Digital Assets, MiCA & EU Investment Fund Law

PurposeTo analyze and draw conclusions from the “Framework for ‘Investment Contract’ Analysis of Digital Assets” (the “Framework”), released by the US Securities and Exchange Commission (the “SEC”) on April 3, 2019, and the SEC’s corresponding no-action letter to TurnKey Jet, Inc. (“TKJ”), which is the SEC’s first no-action letter publicly agreeing with the view that the digital asset described therein is not a security.Design/Methodology/ApproachExplains how the Framework assists market participants in analyzing whether a digital asset is a security, by applying the Howey factors for identifying an investment contract. Discusses the SEC’s TKJ Letter, highlighting the factors the SEC emphasized in its analysis of the Framework.FindingsWhile largely reiterating prior guidance, the Framework provides a helpful overview of the SEC’s views on when a digital asset is a security and how to properly analyze the prongs of Howey with respect to digital assets. The Framework also leaves certain important questions unanswered, including, for example, whether digital assets distributed by means of a so-called “Airdrop” are securities under the Framework, and the extent to which the Framework is meant to interact with digital assets that were issued or otherwise operate on platforms that are primarily overseas.Originality/ValueExpert guidance from lawyers with broad experience in financial services, securities, investment funds, derivatives, and digital assets regulation and compliance.

In 2008, an unknown author publishing under the name Satoshi Nakamoto released a white paper describing Bitcoin, a peer-to-peer version of electronic cash, and the corresponding software that facilitates online payments directly between counterparties without the need for a financial intermediary. In the decade that has followed, Bitcoin and countless other open-source, decentralised protocols inspired by Bitcoin (for example, Ethereum) have come to represent a $300 billion-plus market of alternative assets, commonly referred to as “digital assets”, which are typically traded over the internet using online exchange platforms. The digital asset market extends beyond the assets themselves. Other participants, including online exchanges, payment processors and mining companies, compose the broader digital asset industry. And as this industry continues to grow, it has captured the attention of retail and institutional investors alike, including asset managers seeking to develop investment strategies and products involving these emerging assets and companies. Some strategies resemble early-stage growth strategies, featuring long-term investments either directly in certain digital assets or in start-up ventures developing complementary goods and services for the industry. Other strategies include hedge fund strategies, such as long/short funds, which often use derivatives, or arbitrage strategies, which seek to capitalise on the price fragmentation across the hundreds of global online exchanges. Additionally, during periods of weak or middling performance in the cryptocurrency markets – for example, during the so-called “crypto winter” of 2018–19 – fund managers began experimenting with novel revenue-generation strategies, such as staking cryptocurrencies, adopting credit fund-type strategies (e.g., distressed debt), engaging in market-making and executing venture capital investments. This chapter outlines the current U.S. regulatory and tax framework applicable to cryptocurrency and other digital asset investment funds offered to U.S. investors and how those regulatory and tax considerations affect fund-structuring decisions.

The article is devoted to a detailed analysis of the legal aspects of regulating virtual assets in Ukraine, particularly their legal status, integration into the financial system, and impact on the country’s economic stability. The main focus is on the legal regulation of digital assets, such as their monitoring, taxation, legal control mechanisms, and ensuring transaction transparency. Special attention is paid to compliance with international regulatory standards and studying the experience of leading countries, including the US and the EU, for adapting best practices to Ukraine’s legal framework. The article examines key risks associated with the use of virtual assets, including tax evasion, money laundering, financing illegal activities, and shortcomings in the legal infrastructure for protecting investors’ rights. Significant attention is given to the role of government agencies in ensuring effective control over digital asset transactions and their transparency. The article proposes measures to improve the legal framework governing the circulation of virtual assets and ways to mitigate potential risks to the national economy. A separate section is devoted to analyzing key issues in cryptocurrency regulation in Ukraine, such as the imperfection of taxation mechanisms, the low level of financial literacy among the population, the lack of effective legal tools, and ambiguity in the application of existing legislative norms. The provisions of the Law of Ukraine “On Virtual Assets” are explored, highlighting its potential for developing a transparent cryptocurrency market and stimulating the digital economy. The article includes an overview of international trends in digital asset regulation and analyzes the prospects for Ukraine’s integration into the global financial space. The necessity of harmonizing national legislation with international standards to ensure competitiveness and protect the interests of Ukrainian investors is emphasized. The prospects for introducing innovative financial technologies, particularly blockchain systems, into legal and economic relations are also discussed. The material will be useful for legislators, government agencies, lawyers specializing in financial law, entrepreneurs interested in using virtual assets, and researchers studying the digitalization of financial relations and the impact of modern technologies on economic development.

