Blockchain, the technology behind virtual currencies is now growing in other areas of financial services and beyond.
These opportunities introduce new risks and give rise to new legal, governance and regulatory issues which require careful consideration before the technology’s full potential can be realised. Our specialists are experienced in helping you meet these challenges.
Our colleagues also support the development and promotion of blockchain in our local jurisdictions. Peter Colegate is a founder and director of the Blockchain Association of the Cayman Islands.
Virtual Currencies, Token Sales & Initial Coin Offerings
The sudden emergence and rapid growth of cryptocurrencies and other digital assets in recent years, combined with seemingly unlimited potential applications for blockchain and distributed ledger technologies across a range of industries has led to an unprecedented period of technological innovation and the emergence of disruptive businesses and entirely new models of funding.
Initial coin offerings, the tokenisation of assets and other token funding methods have created complex legal and regulatory challenges. Appleby’s technical expertise, geographic footprint in key offshore markets, and depth of experience allows us to help our clients meet the challenges of this rapidly evolving sector and capitalise on the new opportunities the sector offers.
Financial technologies or “FinTech” have the potential to supplement or disrupt the financial services industry, with internet banking and mobile payment applications as obvious early examples. As offshore centres press forward with ambitions to be leading regional technology hubs, FinTech will soon become an important point of focus, both for market participants and for regulators.
Digital Technology and E-Commerce
From wearable devices that measure and record health information to mobile, online and in-app payments, the digital technology landscape is changing daily.
Our varied expertise combined with technology sector knowledge enables us to give you practical and commercial advice at every stage of the development of your business. We help with regulatory compliance, the establishment of new entities and compliance with local laws, along with a range of digital technology issues including:
- Website development, terms and conditions and policies;
- Corporate and commercial transactions;
- Dispute resolution and litigation;
- Content acquisition and licensing;
- Advertising and promotional activities including copy clearance;
- Funding and finance;
- Big data and data analytics;
- Cloud services;
- The Internet of things and machine-to-machine technologies;
- Mobile, online and in-app payments; and
- Wearable technology
Intellectual property is one of the most valuable assets a business can own: protecting it is essential to commercial success. Appleby works with you to register and protect your rights. In conjunction with our Commercial Litigation group, Appleby has substantial experience in taking action to protect against the infringement of IP rights and in the conduct of passing-off actions.
We also offer investigative services to identify the source of, and distributors of, infringing goods, working closely with the relevant bodies as necessary.
Unmanned Aircraft Systems
The increasingly popular use of UAS (or, more popularly, “drones”) for aerial photography and surveillance has created a number of regulatory and privacy challenges. UAS present unique privacy challenges and their ability to collect data with great resolution and granularity at distant vantage points, often for long periods, enables them to conduct effective aerial surveillance in a sustained and surreptitious manner.
This has led to the use of UAS for commercial purposes requiring a licence or other form of registration in certain jurisdictions. Our experts understand the opportunities UAS offer and help navigate the regulatory complexities.
IT and Communications
IT and telecommunications services are business critical and have an enormous impact on society. We cover all legal aspects of the telecoms sector and its convergence with adjacent technology and media sectors.
Our experience extends across all types of network and platform – fixed, mobile, satellite, VPN, terrestrial broadcasting, cable TV and the internet.
Data Protection and Information Management
There are now data protection laws in more than 90 countries around the world. These, together with cyber security concerns and new international data sharing regimes such as FATCA are making the regulation of data more complex than ever before.
We offer advice to clients on all aspects of data protection and information management compliance, including:
- Privacy impact assessments, to enable an organisation to assess privacy impacts due to proposals for organisational, technological or policy change;
- Data centres; covering developers, operators and end-users;
- Data collection and capture, including policies concerning the mechanics of collecting consents;
- Direct marketing and the implementation of “opt-in”/”opt-out” requests;
- Structuring cross-border data transfers including as part of shared services and cloud arrangements;
- Human resources management, including policies dealing with job applicant data, retention of and access to employee files, employee monitoring, management of sensitive employee data and the use of external vendors for functions such as payroll and counselling;
- Data subject access, including procedures for assessing and verifying requests and responding to those requests;
- Big data and data analytics, including policies specifying the types of profiling data that may be used, and anonymisation/aggregation principles;
- Digital identity, authentication and biometrics;
- Responding to data requests from foreign authorities, law enforcement agencies and regulators;
- Complaints handling, including complaints from customers, employees and other affected individuals; and
- Data quality management, including procedures for updating and correcting databases and determining if data is to be erased.
