Crypto & Asset Tokenization: Regulatory Developments

STELIOS AMERICANOS & CO LLC APRIL 2022

CRYPTO & ASSET TOKENIZATION:
REGULATORY DEVELOPMENTS

DR. CHARIS SAVVIDES

Q&A SESSION

BY OUR PARTNER DR. CHARIS SAVVIDES 2) How important is it to apply this We are experiencing
new technology to both the public a wider
1) What are the most important and private sectors? technological
elements of Blockchain Technology advancement as a
that we should know about? First of all, it should be clarified that it is humanity, which
not a matter of choice whether this encompasses
Blockchain technology aims at the technology will be applied or not. What changes in the way
optimal management of digital I mean with this, is that we are we communicate
information. It allows for the secure experiencing a broader technological and trade
recording and storage of digital data, in a advancement as humanity, which
way that allows for their dissemination involves changes in the way we the easy and trusted certification of
with the general public or with selected communicate and transact. Our long- the authenticity of the now digitized
persons, on the basis of a predetermined standing need for faster and more information. This is a fact to which
protocol excluding their falsification. economical data exchange solutions both the private and the public
Therefore, Blockchain technology have led us to the digitization of data. sector must respond adequately,
concerns a technology which is From thereon, having "conquered" approaching it from now on, as the
interlinked with transparency and the digitization, the focus has turned to the normal development of services and
enhancement of security and trust in creation of technologies for the reliable markets more generally.
terms of who, where and when he draws recording, storage and sharing of
up, shares, completes (and not deletes) a digitized information. We are all looking
digital file. and striving for technological 'tools' for

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STELIOS AMERICANOS & CO LLC APRIL 2022

CRYPTO & ASSET TOKENIZATION:
REGULATORY DEVELOPMENTS

DR. CHARIS SAVVIDES

3) What are the most important insofar as the administration of justice Major companies have
advantages of this technology and and legal science more generally are developed and offer their
potential risks? concerned. In relation to potential risks, clients specialized
I believe that there is no risk in the software programs that
From my experience, I consider that the technology itself. As in any other case, allow them to create and
reporting and recording of advantages risks may arise through human failures manage their own private
or risks of Blockchain technology is a or omissions during the programming Blockchain platforms and
subjective matter. It depends on an of the protocol for the management of applications.
individual’s professional background, on digital information, in the so-called
the practical (and not only theoretical) "smart contract" (smart contract). these platforms and applications, the
usefulness of technology, combined with optimal dissemination of information
the problem it is employed to solve, and 4) In which industries is there interest and data between partners,
certainly not on the general in applying this new technology? employees and customers is
predisposition on the part of the achieved. In addition to the
professionals. For me as a lawyer, this The global interest in this technology, individual sectors of economic
technology has the advantage of a as well as the evolution of the activity which currently record the
secure proof of creation, distribution and technology itself, are following a greatest interest, such as the finance,
flow of any digital information, in such a parallel upward trend. Major companies health, real estate and logistics
way that any proprietary and property have developed and are offering their sectors, a horizontal promotion of
rights and obligations of persons are customers specialized software technologyis also recorded as a tool
disclosed and certified in real time. This programs that allow them to create and for raising and managing investment
is perhaps the greatest and most manage their own private platforms funds under the rubric of asset
tangible benefit existing at the moment and Blockchain applications. Through tokenization.

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STELIOS AMERICANOS & CO LLC APRIL 2022

CRYPTO & ASSET TOKENIZATION:
REGULATORY DEVELOPMENTS

DR. CHARIS SAVVIDES

5) What exactly is the trend with amount will obviously be much more the legal force of contracts,
regards to asset tokenization? than those who can pay 1 million Euros. transactions and generally all
This provides for excellent prospects functions performed through
Blockchain technology has somehow especially with regards to assets that are Blockchain technology. This is what
"unlocked" the ability to convert any difficult to liquidate, such as real estate, has essentially been set in motion
asset into individual digital shares, intangible assets, loans and receivables with the drafting by the Ministry of
giving the opportunity to access an and this is precisely where the trend is Finance of the “Bill on the
incomparably larger base of potential observed internationally. I believe it is Distributed Ledger Technology Law
buyers and raise liquidity in a regime of only a matter of time before it also of 2021”. The completion of the
transparency, lower costs and full develops in Cyprus. discussion of the Bill and its passage
automation. Since its issuance and for into law, which I wish will be in due
the entire duration of its effect, the 6) What drastic changes do you expect time, will in my opinion, bring about
digital share represents the value and following the establishment of the the necessary legal certainty to
rights allocated to it in real time, on the Legislative Framework? businesses and consumers in relation
basis of the underlying asset. If, for to sale and purchase contracts
example, the underlying asset is a single It is very important to stress that executed through smart contracts
share of a company, divided into 10 legislative intervention is necessary in and digital assets (cryptocurrencies).
digital units, then each of them order to fully reap the benefits of the This is something which I foresee will
represents 1/10 in value and rights over technology. Private-sector initiative and be strengthened further with the
that share, as those are formed over adoption of the technology must be adoption of the much-anticipated EU
time. In another example, if someone accompanied with corresponding Market in Crypto-Assets Regulation,
sells a property worth 1 million Euros, actions from the public sector and in known as MiCA.
divided into digital shares of 100 Euros, particular with legislative and regulatory
those willing to pay this minimum rules that recognize, vis-à-vis everyone,

