Group Polsinelli PC Capitol Alliance Group Hogan Lovells LLP Polymath Circle Hub Culture Services Qtum Cisco IBM R3 Citizens Reserve IHS Markit Reed Smith LLP Civic Technologies Incremint Rimon Law PC CME Group Input Strategic Partners Ripple CMT Digital Intuit Rivetz Cognizant Irell and Manella LLP RKL LLP Coin Circle Joshpe Mooney Paltzik LLP RockTree Capital CoinList KPMG RSM Colorado Blockchain Capital LBRY SALT Lending Crowe Locke Lord LLP Secure Identity Ledger Corporation Crowell and Moring LLP Loyyal Seed CX Debevoise & Plimpton LLP Lykke Seward and Kissel LLP Deloitte MadHive Shulman Rogers Gandal Pordy Delta Strategy Group MakerDAO and Ecker, PA Dentons LLP Medici Ventures Slice Technologies Digital Currency Group Mercury Protocol Smith + Crown DLx Law LLP Messari Smitz Laboratories 8 | TOKEN ALLIANCE II. FOREWORD Paul Atkins and James Newsome The