Appleby advised Bittrex Global on acquiring their Digital Asset Business License to operate their cryptocurrency exchange from Bermuda.
Appleby acted as Bittrex Global GmbH’s Bermuda counsel, on their application for a Class F Digital Asset Business (DABA) License which represents the third such license issued by the Bermuda Monetary Authority (BMA). The DABA license will provide Bittrex Global with an additional important gateway for global accounts. From its Bermuda hub, the company will offer additional digital asset services over time subject to further approval by the BMA.
Appleby advised Bittrex Global GmbH, an international fintech company that operates a digital asset exchange platform from Liechtenstein and is a member of the Bittrex Global Group, on the establishment of Bermuda based Bittrex Global (Bermuda) Ltd.
Bittrex Global (Bermuda) Ltd. will operate a full service digital asset derivatives exchange platform from Bermuda, under its Class F DABA License. Appleby advised on all aspects of the DABA license application, including all AML/ATF regulatory requirements.
Bittrex Global (Bermuda) Ltd.’s digital asset exchange platform will provide customers with the ability to trade digital asset derivatives. Currently, the platform allows customers to trade digital asset leverage tokens, with a view to allow digital asset futures contracts and digital asset perpetual contracts to be traded in the future.
“The entire crypto industry is about looking forward,” said Bittrex Global’s CEO Tom Albright. “Working with the Bermuda government and the BMA to be part of another regulatory community that keeps innovating is extremely exciting and is an important step in increasing crypto’s penetration at all levels of the financial industry,” Albright said.
Steven Rees Davies, lead partner at Bittrex Global’s legal counsel, Appleby in Bermuda, commented: “Congratulations to Stephen Stonberg and Tom Albright and the innovative team at Bittrex on the establishment of their cryptocurrency exchange from Bermuda. With digital asset derivatives trading up to roughly seven times the volume of the spot market, providing a platform for traders to actively participate in digital asset derivatives trading is a big step forward in the growing digital asset sector. Bermuda’s highly established regulatory and fintech community welcomes your ingenuity and we look forward to continuing to support your many forward-thinking initiatives.”
Partner Steven Rees Davies was supported by Partner Matthew Ebbs-Brewer, Associate Kit Cunningham and Trainee Amber Farrington on the establishment of the Bermuda company and the DABA application, and by Partner Sally Penrose on the AML/ATF regulatory aspects.
APPLEBY ADVISED ON THE CARLYLE GROUP’S INVESTMENT IN ANT INTERNATIONAL
Leading offshore law firm Appleby acted as Cayman Islands counsel to The Carlyle Group on its subscription of Series C preference shares issued by Ant International Co., Limited, a Cayman Islands company and a wholly-owned subsidiary of Ant Small and Micro Financial Services Group Co., Ltd. (Ant Financial). This deal forms part of Ant Financial’s circa USD 14 billion equity financing programme. Since its establishment in 2014, Ant Financial has formed international partnerships with global strategic partners to serve local users in those markets, and serve Chinese travellers overseas by connecting Alipay with online and offline merchants in popular destinations. The deal was led by Partner Nicholas Davies and Counsel Vincent Chan, both based in Appleby’s Hong Kong office. Commenting on the matter, Nicholas said “We are delighted to have advised the Carlyle Group on the Cayman law aspects of this high-profile FinTech deal. As a leading global offshore law firm with full service capability on the ground in Hong Kong and in each of our jurisdictional offices, we take great pride in assisting our clients with their key transactions wherever in the world they might need us.”
Appleby acted as Bermuda counsel for the Hashdex Nasdaq Crypto Index ETF
The world’s first exchange-traded fund designed to track digital assets investments has been approved for listing on the Bermuda Stock Exchange (BSX).
