Search Results

In the rapidly growing and evolving world of (cryptocurrency) virtual services, businesses must establish a robust User Agreement that protects the company and its users. This article aims to provide a comprehensive overview of the key elements that should be included in such agreements, highlighting the importance of each aspect and the legal consequences a company may face if these clauses are absent. 1. Eligibility and Compliance 1.1. Age Requirements A User Agreement must clearly define the minimum age requirement for users to access and use the platform's services to ensure legal compliance. This typically includes a statement that users must be of legal age (usually 18 years or older) or have parental consent. Without an age requirement clause, a company may inadvertently allow minors to access its platform, potentially leading to legal issues and reputational damage. 1.2. Geographical Restrictions A User Agreement should also specify any geographical restrictions that apply to the use of the platform. These restrictions may arise due to varying legal and regulatory requirements across jurisdictions. It is crucial for a company to be aware of the specific laws and regulations in the countries where its users are based and to exclude users from jurisdictions where its services are not permitted. If geographical restrictions are not clearly stated, the company may face legal consequences, such as fines or sanctions, for operating in restricted jurisdictions. 1.3. Compliance with Laws The User Agreement must emphasize that users comply with all applicable laws and regulations when using the platform's services. This includes but is not limited to, anti-money laundering (AML), know-your-customer (KYC), and counter-terrorism financing (CTF) regulations. By having this clause, the company can protect itself from potential legal liabilities arising from users engaging in unlawful activities. If compliance with the laws clause is absent, the company may be held accountable for any illegal actions on its platform, resulting in financial and reputational consequences. 2. Acceptance of Risks In a User Agreement, it is essential to outline various risks associated with using the platform and dealing with cryptocurrencies. This helps to ensure that users are fully aware of the potential consequences of their actions and protects the company from liability. 2.1. Cryptocurrency Risks The User Agreement should clearly state that the user acknowledges the inherent risks associated with cryptocurrencies, including price volatility, security threats, and the potential for loss of funds. Users take responsibility for their actions and investments by accepting these risks, reducing the company's liability. 2.2. Technical Risks The agreement must also highlight technical risks, such as software vulnerabilities, hardware failures, or network disruptions, which can result in losing funds or access to the platform. By including this clause, the company emphasizes that it cannot guarantee uninterrupted service and disclaims responsibility for any losses resulting from technical issues. 2.3. Regulatory Risks Users should be made aware of the potential regulatory risks, including the possibility of changes in laws or regulations that may affect the platform's operation or the value of cryptocurrencies. By acknowledging these risks, users accept that the company cannot be held responsible for any negative impacts of regulatory changes. 2.4. Market Risks The User Agreement should also mention market risks, such as price fluctuations, liquidity issues, and market manipulation. This helps users understand that the company has no control over market conditions and cannot be held responsible for any losses resulting from such risks. 2.5. Platform Risks The agreement should outline platform-specific risks, such as the possibility of system failures, security breaches, or unauthorized access. By including this clause, the company emphasizes that users accept these risks and agree to hold the company harmless in case of any issues. 2.6. No Refunds and No Returns Policy A User Agreement may state that no refunds or returns of cryptocurrencies are possible once transactions have been completed. This clause protects the company from potential disputes and ensures users understand the finality of transactions. 3. Limitation of Liability and Indemnification 3.1. Limitation of Liability The User Agreement may contain a limitation of liability clause that specifies the company's liability is limited to the extent permitted by law. This clause protects the company from excessive claims and helps to manage potential legal disputes. 3.2. Indemnification An indemnification clause in the User Agreement requires users to indemnify and hold the company harmless from any claims, damages, or losses resulting from using the platform or violating the agreement. This clause provides additional protection for the company by transferring the responsibility for potential legal issues to the user. 4. No Investment Advice or Recommendation The User Agreement should clarify that the company does not provide investment advice or recommendations regarding cryptocurrencies or other financial products. This helps protect the company from liability for any losses users incur based on their decisions. 