Digital asset is a concept included in the economic and legal vocabulary and later in general use as a result of the popularization of the blockchain technology. Its emergence marked the beginning of the transition to a fundamentally new model of economic relations.
Despite the continuing interest from individuals and legal entities, there is no unified approach to the issues of legal regulation and declaration of property created on the basis of the blockchain platforms at the moment. The general definition of digital assets covers only certain aspects of functioning of this information product and does not allow regulators to unify approaches to determining its legal nature.
Different approaches to determining the nature of a DA
Digital asset is often defined as an information resource derivative of the right to a value and circulating in the distributed ledger in the form of a unique identifier. Clarification of the concept of value has led to the formation of two of the most common approaches to understanding the legal nature of a DA: digital assets are considered either as a means of payment or as a means of exchange. Quite a number of disputes arise at the national and international level because of their use as a donation or gift.
Today digital assets are fully legalized as a means of payment only in Japan. In other jurisdictions, DAs may have the status of:
· money analogue;
· exchange goods;
· private money;
· financial instrument;
· certain asset, transactions with which should be subject to taxation.
It is noteworthy that the partial or full legalization of digital assets is not identical with the legalization of crypto and the automatic recognition of the ICO’s legality by the regulator.
Digital asset can be distinguished from cryptocurrency by the following criteria:
Digital asset operates in accordance with the terms and conditions specified in the Protocol; it is backed by property or property rights; it is a unique digital copy of a real asset with the ownership right to it recorded in the blockchain. The creators of cryptocurrencies and blockchain tokens are increasingly defining their cryptocurrencies and tokens as digital assets taking into account current trends. The accompanying substitution of concepts only introduces ambiguity and confusion for new market participants. Additional problems also arise in connection with the use of different approaches to defining a DA by different organizations within the same jurisdiction.
Thus, in the US digital assets mean everything that exists in binary format and comes with the right to use (digital documents, sound content, movies and other digital data that are currently in circulation or stored on digital devices). The revenue service uses the concept of “cryptocurrency” and considers crypto to be a digital representation of value, which is used for value exchanging, recording and storing, and the IRS (Internal Revenue Service of the US) considers it as a means of barter exchange. Unfortunately, the process of legal determination of the status of digital assets is still far from complete in Ukraine. Attempts at legalization were made both in 2017 and in 2018, but the question still remains in limbo.
Initiatives for Digital Asset Legalization in Ukraine
The Research Center of Legal Solutions in the Area of Application of Distributed Ledger Technologies is currently promoting initiatives to determine the legal status of digital assets in our country. The activity of the Center is aimed at promotion of digital assets in the Ukrainian market and their application in all fields of society. The Center considers development and systematization of the terminology of legal documents, which will regulate all products created on the basis of the blockchain platforms, as one of the tools for implementing the tasks set.
The Center has already held a thematic event. The Center held a roundtable on “Standards of Blockchain Tools” in Kyiv in mid-December. The roundtable resulted in the creation of a working group on the development of a Doctrine of Economic and Legal Regulation of the Market of Information Resources. The representatives of Simcord, the company that specializes in developing the blockchain products and is interested in the legalization of digital assets, took an active part in the events apart from scientists and legal experts.
Legal regulation of the use of a DA will accelerate the process of digitalization and diversification of the Ukrainian economy. The use of digital assets will open up new opportunities for economic entities, save resources and time in the transaction process and will stimulate economic growth as well.