The Hashdex Nasdaq Crypto Index ETF is an open-ended investment fund that will work as a traditional ETF, with a creation and redemption mechanism involving the delivery of a basket of assets or cash by authorised participants. It will track the Nasdaq Crypto Index to represent the institutional investable landscape of cryptocurrency assets.
Marcelo Sampaio, Hashdex CEO stated, “We are truly excited to bring to market the first true crypto ETF in the world with the support of the BSX, MIH and Nasdaq. We believe that the launch of the Hashdex Nasdaq Crypto Index ETF is significant and is poised to transform financial markets in big ways in the years to come.”
Partner Steven Rees Davies led the transaction and said, “The listing of the Hashdex Nasdaq Crypto Index ETF on the BSX is a great achievement for both the Hashdex and BSX teams and is testament to how real the opportunities are in the digital asset sector for those willing to think outside the box and create solutions that facilitate regulated access to new markets.”
Appleby advises iFinex on its USD 1bn LEO token offering
Appleby acted as BVI legal advisers to iFinex on the private token sale of LEO tokens, which commenced on 8 May 2019. iFinex’s Chief Technology Officer, Paolo Ardoino, took to Twitter to announce that the sale had raised approximately USD 1 billion in 10 days. The sale of LEO tokens was made privately to select purchasers who met the qualifications set out in the purchase documentation.
iFinex began operations in 2012 and, among other cryptocurrency and cryptoasset-related products and services, operates Bitfinex, one of the world’s largest virtual currency trading platforms. The LEO tokens were issued by a newly formed BVI subsidiary of iFinex, Unus Sed Leo Limited, and are intended to be utility tokens at the heart of the iFinex ecosystem.
The Appleby team was led by BVI partner Andrew Jowett with assistance from Peter Colegate, counsel in Appleby’s Cayman office, and Rebecca Jack, senior associate in Appleby’s BVI office. Appleby advised iFinex alongside US counsel, Steptoe & Johnson LLP.
Our Music Festival
The latest real-life application for blockchain technology has arrived: live events. Our Music Festival (OMF), the world’s first blockchain-powered music festival, took place in front of a sell-out crowd in San Francisco in October 2018. OMF has created a music festival network powered by a cryptocurrency to give the power back to the fans. Announced at the event in San Francisco, the OMF Token will be redeemable for products, services and experiences within the OMF festival network, to drive all transactions between consumers, artists and event organisers from merchandising, production and hospitality to food and beverage services, brand sponsors and transportation. The brainchild of musician and producer 3LAU, aka Justin Blau, OMF is all about connecting with the fans and giving them the power to change the traditional festival model. The benefits of blockchain technology to the music industry are obvious, and for OMF, it’s an opportunity to use the technology to correct some of the problems that infuriate music fans, from cutting out unnecessary administrative and third party fees to stamping out ticket touts and ticket price inflation on secondary markets. Blockchain technology could quickly improve the situation in a number of ways. For example, the technology could make the sales of counterfeit tickets impossible by permanently tying the original ticket holder’s identity to their ticket, regardless of how many times the ticket changes hands. The possibilities are endless but ultimately, the hope is that OMF token holders take the power back by using their tokens to influence future festival line-ups, where they take place and everything in between.
Appleby’s Technology and Innovation Group in the Cayman Islands has been working with OMF since its inception and has advised OMF on its corporate structuring, funding and the issuance of the native OMF Token.
Parabolic Digital Holdings Ltd.
Appleby were engaged to advise on the establishment of Parabolic Digital Holdings Ltd. as a Bermuda company that would focus on the development and financing of green energy blockchain data centres.
Parabolic Digital Holdings Ltd. developed new technological solutions for cryptocurrency mining, Portable Data Centers, GPU Rendering and GPU AI (Artificial Intelligence) projects and was one of the first companies to seriously consider the benefits of Bermuda’s Digital Asset Business licensing and offering regimes .
Appleby initially advised on the set up of the corporate structure in Bermuda together with applicable corporate governance advice.
Once incorporated Appleby advised the company on the application of Bermuda’s digital asset business licensing and offering regimes, including the requirements to secure permission to conduct certain offering activities and exemption classifications.
Appleby also advised on all aspects of compliance with and exemption from Bermuda’s Digital Asset Business licensing and offering regimes as well as corporate governance matters pertaining to the project.