5. Tax Implications Including a clause addressing the tax implications of using the platform and trading cryptocurrencies is essential. The User Agreement should state that users are solely responsible for determining and paying any taxes applicable to their transactions. To the extent the law permits, this may shift the responsibility for tax compliance to the user, protecting the company from potential legal issues. 6. Intellectual Property Rights The User Agreement should outline the company's intellectual property rights, including copyrights, trademarks, and patents related to the platform and its services. Users should agree not to infringe upon these rights and acknowledge that any unauthorized use may result in legal action. 7. Privacy Policy and Data Protection A User Agreement should reference the company's privacy policy and emphasize the importance of data protection. Users should agree to collecting, storing, and processing their personal information under the privacy policy. This helps to ensure compliance with data protection laws and regulations. 8. Amendments to the User Agreement The agreement should include a provision allowing the company to amend the User Agreement at its discretion. Users should be notified of any changes and agree to be bound by the updated terms. This allows the company to adapt the agreement to address new developments or regulatory requirements. 9. Governing Law and Dispute Resolution 9.1. Governing Law The User Agreement should specify the governing law, which determines the legal framework that will apply in the event of a dispute. This clause provides certainty for both the company and users by establishing the legal jurisdiction that will be used to interpret and enforce the agreement. 9.2. Dispute Resolution A dispute resolution clause should be included in the User Agreement, outlining the process for resolving any disputes between the company and users. Depending on the company's preference, this may involve negotiation, mediation, arbitration, or litigation. A transparent dispute resolution process helps to manage potential conflicts and minimize the risk of protracted legal battles. * * * Creating a comprehensive User Agreement tailored to a specific project's needs is crucial for mitigating legal risks and ensuring smooth operations in the dynamic crypto sphere. Prokopiev Law Group's experienced legal professionals can help you craft a robust User Agreement that addresses your project's unique aspects and requirements. Choosing Prokopiev Law Group means trusting an expert partner to navigate the complexities of crypto regulations and compliance. Our knowledge and experience will ensure your project is set up for success, allowing you to focus on growth. Contact Prokopiev Law Group today to solidify your project's legal foundation. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

On March 14, the European Parliament endorsed new data regulations that could necessitate the incorporation of a kill switch in smart contracts to reset operations. The 2022 Data Act, an EU bill, aimed to provide individuals with greater control over data from smart devices but has raised concerns within the Web3 community. The bill received 500 votes in favor, 23 against, and 110 abstentions from EU legislators. During the bill's debate, lead legislator Pilar del Castillo Vera stated that the new regulations would enable consumers and businesses to decide how data generated by connected products are used. Del Castillo Vera's revised draft of the bill requires that smart contracts implement access controls, protect trade secrets, and include functions to pause or reset – stipulation experts fear could compromise their intended purpose. Only some people support the bill. Thibault Schrepel, an associate professor at VU Amsterdam University, expressed concerns about Article 30 on Twitter before the vote, stating that it "endangers smart contracts to the extent that no one can predict." Schrepel, a blockchain legal expert, contends that the legislation is vague about who would be responsible for activating a smart contract's kill switch and that it conflicts with the fundamental concept that no one can modify automated programs. While the EU Data Act aims to give people more control over their personal information, the Web3 community is concerned that mandating a kill switch in smart contracts could undermine decentralization and introduce security flaws. In information technology, administrators frequently employ kill switches to deactivate a device, network, or software in response to a security risk. When applied to smart contracts, a kill switch could terminate the contract or initiate a stop, fix, and re-launch process in case of a significant flaw or violation. One alternative to a classic kill switch is a pause function, which temporarily freezes the smart contract rather than destroying it. To avoid security risks, separate keys can be used for pausing and unpausing the contract and can be stored offline. A multi-signature approval protocol can be implemented to address centralization concerns, where emergency powers are granted for immediate action, while unpausing requires a quorum approval. Changing admin keys after a kill switch is used can further enhance security. Although achieving complete decentralization might not be possible, smart contract developers can deploy the pause functionality, separate keys, and establish a multi-signature approval process to maintain security and limit centralization. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