The subject of the research is legal-linguistic convergence in the area of criminal law regulation of liability for crimes related to cryptocurrencies and tokenized assets. The analysis focuses on the interrelation between the language of criminal law and the digital economic reality, the peculiarities of the conceptual framework used to describe cryptocurrency and other digital assets, as well as the impact of terminological uncertainty on the qualification of crimes, asset confiscation, and the assessment of operations for the legalization (laundering) of income. The analysis relies on criminal, civil, and financial legislation, doctrine, and judicial practice, including the positions of the Supreme Court of the Russian Federation. Special attention is given to the typology of linguistic uncertainty (terminological, systemic-structural, and pragmatic) and its role in forming uniform approaches to recognizing cryptocurrency as an object of property for the purposes of criminal law qualification. The research is based on an interdisciplinary approach, including legal-linguistic analysis, comparative law methods, doctrinal interpretation, and the study of judicial practice, which allows identifying the influence of language models on the qualification of crimes related to digital assets. The scientific novelty of the study lies in the justification of legal-linguistic convergence as an independent methodological foundation that ensures consistency of the conceptual framework of criminal, civil, and financial law in regulating the circulation of cryptocurrencies and tokenized assets. The work presents an author's typology of linguistic uncertainty – terminological, systemic-structural, and pragmatic – demonstrating how linguistic discrepancies give rise to differences in the qualification of crimes, affecting the definition of the subject of encroachment, methods of committing acts, and legal consequences. It concludes that there is a need for normative clarification of the definitions of digital assets, unification of intersectoral terminology, and institutionalization of judicial linguistic practices. The application of legal-linguistic convergence allows eliminating conceptual contradictions, increasing the predictability of law enforcement, and creating a cohesive model of criminal law protection in the context of the digital economy.

Digital Assets, MiCA and EU Investment Fund Law

The article examines the current international experience of Japan, Spain, Poland, Bulgaria, and the Republic of Belarus in the development of financial monitoring of cryptocurrency transactions. The methodological basis of the research was general scientific methods of cognition: observation, generalization, comparison, deduction, induction, analysis, synthesis. The article summarizes the models for building a financial monitoring system for transactions with cryptocurrencies: the «observation»model; the «risk minimization»model; and the «prohibition» model. The main characteristics of financial monitoring of transactions with cryptocurrency are determined by the following criteria: regulatory document, state body, punishment for committing a crime. Measures from foreign practice to improve the Financial Monitoring System in terms of the use of cryptocurrency for terrorist financing are defined, which can be taken into account by domestic regulators (in particular, identifying customers and beneficiaries for all transactions with cryptocurrency, regardless of its amount; developing mechanisms for information exchange between the State Financial Monitoring Service and law enforcement agencies; stimulating and supporting the work of the state financial monitoring service; strengthening and expanding international cooperation in the field of countering the financing of terrorism). Keywords: financial monitoring, terrorist financing, public administration, cryptocurrencies, digital assets

Hedge funds have been on the leading edge of technology in finance with the use of big data, artificial intelligence, machine learning algorithms, and blockchain technology. This chapter examines how and why private fund advisors utilize emerging technology. Some indicia suggest that emerging technology plays a primary role in front office and investment functions, in the securing of crypto assets, but also in private investment fund managers’ attempts to satisfy the growth expectations of clients. The use of emerging technology in trade execution and other back-office functions goes hand-in-hand with an ever-increasing interest in the private investment fund industry in investing in digital assets.

The necessity of forming investment capital by enterprises to ensure stable functioning and development is substantiated. The importance of utilizing various sources by enterprise management during the formation of investment capital is emphasized. It is noted that the formation of investment capital in modern conditions faces numerous new challenges caused by both global economic trends and the specific characteristics of national economic development. Attention is drawn to the need for enterprises to adapt to challenges such as rising debt capital costs, increasing macroeconomic instability, digitalization and technological transformations, the growing role of venture and private capital, financial restrictions and regulatory risks, and high competition for investment resources. To adapt and achieve sustainable growth under these conditions, enterprise management must implement innovative approaches to forming investment capital, including crowdfunding and crowdinvesting, attracting investment funds and obtaining grants, utilizing financial technologies, corporate financial instruments, digital assets, and blockchain technologies, integrating public-private partnerships, and conducting investment analysis using artificial intelligence and Big Data.

