Abstract
Ethereum launched in 2015 ushering a sea change over its predecessors in it’s ability to tokenise an asset. This was a technical innovation and an Initial Coin Offering (ICO) boom ensued, peaking in 2017. The legal and compliance requirements of tokenisation failed to keep step in these early stages, but were eventually brought to bear after the ICO bubble burst, forcing technological liberalism to confront regulatory realities. The Digital Security Offering (DSO)—a name change intended to reflect full compliance—was coined. However, truly executing a fully compliant DSO remained elusive for many. In this chapter we navigate the regulatory landscape for DSOs and construct a compliant blockchain solution, using it to support the DSO capital raise for a product named Talketh in December of 2018. The journey discusses the key compliance concerns of Know-Your-Customer (KYC), Anti-Money-Laundering (AML), Custody, Tokenisation and onward secondary trading as part of a Distributed Exchange (DEX).
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Notes
- 1.
- 2.
- 3.
- 4.
- 5.
- 6.
Where a “blockchain hook” refers to an entry point on a smart contract that can be executed by traditional software.
- 7.
Which, incidentally, is illegal in most jurisdictions as of July 2019.
- 8.
Visit https://kycware.com for further information.
- 9.
For reference, a deployed example of this contract is here: https://kovan.etherscan.io/address/0x88e6f26a86caf47873e7c84bd43808f895b88b5a#contracts.
- 10.
The full list of Ethereum Request for Comment (ERC) is here: https://github.com/ethereum/EIPs/tree/master/EIPS.
- 11.
Used the “approve()” and “transferFrom()” operations on the standard ERC-20 interface.
- 12.
The name ascribed to the production network of Ethereum.
- 13.
For example, the owner of a corner shop.
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Le Gear, A. (2020). A Blockchain Supported Solution for Compliant Digital Security Offerings. In: Treiblmaier, H., Clohessy, T. (eds) Blockchain and Distributed Ledger Technology Use Cases. Progress in IS. Springer, Cham. https://doi.org/10.1007/978-3-030-44337-5_6
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