On Tuesday, members of the European Parliament (MEPs) from the Economic and Monetary Affairs, as well as Civil Liberties, Justice, and Home Affairs committees, established their stance on three proposed legal frameworks addressing the financing aspects of the EU's Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) policies. The legislative package is comprised of: The EU "single rulebook" - a regulation encompassing provisions for customer due diligence, transparency of beneficial owners, and the utilization of anonymous tools like crypto-assets and novel entities such as crowdfunding platforms. This also covers aspects related to "golden" passports and visas. The text received 99 votes in favor, 8 against, and 6 abstentions. The 6th Anti-Money Laundering Directive - a directive featuring national provisions concerning supervision, Financial Intelligence Units, and accessibility for competent authorities to crucial and reliable data, such as beneficial ownership registers and assets in free zones. The text was approved with 107 votes in favor, 5 against, and no abstentions. The regulation sets up the European Anti-Money Laundering Authority (AMLA), which holds the supervisory and investigative authority to guarantee adherence to AML/CFT mandates. This text was endorsed with 102 votes in favor, 11 against, and 2 abstentions. Preventing money laundering and terrorist financing Based on the adopted texts, various entities, including banks, asset and crypto-asset managers, real and virtual estate agents, and top-tier professional football clubs, must verify the identity of their customers, possessions, and the company's controllers. These entities must also identify specific money laundering and terrorist financing risks within their industry sector and convey the information to a central register. To limit cash and crypto-asset transactions, MEPs aim to establish a maximum amount that providers of goods or services can accept for payments. They have set limits of €7,000 for cash payments and €1,000 for crypto-asset transfers when the customer's identity cannot be verified. Due to the evident risk of criminal exploitation, MEPs seek to prohibit citizenship by investment schemes ("golden passports") and enforce stringent AML controls on the residence by investment schemes ("golden visas"). Financial Intelligence Units Each member state should create a financial intelligence unit (FIU) to prevent, report, and combat money laundering and terrorist financing. FIUs must exchange information with one another and competent authorities and collaborate with AMLA, Europol, Eurojust, and the European Public Prosecutor's Office. Beneficial ownership information National FIUs and other competent authorities must be able to access beneficial ownership information, bank account details, and land or real estate registers to detect money laundering schemes and freeze assets promptly. Recognizing that certain commodities are appealing to criminals, MEPs also propose that member states collect information on ownership of items such as yachts, planes, and cars valued over €200,000 or goods stored in free zones. MEPs agreed that beneficial ownership is defined as holding 15% plus one share, voting rights, or any other direct or indirect ownership interest, or 5% plus one share in the extractive industry or a company with a higher risk of money laundering or terrorist financing. Registers for beneficial owners Data on beneficial ownership stored in national central registers should be digitally accessible, available in an EU official language and English, and include current and historical information for a specified period. The organization responsible for the central register will be able to request any necessary information from corporate and legal entities to identify and verify their beneficial owners. This information must be up-to-date and accessible to FIUs, AMLA, competent authorities, self-regulatory bodies, and obligated entities. Failure to provide accurate and sufficient data to registers will result in penalties. Entities responsible for central registers should be able to use suitable technology for conducting verifications. Information accessibility Following the latest Court of Justice ruling, MEPs determined that individuals with a legitimate interest, such as journalists, reporters, media organizations, civil society groups, and higher education institutions, should be able to access the register, including interconnected central registers. Their right to access will be valid for at least two and a half years. Member states will automatically renew access but may