Aviya Arika: “When a wallet has no control over your private keys, there’s nothing that’s up for grabs”
Head of Blocking Innovations at Nir Porat & Co law firm Aviya Arika is convinced that crypto exchanges and cryptocurrencies circulation in general need regulation. But there can be no single standard for everyone: differentiated approach is required.
Aviya Arika has extensive experience in blockchain companies. She advises dozens of such businesses in Israel, including cryptocurrency exchanges, funds and projects planning ICO; studies the taxonomy of different types of tokens and the application of legislative norms to them.
In the interview with the press office of Blockchain & Bitcoin Conference Belarus, the speaker described her vision of the blockchain legislation and legal challenges faced by startups today.
Interviewer: Blockchain & Bitcoin Conference Belarus (BCB)
Speaker: Aviya Arika (A.A.)
BCB: Hello, Aviya! Tell us, which of the existing cryptocurrency wallets do you consider to be most protected against hackers stealing funds? Why this wallet?
A.A.: Basically, a wallet that makes sure you control your private keys and has no control over them is the safest, simply because when a wallet has no control over your private keys, there’s nothing that’s up for grabs for hackers.
BCB: How does the type of a token affect its legal status?
A.A.: A utility token, meaning, a token that is useful only within the ICO platform/ ecosystem that issues is and is not being bought by investors in order to make profit, is usually unregulated and is views like a consumable product. When token it not a utility token, it will usually be a security. Once a company issues and offer securities to the public, heavy regulations apply and that company would have to comply to the securities laws of the countries where its investors are located and of its own jurisdiction. This burden is the reason that most ICOs prefer to state that they sell utility tokens, although that is often just a disguise. I think that the next trend will be ICOs that go out and state that they are securities, and take the heaviest regulatory measures in order to be on the safe side.
BCB: Different jurisdictions have different approaches to regulating the activity of cryptocurrency exchanges: some ban it, some stand for moderate regulation and others advocate self-regulation. In your opinion, which approach makes a country more attractive for creating a cryptocurrency exchange?
A.A.: I think, that modern regulation is a must for cryptocurrency exchanges. Outdated previous regulation that refers to money transmitters (see for example in U.S states) can’t really accommodate the needs of crypto exchanges, because of their cross-border, modern characteristics. I think that regulation of crypto exchanges is needed in order to protect users and prevent money laundering and tax evasion, but it has to be modern and custom made.
BCB: What problems are heads of cryptocurrency exchanges facing the most?
A.A.: From my perspective, it’s complying to different regulations in different jurisdictions from where they accept clients. This is a time-consuming, costly process that can be frustrating, since there are no cross-border international regulations yet.
BCB: What are the main risks of managing a cryptocurrency exchange?
A.A.: Security breaches and the enormous exposure to facilitating money laundering.
BCB: Trading platforms of cryptocurrency exchanges provide fewer opportunities for traders than stock exchange or Forex platforms. In your opinion: should cryptocurrency exchanges implement new tools and expand trading opportunities? Please explain why you think so.
A.A.: I think they will have no choice, I just think they’re not there yet because these products are still under development and regulatory questions marks which prevent their fast distribution and adoption.
BCB: What will your presentation at Blockchain & Bitcoin Conference Belarus touch on?
A.A.: I will touch on different kind of exchanges and how this affects regulatory requirements, I will give a regulatory overview of cryptocurrency exchanges and also touch on different legal statuses of token types.