2. Speaker
2
Vlad Burilov
Tilburg Law School,
Research Master in Law
Consultant,
International Legal Practice, O2 Consulting
Legal Team,
KEYICO consortium

3. Contents
3
Burilov, Vladislav, Utility Token Offerings and Crypto Exchange Listings: how
regulation can help? (November 13, 2018). Available at
SSRN: http://ssrn.com/abstract=3284049
• General classification of tokens (features and functions)
• Regulator’s approach to classification (Malta)
• Intermediate conclusions
• Regulator’s approach to ICOs and listings (primary and secondary offerings of
tokens) (Malta)
• Case study on listing – “multi-stage collaborative token selection procedure”
• Recommendations to policy-makers

4. Protocol tokens: what are they?
4
Buyer
Seller
Buyer
Seller Seller
Buyer
• Exclusively payment function
(means of exchange, unit of
account, store of value)
• Cannot per se confer rights and
impose obligations upon any
person
• By default transfer is not
restricted. Any Seller. Any Buyer.
Any terms of exchange
contractually defined (or not)

5. “Platform” is a set of contractual arrangements and claims
between its participants and the Platform Operator
Application tokens: what are they?
5
Buyer
Seller
Buyer
Seller Seller
Buyer
Procure
acceptance
Platform
Operator
Participation
Agreement
Claim
A.T.
Terms of
sale (pricing)
A.T.

6. Token models which favor transferability over possession
“Claim” and “Certification” App Tokens
6
Authentication of identity,
status, qualification
Non-fungible and
Non-transferable
Transferability of the Token on the Platform
Not a claim per se but
authentication
which of itself may
give claims
on the Platform
A.T. A.T. A.T.
Claim control over an
asset and / or
entitlement:
Non-fungible but Transferable
Sole control over non-divisible
assets or entitlements
1 share
1 Vote1 Painting
Fungible and Transferable
Fractional control
over non-fungible
assets or over a
pool of fungible
assets
Sole control over
fungible assets

7. 7
A.T. A.T.
Financial Entitlement
Security Token Utility Token
Non-financial Entitlement
to a pre-defined asset or a fraction
thereof
to services:
 on subscription basis (you pay
a fixed amount upon
subscription and get a free
access to the Platform);
 on coupon basis (you first buy
coupons and then spend them
per service)
Utility Tokens and Security Tokens: basics
pre-determined
cash flows
share of profits

8. 8
Security Token
2. Capable of being exchanged beyond the Platform?
3. Decision-making power on the Platform?
A.T.
1. Non-financial Entitlement
Utility Token
ESMA SMSG Initiative Report, 19 Oct, 2018
Utility Tokens and Security Tokens: blurred line

9. 9
First Enacted Classification of Tokens (1/2)
Malta Virtual Financial Assets Act, in force from Nov. 1, 2018
Virtual financial asset - means any form of digital medium recordation that is used as a
digital medium of exchange, unit of account, or store of value and that is not
(a) electronic money;
(b) a financial instrument; or
(c) a virtual token
Fungible and
Transferable
Non-fungible but
Transferable
Non-fungible and
non-transferable
“virtual
financial
assets”
Non-transferable
by design on
crypto
exchanges
Solely to the
acquisition of goods
or services
Transferable by
design on crypto
exchanges
“virtual token”
Regulation of ICO and
secondary offering
VFA
VT

10. 10
Candidate
Service
Provider
A.T.
Platform User
Platform
Operator
Platform User Platform User
Token Curated Registry Model
First Enacted Classification of Tokens (2/2)
Shall we regulate public offering of a
closed-loop TCR app token?
Malta says “yes”?
A.T. A.T.
A.T.

11. Intermediate conclusions
11
• regulation shall address the actors and not the products themselves
• a more generic approach for defining tokens based on whether they
vest any “claim(-s)” (Proposal in France) to the holder or “use a
counterparty” (EU Crowdfunding Proposal)
• more principle-based approach could be applied (e.g. mutually
exclusive “Yes / No” criteria for standard cases accompanied by
interpretative case studies for hybrid cases)
Does “Classify” mean rigidify “moving and still unidentified objects”?