also revoke or suspend it if abused. Legitimate interest should apply without discrimination based on nationality, country of residence, or establishment. Consistent enforcement by AMLA The new AMLA will monitor risks and threats within and outside the EU, directly supervising specific credit and financial institutions based on their risk level. Initially, it will supervise 40 entities with the highest residual risk profile present in at least two member states, with a minimum of one entity chosen from each member state. To carry out its responsibilities, AMLA can require companies and individuals to provide documents and information, conduct on-site visits with judicial authorization, and impose sanctions of €500,000 - €2 million or 0.5-1% of annual turnover for significant breaches, and up to 10% of the total annual turnover of the obligated entity in the preceding business year. MEPs' position on the draft law includes extending the agency's competence to create lists of high-risk non-EU countries, giving AMLA the authority to mediate between national financial supervisors and settle disputes, supervise and investigate the national implementation of the single AML rulebook, ensure stronger oversight of supervisors in the non-financial sector, and receive whistleblower complaints. The agency's location will be determined during the Parliament and Council negotiations. Next steps Following confirmation during a plenary session in April, the European Parliament will be prepared to start negotiations on the AML/CFT package. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

DAO governance is the backbone of decision-making within a decentralized organization. By defining who can make decisions and how they're made, you lay the foundation for your DAO's operations. Governance can range from a simple majority vote among a small group to an intricate network of individuals participating in large-scale decisions. As your DAO evolves, so should its governance structure. To kickstart this process, follow these eight steps to establish a robust and adaptable governance system: Determine voting eligibility Set the minimum participation threshold, also known as the quorum Define the pass-rate requirements Establish the voting duration Design your proposal process Outline the proposal structure Select the appropriate tools for on-chain and off-chain governance Conduct a trial vote, document the outcome, and refine your approach as needed! Now, let's explore each step in greater detail! Determine voting eligibility At the core of DAO governance is the voting process. It is crucial to decide who can vote and how they vote before selecting any tools or parameters. In the current DAO landscape, there are two main options: Token-based voting (using fungible tokens or NFTs) Wallet-based voting (typically employing multi-signature wallets or multi sigs) Governance token voting operates on the principle of 1 token = 1 vote, with the weight of a vote determined by the number of tokens a participant holds. The more tokens a person has, the more significant their voting power is. Governance tokens are cryptocurrencies created by DAOs and used in on-chain votes. They can be traded on exchanges, allowing anyone to buy and speculate on the tokens for potential profit. However, this means that DAO governance tokens may only partially represent the DAO's engaged members. Token-based voting is typically utilized by DAOs that: want to give more voting power to those with a higher financial stake; aim to be Sybil-resistant, avoiding the issue of multiple people holding more than one wallet; are large-scale and do not require knowledge of contributors' identities; want to conduct all governance processes on-chain. In wallet-based voting, specific wallets are authorized to vote, with the rule of 1 wallet = 1 vote. This can be achieved by setting up a multi-signature wallet requiring multiple transaction approvals. For example, a three-of-five multi-sig wallet would require three out of five linked wallet addresses to approve a transaction before it can proceed. Wallet-based voting is best suited for DAOs that: are comfortable with members linking their identities to wallet addresses to prevent sybil attacks (where one person creates multiple wallets to inflate their voting power artificially); want to eliminate the financial aspect of voting, ensuring voting power cannot be directly purchased. are smaller in scale; conduct governance processes primarily off-chain, then execute actions on-chain using the multi-sig. It is common for DAOs to begin as wallet-based organizations (voting with a multi-sig) and then evolve into token-based DAOs (voting with governance tokens) or more comprehensive governance mechanisms. In most instances, the key to a successful DAO lies in its ability to adapt and change over time. Establish minimum participation, also known as quorum Minimum participation, or quorum, refers to the required number of voters for a vote to be considered valid. This figure does not represent the number of "yes" votes but the total number of participating voters. Large DAOs with widespread token distribution may have relatively