Steven Rees Davies led the transaction with assistance from Jerome Wilson and Jennifer Eve.
Legal Advisors for SelfKey Token Sale
SelfKey, a transformative, blockchain-based digital identity solution, which allows individuals and companies to truly own, control and manage their digital identity, recently completed its sell-out token sale with the support of offshore law firm Appleby. After a USD 15.8 million pre-sale in December, SelfKey’s public crowdsale, which was originally projected to last two weeks, was oversubscribed and reached its sale cap just 11 minutes after the KEY tokens were made available for sale on 14 January. Appleby acted as lead legal adviser to SelfKey on the offering, which raised a total of USD 22 million. The Appleby team was led by Cayman based corporate attorney Peter Colegate who devised and implemented an innovative corporate structure to conduct the sale and to govern the SelfKey network as the community grows. Appleby headed a team of 12 lawyers across multiple jurisdictions and formed an integral part of the 70-strong SelfKey team. The Appleby team also included Cayman Corporate partner Bryan Hunter, Mauritius corporate lawyers Melissa Virahsawmy and Sharmilla Bhima and Cayman trusts attorney, Esmond Brown. Commenting on the transaction, Peter Colegate noted: “Blockchain technology will revolutionise the way we manage our identities and the way we conduct business, online. SelfKey’s vision is to enhance know-your-client and anti- money laundering compliance whilst dramatically improving efficiency. We feel privileged to have been a part of the team that introduced the world to such a transformative technology.” The SelfKey technology is now live and anyone can download the SelfKey Identity Wallet for free.
SelfKey founder, Edmund Lowell, commented: “After the successful sale, we are pleased to be able to carry out our mission to put identity owners in control of their data and change the current centralized approach of identity management systems to one which is decentralised and self-sovereign. Without the help of our core team, advisers, lawyers including Appleby and in particular Peter Colegate, none of this would be possible.”
Appleby advised the Southern Cross Group of Bermuda companies in respect of all aspects of Bermuda law in relation to Telstra’s acquisition of a 25% equity interest in the Southern Cross Group and the Group’s subsequent network investment in the Southern Cross Next subsea cable project. Although the transaction is still subject to some conditions, these are procedural in nature and are expected to be satisfied within the next few days.
Southern Cross NEXT will provide data connectivity between Sydney, Auckland, and Los Angeles and is scheduled for completion by January 2022. The new route will also provide critical international cable connectivity to the Pacific Islands of Fiji, Tokelau and Kiribati.
The new 13,483 kilometre (main trunk length) cable system, (16,148km including all branches), has been developed as an extension of the existing Southern Cross two cable eco-system. It will allow customers to leverage Southern Cross’ extensive point-of-presence network and access infrastructure already in place. It will also allow Southern Cross NEXT customers to flexibly assign new and existing capacity across the three routes across the Pacific, connecting Australia, New Zealand, Fiji and the United States, maximising diversity and resiliency.
Southern Cross NEXT represents a network investment of around US$300 million by Southern Cross and is designed to carry 72 Terabits per second of traffic across its 4 fibre pair design using C-band technology, ensuring Southern Cross can cater for its customers’ growing data requirements well into the future. Services offered on the new system will be an extension and integration of the services offered across the current Southern Cross eco-system.
The Bermuda aspects of both the equity and network investments were led by partner Steven Rees Davies and assisted by Andrew Kuzma and Sarita Ebbin.
Stablehouse successfully applied for a Class M Licence pursuant to the Digital Asset Business Act 2018 (DABA). The Class M Licence was granted for a limited duration of not more than 18 months. Stablehouse intends to conduct its digital asset business as an ‘electronic exchange.’ It will adopt a classic centralised clearing-house model for the trading of ‘Stablecoins’ which are a type of block-chain technology. The reasoning behind acquiring a temporary Class M Licence is for Stablehouse to effect Beta-Testing of its exchange Platform. The Beta-Testing shall assess the robustness and user experience of the Platform, and the ability of it to scale its transaction infrastructure, with intent to ultimately apply for a Class F Licence. Such marks a significant development in Bermuda’s Fintech sector.