For appropriate attraction of retail investors it is necessary toimprove legal regulation of institutes of joint investment and to investigateinvestment's existing forms in the foreign legislation, first of all in EU.Recent research and publications analysis. To research of a legal andeconomic condition of activity of institutes of joint investment the considerableattention of scientists, as lawyers and economists, such as was paid by A. V.Garagonich, Ju. M. Bisjaga, O. Ju. Kampi, O. M. Vinnik, A. M. Dyba, E. A. Sidorov,V. V. Reznikova, Armin J. Cammel and others.Paper objective. Article's purpose is to carrying out of research of economiclegalregulation of institutes of collective investment in EU as example on a way ofadaptation of the legislation of Ukraine to EU law.Paper main body. UCITS can be based in such traditional organizational-legalforms: 1) the common fund which actives cope a management company - the contractform; 2) share fund (unit trust) (the concept confidential (trust) law in general lawsystems); 3) the investment company - the corporate form.The alternative investment fund, except the Directive 2009/65, functions on thebasis Directive 2011/61/EU of the European Parliament and of the Council of 8 June2011 on Alternative Investment Fund Managers and amending Directives2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No1095/2010.European social entrepreneurship funds (EuSEF) are funds which are directedon achievement of positive social consequences and the decision of social problemsand put their corporate purposes, unlike usual investment funds in which an overallobjective is profit accumulation.European venture capital funds (EuVECA) are directed on assistance todevelopment of venture investments into the innovative SME.Funds of long-term investment are separately regulated in EU. Investmentthrough European long-term investment funds (ELTIF) provides wider approach,than EuVECA and EuSEF, namely investments in a wide range of long-term activesprivate investors.Conclusions of the research. Existing statutory acts and actual tendencies ofregulation in the law of EU of institutes of collective investment testify to adiversification of possibilities for investors regarding placing of investments intovarious actives depending on the purpose of placing, kinds of the actives, differentdegree of investment risks, placing terms that, on the other hand, gives possibility torecipients of various branches of economy and social groups to have access toinexpensive non-bank financing.

In this article, we find a partisan electoral effect in French European Parliamentary (EP) elections that we consider to be a variant of an economic voting determinant. EU Structural and Investment Funds (SIFs) can be partially predictive of French EP electoral results. The direction of this electoral effect, however, is determined by partisanship. Left-leaning parties’ vote shares are positively correlated with SIF disbursement levels, while right-leaning parties’ vote shares are negatively correlated with SIF disbursement levels. This electoral phenomenon gives further credence to other findings that have demonstrated that variants of economic voting are occurring at subnational levels in second-order elections.

Health inequalities in the European Union remain a major source of concern. ESI Funds are intended to reduce inequalities between European regions. The reduction of health inequalities should therefore be a natural focal point for EU policy makers in assessing the effectiveness of the utilisation of ESI Funds both ex ante and ex post. The workshop brings together key stakeholders to examine ways in which regions and countries can be successful in their bids to utilise EU Structural and Investment Funds (ESI; formerly EU Structural and Cohesion Funds/EU SF) …

Before the outbreak of the coronavirus (COVID-19) pandemic, discussions were already taking place on how to complete Economic and Monetary Union (EMU) and increase its resilience, inter alia, by speeding up economic convergence. The impact of the current unprecedented crisis on the euro area economy has given the debate new impetus. As a contribution to this topic – and without going into details of new mechanisms for crisis resolution – this paper analyses the role of fiscal transfers in real and business cycle convergence at a regional level. The paper distinguishes between net fiscal transfers – a broad measure defined as the ratio between disposable and primary incomes – and EU structural and investment funds. It provides evidence that net fiscal transfers have contributed to income redistribution across regions and to faster convergence in disposable incomes, although not to higher economic growth and real convergence. More positive evidence has been found for the role of the EU structural and investment funds over the medium term, based on the newly available – and richest so far – European Commission database. Going forward, in addition to efficiency considerations, which are important for real convergence, recommendations on the size and allocation of fiscal transfers should account for their impact on the business cycle. At the same time, in the longer run, it should be borne in mind that fiscal transfers are no substitute for genuine structural reforms and sound macroeconomic and fiscal policies when it comes to promoting sustainable economic growth and convergence.

Non-EU or third-country investment funds may be subjected to final withholding taxes on their dividend income earned in various Member States within the EU. Such dividend withholding taxes may be discriminatory in nature given that EU or Member State investment funds may not be subjected to them. This raises the question whether, and to what extent, third-country investment funds could access the fundamental freedoms (like the free movement of capital) – enshrined in TFEU – in order to gain some measure of tax relief from discriminatory dividend withholding taxes. This article examines what terms of comparability the European Court of Justice (‘ECJ’) has developed in its recent case law in determining whether a restrictive dividend withholding tax is discriminatory vis-à-vis a third-country investment fund as compared to a Member State investment fund. In particular, the article examines how the ECJ considers compliance with UCITS (as well as other regulatory frameworks) in its determination of whether restrictive dividend withholding taxes are discriminatory. Regarding grounds of justification, the article considers ECJ case law that – within a third-country context – establishes that some forms of justification (like the need to guarantee fiscal supervision) could very well justify a discriminatory dividend withholding tax under certain circumstances.

The report examines recent trends in Croatia's in trade, productivity, innovation performance and policy governance framework, to help identify priorities for the development of the country's Smart Specialization Strategy, which is an ex-ante conditionality for access to the EU's Structural and Investment Funds over the 2014-20 programming period.

Addressing health inequalities by using Structural Funds. A question of opportunities