low quorums, even as low as 1% of token holders. On the other hand, DAOs that are wallet-based, use multi-sig voting and have highly active voting processes might require a quorum of 50% or more to execute transactions. Setting a minimum participation rate that is too high for your organization could lead to governance deadlocks. As a result, it might be more practical for DAOs to establish their minimum participation rate after completing a few votes and gathering data on average voter participation. Define pass rate The pass rate refers to the required percentage of "yes" votes for approval of a proposal. The proposed action is not executed if a vote fails to meet the specified pass rate. The pass rate can be adjusted when designing various governance flows for different proposal types. For instance, many DAOs opt for a majority pass rate for basic decisions. They might employ a super-majority (2/3rds) for more critical or contentious decisions, such as amending the charter or minting additional tokens. Determine the voting period The voting period is the duration for which a vote remains open. DAO members can cast their votes only within this specified timeframe. A seven-day voting period is standard among many DAOs, providing a whole week for members to review the proposal and vote. However, if your DAO requires quicker decision-making, a shorter voting period of three or five days might be more appropriate. In some cases, voting periods are followed by a timelock, which prevents the execution of the vote's outcome within that period. This serves as a security measure, allowing DAOs time to react if a harmful proposal is approved. For instance, with a seven-day timelock, the result of the vote can only be executed once the seven-day period has elapsed, after which the funds can be disbursed. Establish a proposal process Having determined the governance parameters—including voting eligibility, minimum participation, pass rate, and voting period—it's time to create a proposal process that informs members how to suggest new ideas and obtain funding for their implementation. The proposal process outlines the necessary steps for a proposal to evolve from a concept to execution. Consider this a step-by-step guide to securing funding for a new workstream. A sample proposal process might include the following: Assemble your team: Identify individuals interested in collaborating on the proposal. Proposals backed by a well-organized team are more likely to receive constructive feedback from the community. Share the proposal on the DAO's forum for feedback: Obtain input from the broader DAO membership, and consider incorporating a poll to gauge sentiment. Submit a revised draft if significant edits are needed: If DAO members suggest major revisions, it may be wise to present an updated draft. Post the proposal for an official vote on your DAO's voting platform: This could involve an off-chain vote, such as on Snapshot, or an on-chain vote using platforms like Aragon or Tally. Establish your proposal structure A proposal structure gives teams guidelines for what to include in their proposals. Think of it as a template for drafting proposals. A sample proposal structure might consist of the following: Title: The main subject of the proposal. Brief description: Summarize the proposal's objective in one or two sentences. Detailed description and funding request: Elaborate on the funding request and the intended use of the funds. Technical specification: Include this section if your proposal involves code changes or technical details that others may need to review. Metrics or key performance indicators: How will you assess and report team performance? Team description: Highlight the team's relevant experience. Select your tooling stack for on-chain and off-chain interactions A DAO tooling stack comprises all the tools required to function as an organization. This includes communication channels, contributor payment and rewards systems, and membership tracking tools. Conduct your initial trial vote, document the procedure, and adapt as necessary Think about organizing a trial vote that doesn't disburse funds or sends only a minimal amount. This trial vote lets you evaluate whether you need to tweak your governance parameters or modify your tooling stack. After completing the vote, record the process. This documentation will be valuable when you need to review and adjust your governance process in the future. It's crucial to experiment and adapt as you progress; having this documentation for reference will be beneficial. Navigating the legal aspects of DAO governance can be complex and challenging. Prokopiev Law Group is here to support your DAO in addressing legal concerns throughout the entire process. Our expertise in the field can help ensure your DAO's governance structure complies with applicable regulations and best practices, allowing you to focus on building and growing your decentralized organization with confidence. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