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STELIOS AMERICANOS & CO LLC APRIL 2022

CRYPTO & ASSET TOKENIZATION:
REGULATORY DEVELOPMENTS

DR. CHARIS SAVVIDES

7) On cryptocurrencies more generally, and vaguely) are unfairly described as way that is more familiar to the
there is a lot of reticence across 'tools' of fraud, money laundering, and traditional banking regulatory
Europe, since they are considered to so on. The other reason, which for me is framework. In particular, I consider
be of high risk. What are your deeper and more complex, has to do that the two most important
comments on these concerns? with the all-encompassing and chapters in initiating such a process
persistently dismissive attitude of the of reassessment and acceptance are
Reservations and concerns exist not only banking sector towards first of all, the mandatory licensing
at European but also at international cryptocurrencies. This dismissive requirement for the provision of
level and my stance is that caution is not attitude is recognized by many as the services related to cryptocurrencies
only necessary but also helpful. It is true, natural banks that banks have vis-à-vis and, on the other hand, the proper
for example, that investing in the competition that cryptocurrencies supervision and adherence to strict
cryptocurrencies carries a high risk of potentially establish and enable vis-à- procedures for the acceptance and
loss of funds. The crucial thing, however, vis their operations, as alternative systematic checks of customers and
is to identify the objective reasons on decentralized, financial systems. transactions. In addition, the
how and why there are concerns raised importance of providing banks with
about cryptocurrencies and what it is 8)Do you believe that banks will the appropriate technological tools
that might sustain such concerns, or change their stance towards should not be forgotten, such that
even worse, exacerbate them. There are, cryptocurrencies? the assessment of potential risks in
in my view, two main reasons for these this specific market is carried out by
concerns. The first concerns the long Certainly. Nonetheless, this will not adequate and most importantly,
period of inaction on the part of the happen overnight. I believe that they correct means.
supervisory authorities and the absence will ease their resistance gradually and
of regulations, which has enabled a simultaneously to the strengthening of
culture of anarchy and appropriation, the regulatory framework for
such that cryptocurrencies (generally transactions in cryptocurrencies, in a

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STELIOS AMERICANOS & CO LLC APRIL 2022

CRYPTO & ASSET TOKENIZATION:
REGULATORY DEVELOPMENTS

DR. CHARIS SAVVIDES

9) What do you mean for banks to be cryptocurrencies, rather than on of ours has attracted great interest in
provided with adequate and correct subjective assessments based on their Cyprus and abroad, helping many
means? financial profile. They are, therefore, colleagues along the process, to
technological tools that both offer more better understand the potential of
I mean that existing practices, platforms reliable results in terms of the source of this technology. This innovation has
and generally the customer and the customer's wealth and set the also attracted the interest of
transaction checking systems employed combatting of money laundering to a supervisory authorities as it became
by banks, are not compatible with the different level. possible for the first time, to certify
cryptocurrencyecosystem. To put it the authenticity and validity of such
simply, we cannot expect that within this 10) You are the first Cyprus law firm a certificate inexpensively, directly,
ecosystem, the risk to a bank will be and one of the first law firms at any time (24/7), even by the
determined, nor should it be internationally to adopt Blockchain person legally responsible for the
determined, only by reference to a technology. How did this innovation keeping and updating the register of
customer’s identity card, Curriculum come about and how do you use it? shareholders of a company; namely,
Vitae, a water or electricity bill, and so the company secretary. We are
on. The procedures for the acceptance By evaluating various benefits that currently planning to upgrade the
and systematic checks of customers and Blockchain technology can deliver to system with the inclusion of
transactions related to cryptocurrencies the legal profession and equipped with additional data, which will offer a
must be carried out through specialized a willingness to integrate more speedy, automated and fully updated
systems that utilize Blockchain technology into our services, we have status of the customer's profile.
technology. These systems focus on the been offering our clients since 2019, the
content of the customer's "digital option of issuing a digital certificate of
wallet" and the origin and type of their shares on a blockchain. This innovation

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STELIOS AMERICANOS & CO LLC APRIL 2022

CRYPTO & ASSET TOKENIZATION:
REGULATORY DEVELOPMENTS

DR. CHARIS SAVVIDES

11) As an academic, what would you For the Future, I do not personally Blockchain, Artificial
say are the most important changes consider that the concept of "congested Intelligence and many
brought by the new technologies in the professions" exists anymore. The other new
field of Higher Education and to what curricula, level of research and technologies will
extent are you satisfied with the education, always combined with the disrupt and benefit
interest shown in these new curricula? needs and prospects of the labour almost all areas of
market, open new professional work sooner or later
Blockchain, Artificial Intelligence and horizons. This is my message to every
many other new technologies will young fellow lawyer and to every young PAGE 6/6
disrupt and benefit almost all areas of scientist in general. We live in an age of
work sooner or later. It is for this reason specialization and it is possible that
that Higher Education assumes a pivotal never before have specialization and
role, both in the research and technology 'gone hand in hand' to the
educational fields, as well as in the same extent as they do today.
interconnection and parallel action with
industry actions and businesses in
general. I am pleased that I am
experiencing this challenge as an
academic at the University of Nicosia,
one of the leading international
universities in the field of Blockchain and
cryptocurrencies. From my experience as
a member of the University’s Institute

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