Stablehouse’s Class M Licence is the fourth DABA Licence ever granted by the BMA. As such, Appleby is now poised as market-leader with respect to legal advice in connection with digital assets. Appleby has advised two thirds of all successful DABA applicants currently issued Licences, evidencing our leading role, experience and expertise in the Fintech sector. The successful application also showcases Bermuda as global-leader in digital asset regulation.
Appleby acted as counsel to Stablehouse in connection with its application for a Class M Licence. Steven Rees Davies led the transaction with assistance from Sally Penrose, Jerome Wilson, Matthew Ebbs-Brewer and Josephine Noddings.
Strix Group PLC
Appleby Isle of Man advised Strix Group PLC on its £190 million flotation on the London Stock Exchange (Alternative Investment Market)
Appleby acted as Isle of Man legal counsel to Strix Group PLC during the process of scheduling and listing its shares on the London Stock Exchange’s Alternative Investment Market. The listing went live on 8 August 2017 and raised £190 million. The flotation provided a clean exit for AAC Capital Partners, which invested in Strix in 2005. Strix is incorporated and registered in the Isle of Man and operates a sizeable commercial operation in the Island, employing more than 65 people locally. Appleby’s Isle of Man office advised on a range of legal areas, including corporate, banking, pensions, property and employment. The Appleby Corporate team which worked on the project was led by Kyle Sutherland, Partner, Tom Brook, Counsel, and Associate Katherine Johnson. Kyle commented: “We were pleased to share our listing expertise with one of the most well-known, established businesses in the Isle of Man as it prepared to take a significant step in its future development. It is particularly satisfying that this IPO is in respect of a locally based manufacturing business with strong roots in the Island.
“We very much enjoyed working with the Strix team on this project against a challenging timescale. We also note the appointment of Gary Lamb as interim non-executive chairman, who we have worked closely with previously on the listing of Manx Telecom back in 2014.” Appleby advised Strix alongside CMS Cameron McKenna Nabarro Olswang LLP (English law), Zeus Capital Limited (broker and nomad), PriceWaterhouseCoopers LLP (tax and structuring), Eversheds Sutherland LLP (legal advisers to the nomad), Estera Trust (Isle of Man) Limited (corporate services) and Conyers (Bermudan law). Strix was established in the Isle of Man as Castletown Thermostats in 1951 by Eric Taylor, inventor of a revolutionary thermostat during World War II to control heated flying suits worn by bomber crews at high altitudes. The firm is a global leader in the design, manufacture and supply of kettle safety controls and other components for devices involving water heating and temperature control, steam management and water filtration.
Appleby acted as XBTO’s Bermuda counsel on their application for a Digital Asset Business Licence as a Digital Asset Service Vendor (Market maker for digital assets). This license allows XBTO to provide market maker services for digital assets in and from within Bermuda and are now regulated by the Bermuda Monetary Authority (BMA) under the Digital Asset Business Regulations. Appleby advised on and prepared documentation for XBTO’s license, which is one of only 3 DABA licenses issued to date in Bermuda under the new FinTech regime.
XBTO International Ltd. (Bermuda) (“XBTOI“) is a licensee of XBTO Group, one of the most active global crypto investors. XBTOI is a leading digital asset provider offering best-in-class market making products through superior proprietary technology and connectivity. “This is a significant development for our business in Bermuda and across the global trading landscape,” said Julien Auchecorne, Chief Operating Officer of XBTOI. “We are engaged in many exciting projects and are proud to showcase Bermuda’s growing status as a leading offshore digital asset hub. Our local commitment extends beyond our own office presence and working relationships with service providers on the island.”
Steven Rees Davies, lead partner at XBTOI’s legal counsel, Appleby in Bermuda, commented: “We congratulate Julien and the team at XBTOI on this well-deserved achievement. The receipt of a Digital Asset Business License from the BMA is testament to the standards by which XBTOI operates globally and sets them apart from others in this highly competitive sector.” Steven Rees Davies was supported by Matt Ebbs-Brewer (Partner), Jo Noddings (Senior Associate) and Alexis Haynes (Associate) on the DABA application and Sally Penrose (Partner) and Monika Adams (MLCO) on the AML/ATF aspects. Caleb Crockwell (Associate) and Luisa Olander (Associate) also assisted on this transaction.