Rollups have emerged as a promising solution to the scalability issues that blockchain networks face. With the rise of rollups, new legal issues need to be addressed. In this article, we will discuss the legal challenges surrounding rollups and what you need to know. 1. Regulatory Compliance One of the most significant legal challenges facing rollups is regulatory compliance. Depending on the jurisdiction, rollups may be considered financial instruments and, as such, may be subject to regulatory requirements. It is essential to understand the regulations in your jurisdiction and ensure that your rollup complies with all applicable laws. 2. Smart Contract Risk Rollups heavily rely on smart contracts to function, which introduces new legal risks. Smart contracts are self-executing agreements with the terms of the agreement being directly written into lines of code. As such, they can be challenging to change or update once deployed. Any errors in the code or vulnerabilities could result in losses for users. It is important to ensure that your smart contract code is secure and has been audited by a reputable third party. 3. Intellectual Property Issues Rollups involve creating and deploying new technologies, which can lead to intellectual property issues. It is crucial to ensure that your rollup does not infringe on the intellectual property rights of others. This includes conducting a thorough search of existing patents and trademarks to ensure that your rollup is not infringing on any existing intellectual property rights. 4. Governance and Dispute Resolution Rollups involve a complex set of rules and processes that govern their operations. Disputes may arise over the interpretation of these rules and processes, and it is vital to have a clear governance framework in place to resolve these disputes. This includes the development of transparent dispute resolution processes and mechanisms. 5. Privacy and Data Protection Rollups process large amounts of data, including personal information, introducing privacy and data protection issues. It is important to ensure that your rollup complies with applicable data protection and privacy laws. In conclusion, the rise of rollups has created new legal challenges that must be addressed. To ensure that your rollup is legally compliant, it is important to have a thorough understanding of the regulatory requirements in your jurisdiction, the risks associated with smart contract code, potential intellectual property issues, governance and dispute resolution, and privacy and data protection. If you need help with any of these legal issues, contact a legal professional with experience in blockchain and smart contract law. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

The Arbitrum Foundation recently announced the next phase of decentralization for the Arbitrum network, bringing exciting legal implications and benefits for users in the world of decentralized finance (DeFi). Arbitrum, a Layer 2 scaling solution for Ethereum, aims to improve the network's performance by reducing gas fees and increasing transaction throughput. This new phase of decentralization is focused on transitioning the control of the Arbitrum network from Offchain Labs, its developer, to a decentralized network of validators. So, what does this mean for users? Enhanced Security and Trust: Decentralization helps eliminate potential points of failure and reduces the risk of centralization-related issues. This fosters increased trust and security for users interacting with the Arbitrum network. Greater Transparency: Decentralized governance ensures transparency in decision-making as the control and governance of the network shift from a single entity to a community of validators. Users can have greater confidence in the system's operation and fairness. Empowerment of Users: Decentralization gives users a more significant say in the network's governance. This democratic approach promotes collaboration and shared decision-making, aligning with the core principles of decentralized finance. Legal Certainty: As Arbitrum moves towards decentralization, it may provide more legal certainty for users. The decentralized network could reduce regulatory risks and challenges associated with centralized control. As the Arbitrum network continues its journey toward decentralization, it opens up new opportunities and benefits for users. It's an exciting time to be part of the DeFi ecosystem, and we can't wait to see how this development unfolds. Stay tuned for more developments in the world of decentralized finance! Source: https://arbitrumfoundation.medium.com/arbitrum-the-next-phase-of-decentralization-e7f8b37b5226 DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

