Bitbon in the Economic and Legal Field

The relations that arise when exercising the property right to the Bitbon[i] digital asset are subject to regulation by the norms of the law of obligations1, which ensures the circulation of the Bitbon digital asset within the legal field. This approach is explained by the fact that the Bitbon digital asset, being an information resource[i], contains all information on the rights, duties and liabilities of the parties on fulfilling the mutual obligations, as well as the information on the creator of the Bitbon digital asset, and circulates in the blockchain[i] in the form of a unique identifier[i]. In turn, the law of obligations is a sub-branch of civil law, which is part of the structure of national legal systems and, essentially, establishes regulatory requirements for the process of a value’s movement.

Meanwhile, the “Bitbon Protocol” information resource and the Bitbon digital asset as its component (access to the services of the Bitbon System[i]) are the regulators of legal relations between Bitbon System Participants[i], the object of which is the Bitbon digital asset, and the subjects — its owners. So we can say that the Bitbon digital asset is the confirmation of its owner’s right to a mutual use of the value — “Bitbon Protocol” information resource. In turn, the existence of a value as the basis for the Bitbon digital asset is determined by the main principle of ensuring the operation of the Bitbon System such as Right to the right[i] that allows the Bitbon System Users[i] to operate the right to an information resource, which is derivative of the right[i] to a value[i], where the value itself remains in possession of its owner.

Using the Bitbon digital asset as a regulator of relations in the Bitbon System does not contradict the principles of law and current legislative norms of legal systems, which allows securing the Bitbon digital asset in the international legal field. This provides the ability to simplify the mechanisms of business and civil circulation related to the use of the Bitbon digital asset as an intangible asset (IA) and does not require the adoption of a field-specific legislation aimed at regulating the relations between subjects that arise when using the Bitbon digital asset.

The above-mentioned statement is also based on the compliance of Bitbon and the Bitbon System as the only possible circulation environment of the Bitbon digital asset with a number of international standards2:

  • to maintain the overall legal order in the Bitbon System, the Anti-Money Laundering Provisions and the Privacy Policy are implemented. The existing Policies of the Bitbon System have been developed in accordance with the General Data Protection Regulation (GDPR), the 5th Anti-Money Laundering Directive (AMLD5), as well as taking into account the requirements of the “Know Your Customer” Policy (KYC);
  • the correspondence of Bitbon to a digital asset[i] can be seen from the example of testing the Bitbon blockchain token’s[i] correspondence to the four categories of a digital asset (defining digital asset as an information resource derivative of the right to a value circulating in the distributed ledger[i] in the form of a unique identifier), which is in the scientific and legal opinion “Determining Whether the Bitbon Blockchain Token Corresponds to a Digital Asset” dated December 6, 2019, which, in turn, is based on the approach represented in the methodological manual “Methodology for Determining Whether a Blockchain Token Corresponds to a Digital Asset”3;
  • for the purpose of accounting, Bitbon can be represented in the balance sheet as an intangible asset (IA). The recording of digital assets of the Bitbon System in accounting documentation is possible as a result of defining Bitbon System digital assets as intangible assets in accordance with the International Financial Reporting Standards (IFRS) 38 “Intangible Assets” dated January 1, 2012. The Bitbon digital asset, being an information resource and an object of intellectual property of the value’s owner, corresponds to an intangible asset (IA), which makes it clear for business entities, individuals and states, as well as is a prerequisite for its successful use in economy;
  • using Bitbon, its owners can ensure the exercising of their rights to managing the Bitbon System and using its services, which is one of its distinctive features. Comparing this and other properties of the Bitbon digital asset with the criteria of the Howey Test allows stating that Bitbon does not belong to the “security” category according to the Law SECURITIES ACT OF 1933. According to the classifier presented in the “A Securities Law Framework for Blockchain Tokens”, the Bitbon digital asset is a utility token. The results of researching the Bitbon digital asset using the methodology presented by FINMA in the “ICO Guidelines” also allow stating that Bitbon is a utility token. You can find the results of the analysis of the Bitbon digital asset using the above-mentioned classifiers in the scientific and legal opinion “Digital Assets as an Object of Legal Regulation” dated November 25, 2019.

The Bitbon System allows its Users to build relations within the norms of the law of obligations, i.e. through blockchain-based agreements (as a modern and improved accounting system) in the form of a Digital Asset Protocol[i], which, essentially, is an information resource, a final document of conducting the Asset Digitization Procedure[i], which establishes certain attributes and properties of a digital asset, terms and conditions for its creation and circulation in the Bitbon System, as well as the execution of the Digital Asset Protocol. Meanwhile, the Bitbon digital asset, in addition to being an intangible asset (IA), is a tool for accounting in the Bitbon System. This is due to the fact that the Bitbon digital asset is endowed with an exchange value for equal exchange of other digital assets in the Bitbon System and conducting various types of activities in the Bitbon System. Thus, as a result of the Bitbon System’s operation, legal relations have emerged that are implemented in the digital space and fall under the category of obligations with full record of their content (rights and duties) in the distributed ledger (blockchain).

1 Law of obligations is a sub-branch of civil law, the norms of which regulate the relations in the field of circulation of values (products, services, works, etc.). Unlike the property right, which determines the fact of belonging of a property to certain persons, the law of obligations mediates the movement of a value.

2 Today, in the age of globalization, the unification of legal systems happens more often, which is a way of bringing them to a common denominator. The international standards have become the key tool in this process, which should broadly be understood as the internationally accepted regulatory requirements approved by a number of states and used by them to simplify the processes of field-specific, including international, interaction within certain legal relations.

3 Methodology for Determining Whether a Blockchain Token Corresponds to a Digital Asset: methodological manual. doi: 10.26697/9786177089055.2019. ISBN 978-617-7089-05-5