12. 12
Policy Concern
Market
Integrity
Investor
Protection
Risk to
financial
system
Broader challenges of regulation

13. 13
VFA Agent
Systems Auditor
Auditor
Custodian
Regulator (MFSA)
VFA Service
Provider (crypto
exchange)
Money-
Laundering
Compliance
Officer
Malta VFA Act: Direct Mandatory Regulation
• Financial Instrument Test
• Whitepaper registration
• Compliance Certificate
• Systems Auditor’s report
• Cyber-Security Framework
If one keeps in mind voluntary Whitepaper registration
proposal of France and an opt-in EU Crowdfunding
Proposal, in the short-term future there could be less costly
alternative regulatory regimes to consider.

14. 14
Double spending on intermediation and
regulatory compliance without Gatekeeper
present?
Investor
Protection
Retail Investor Qualified Investor
Cap on participation in a
Maltese ICO (EUR 5,000 in
tokens of one Issuer over a
12-month period)
Cap on participation in a
Maltese ICO (1% of its net
wealth into Maltese
regulated ICOs)
At the same time – no cap on maximum fundraising amount
VFA Agent
• Financial Instrument Test
• Whitepaper registration
• Compliance Certificate
• Systems Auditor’s report
• Cyber-Security Framework
VFA Agent qualification
requirements
Nominated Adviser
(London AIM LSE)
(i) fit and proper; (ii)
solvent and (iii) competent
in terms of regulatory
framework
(i) be qualified in
corporate finance; (ii)
have relevant
transactional experience;
and (iii) employ at least
four qualified executives
Malta VFA Act: Proportionate and Effective?

15. 15
Candidate
Issuer
Crypto
Traders
Issuer’s
Tokens
Crypto
Exchange
HADAX (HUOBI) Crypto Exchange
Token Listing Model
Crypto
Exchange
Tokens
• reserve for
voting rewards
Crypto Traders
Fundraising amount equals the “voting
target” amount of crypto exchange tokens
collected from crypto traders
Listed
Issuer
Crypto
Exchange
Tokens
Issuer’s
Tokens
Endorsers
Stage: 1 Short-listing (cross-evaluation) and
Presentation
Stage: 2 Community Voting
Crypto Exchange Token Listing Process
• the “voting
target”

16. Introduce Gatekeepers and Disintermediation?
16
Potential advantages of a multi-stage collaborative token selection procedure
• Shortlisting and Presentation (Endorsers):
 Platform’s Quality Check (scalability, revenue model, cryptoeconomics)
• Community Voting
 Transparency, Quality and Integrity mean more for all stakeholders in view of
direct competition for financing;
 Only crypto exchange token holders are eligible (barrier to retail investors);
 “Winning” crypto traders give away crypto exchange tokens for issuer’s
tokens – diversify their risks but not necessarily incur more risks.
• Financing with Crypto Exchange’s Tokens:
 Issuer receives crypto exchange tokens in installments – alignment of
interests with crypto exchange and a way to monitor compliance;
 Crypto exchange token as a unit of account for all listed tokens.

17. Conclusions
17
• Disintermediation:
Voluntary Whitepaper registration at the ICO stage or a mandatory
registration with waivers and exemptions (safe harbors) for ICOs whch do
not exceed the maximum individual participation threshold or maximum
fundraising amount
• Gatekeeper:
Introduce legal certainty in the listing process:
A. engage established crypto exchanges in a regulatory sandbox in order
to evaluate the merits and potential policy implications of a
collaborative token selection process;
B. provide freedom for crypto exchanges to self-regulate and introduce or
waive listing rules; and
C. consider light-touch regulation and standardization of the token
selection process with a principle-based focus on security, commercial
viability and innovativeness of the project.

18. Thank you!
Questions?