The world of decentralized autonomous organizations (DAOs) is rapidly evolving, reshaping traditional concepts of governance and decision-making in the digital age. As DAOs gain popularity, their unique structures create a range of legal and tax implications that must be addressed. With the proper guidance, your DAO can thrive in this dynamic landscape and contribute to the future of decentralized governance. Legal Entity Status One of the primary concerns with DAO taxation is determining the legal entity status of a DAO. Compared to traditional corporations or partnerships, DAOs often need a formal legal structure, which can create uncertainty regarding their tax treatment. Depending on the jurisdiction, DAOs may be treated as partnerships, corporations, or even unincorporated associations, each with its tax implications. Understanding the legal entity status of a DAO in the relevant jurisdiction is crucial for accurate tax compliance. Income Classification DAOs generate income from various sources, such as membership fees, trading fees, and token sales. Classifying these income streams for tax purposes can be challenging, as they may be subject to different tax rates and treatment depending on the jurisdiction. Proper income classification is essential to ensure compliance with tax regulations and avoid potential penalties. Taxation of Token Transactions Token transactions within a DAO, such as minting, staking, or exchanging tokens, can trigger taxable events. The tax treatment of these transactions may depend on factors such as the type of token, the holding period, and the specific transaction's nature. Navigating the taxation of token transactions requires a deep understanding of the applicable tax laws and the unique characteristics of each transaction. Cross-border Tax Issues DAOs often involve participants from various countries, creating cross-border tax implications. DAO members may be subject to tax reporting and withholding requirements in multiple jurisdictions, depending on their location and the source of their income. Understanding and complying with cross-border tax obligations can be complex but is crucial for avoiding potential tax penalties and ensuring the smooth operation of a DAO. VAT and Sales Tax Depending on the jurisdiction, DAOs may also be subject to value-added tax (VAT) or sales tax on certain transactions. For example, the sale of goods or services facilitated through a DAO platform might be subject to VAT or sales tax in some countries. Complying with these tax requirements involves understanding the specific rules applicable in each jurisdiction and accurately calculating and remitting the relevant taxes. High-Level Legal Roadmap To address the legal risks associated with DAO taxation, Web3 builders should follow a high-level legal roadmap that includes the following steps: 1. Consult with legal and tax professionals: Engage the expertise of legal and tax professionals experienced in dealing with DAOs and the unique challenges they present. Their guidance will be invaluable in navigating the complex regulatory landscape. 2. Determine legal entity status: Work with your legal advisors to determine the appropriate legal entity status for your DAO in the relevant jurisdictions. This decision will significantly impact your DAO's tax treatment and compliance obligations. 3. Develop a tax strategy: Collaborate with tax professionals to develop a comprehensive tax strategy that addresses income classification, token transactions, cross-border issues, VAT, and sales tax. This strategy should be tailored to your DAO's unique structure and operations. 4. Think about record-keeping and reporting systems: accurate financial records and timely and accurate tax reporting may help your DAO in the future, even despite the present incomplete regulatory environment. 5. Stay up-to-date with regulatory developments: The regulatory landscape for DAOs is continuously evolving. Work closely with your legal and tax advisors to stay informed of any changes in legislation or guidance that may impact your DAO's tax obligations. 6. Educate DAO members: Make sure your DAO's members know their tax obligations and provide them with the necessary information and resources to help them fulfill these responsibilities. Address tax issues in public DAO documents to prevent future liability. Should DAOs Pay Taxes? Whether DAOs should pay taxes has far-reaching implications for both DAOs and the broader regulatory environment. While DAOs are decentralized and often lack a traditional legal structure, they may still operate within the jurisdiction of various countries, and their activities can generate income, facilitate transactions, and create value. Therefore, it is essential to consider that DAOs may have tax obligations based on the jurisdictions they operate and the nature of their activities. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

The rapid growth and global adoption of digital assets have highlighted the need for a comprehensive and harmonized legal framework. Recognizing this, the International Institute for the Unification of Private Law (UNIDROIT) has developed the Draft Principles on Digital Assets. This article aims to provide a foundational legal framework for the regulation of digital assets, which can be adopted and adapted by jurisdictions worldwide. 