Jusletter IT

The world is going through a real decentralizing, disruptive revolution not only of economic activities, but also of social interrelations and political aspects of life, of which most of us are not aware. Organized by the Center for Intellectual Property and Innovation Law of the University of Neuchâtel (Pôle de propriété intellectuelle et de l’innovation, [PI]2, www.unine.ch/pi2) on 4 October 2016, this seminar on «Fintech, Bitcoins, Blockchains, Decentralized autonomous organizations (DAOs): the future is bright, the future is decentralized» was the first of its kind to handle the legal aspects of blockchains in Switzerland in such a detailed manner, profiling the Neuchâtel region, which counts a rising number of dynamic startups in the field, as a player to count with in blockchains and cryptocurrencies. Moderated by Daniel Kraus, ordinary Professor of innovation law and Director of the [PI]2, this first seminar allowed participants to have fair exchanges of ideas on the subject, to realize what opportunities and perspectives blockchains open, what risks are entailed, and discuss the present and future legal framework for blockchains.

Bitcoin can be viewed as the starting point for all reflections on crypto-currencies and blockchain. However, most of the concepts and notions can also be applied to other blockchains, like Ethereum for instance, which is a decentralized platform for running applications such as smart contracts, or to Decentralized Autonomous Organizations (DAOs). Vincent Mignon provides a general introduction to the subject and explains the basic notions of blockchain, wallet, public keys / private keys, miners, etc. A particular emphasis is placed in the first part on Bitcoin, in the second part on Ethereum and in the third and final part on decentralized autonomous organizations.

This talk explores how DAOs (Decentralised Autonomous Organisations) will look like in the future, through the example of the first iteration of «The DAO». This new form of organisation comes with a new type of governance and enables different interactions between the members of the community. It also brings new challenges and forces us to rethink some of our traditional legal concepts.

According to https://blockchain.info/, as of 10 January 2017, the total market value of mined bitcoins (crypto-currency based on blockchain, a decentralized technology) was USD 14'668'273'764. The Decentralized Autonomous Organization (DAO), a kind of venture capital fund entering into so-called smart contracts (automatically executed contracts in a blockchain), was launched on 30 April 2016; as of 21 May 2016, the total value of invested ethers (another crypto-currency) was more than USD 150 million, from more than 11,000 investors. Amounts at stake invested in crypto-currencies are gigantic, so are the number of owners, and respectively the number of investors. The aim of the presentation is to assess whether the owners of crypto-currencies and the people investing crypto-currencies in DAOs based on blockchain technology are sufficiently protected by Swiss Law and if there is a need for further protection.

Blaise Carron presents the contractual aspects of DAOs (Decentralized Autonomous Organizations) which manage them as investment communities and as enterprises. In his lecture, he first adresses the questions regarding jurisdication and applicable law for internal or external litigation concerning DAOs. Then, he discusses the internal legal relationships of the DAO as well as the areas of responsiblities that each member of the DAO is accountable for. Lastly, he covers the external relationships between the DAO and its contracting parties.

Despite its practical importance, the taxation of cryptocurrencies and DAOs is not governed by any specific legal provision or administrative practice in Switzerland. Therefore, Professor Thierry Obrist recommends in his presentation to rely on general principles governing Swiss tax law in order to determine the way investors, both legal persons and individuals, are treated for Swiss taxation purposes. In this regard, Thierry Obrist differentiates between investments in virtual currencies and in DAOs but also deals with the taxation of DAOs themselves, including some very practical issues regarding VAT.