1. Background of UNIDROIT's Draft Principles on Digital Assets UNIDROIT, an independent intergovernmental organization, has been working towards developing and modernizing private law since its establishment in 1926. With a focus on harmonizing international private law, UNIDROIT has played a pivotal role in creating model laws, conventions, and principles that have influenced legal systems around the world. Recognizing the transformative impact of digital assets on the global economy and the existing legal challenges, UNIDROIT initiated a project to develop a set of principles addressing the fundamental legal issues surrounding digital assets. The Draft Principles on Digital Assets, released for public consultation in January 2023, represent the culmination of extensive research and collaboration among experts in various fields, including law, finance, technology, and policy. 2. Purpose and Scope of the Draft Principles The primary purpose of the Draft Principles on Digital Assets is to provide a common legal framework that different jurisdictions can adopt to regulate digital assets consistently and effectively. The Draft Principles address various aspects of digital asset transactions, including property rights, the roles, and responsibilities of digital asset service providers, dispute resolution, and cross-border issues. In terms of scope, the Draft Principles cover a wide range of digital assets, including cryptocurrencies, tokens, and other digital representations of value or rights. They apply to digital asset systems, such as blockchain networks and digital asset service providers, encompassing entities involved in issuing, managing, exchanging, storing, or transferring digital assets. 3. Key Definitions and Concepts 3.1. Digital Assets The Draft Principles define "digital assets" as an electronic record capable of being subject to control. This broad definition covers various types of digital assets, including cryptocurrencies, utility tokens, security tokens, non-fungible tokens (NFTs), and other digital representations of value or rights. The Draft Principles adopt a functional equivalence approach and technology-neutral stance, ensuring that the framework remains adaptable to the diverse range of digital assets that may emerge. 3.2. Control In the context of digital assets, "control" is a fundamental concept within the Draft Principles. Control refers to initiating and effecting a digital asset transfer or delegating that power to another person. The notion of control plays a vital role in determining the legal implications of digital asset transactions, particularly regarding property rights and the transfer of those rights. 3.3. Legal Relationships The Draft Principles focus on the legal relationships between parties involved in digital asset transactions. These parties may include transferors, transferees, intermediaries, and third parties. The Draft Principles address the legal implications of these relationships, including rights, obligations, and liabilities, without explicitly referring to the term "digital asset service providers." The Draft Principles aim to promote trust, transparency, and accountability within the digital asset ecosystem by establishing a clear and harmonized framework for parties engaged in digital asset transactions. 4. Property Rights and Digital Assets The Draft Principles on Digital Assets address the legal aspects of property rights concerning digital assets, guiding the recognition, creation, and transfer of these rights, as well as priority and third-party rights. 4.1. Recognition of Property Rights The Draft Principles emphasize that digital assets can be recognized as objects of property rights, regardless of their form or the legal classification in a specific jurisdiction. By identifying digital assets as objects of property rights, the Draft Principles provide a basis for legal certainty and facilitate enforcing rights and obligations arising from digital asset transactions. 4.2. Creation and Transfer of Property Rights The Draft Principles establish that property rights in digital assets can be created and transferred through control, as defined in the Draft Principles. The party exercising control over a digital asset is the right holder. Furthermore, the Draft Principles outline that the transfer of property rights in digital assets occurs when the transferee acquires digital asset control, subject to any applicable legal requirements. 4.3. Priority and Third-Party Rights The Draft Principles address the priority issue among competing claims to digital assets. They stated that priority is determined by the order in which the competing claimants acquired control of the digital asset. Additionally, the Draft Principles guide the protection of third-party rights, emphasizing that the rights of a transferee in a digital asset are subject to any pre-existing rights or interests, such as security interests or other encumbrances. 5. Intermediated Digital Assets While the Draft Principles do not explicitly discuss "Digital Asset Service Providers," they do delve into the concept of intermediated digital assets and the legal relationships and responsibilities that emerge from these scenarios. Intermediaries play a crucial role in facilitating digital asset transactions. They may act on behalf of transferors, transferees, or other parties involved in digital asset transactions. Intermediaries can include custodians, wallet providers, and digital asset exchanges. By managing digital assets on behalf of their clients, intermediaries contribute to the digital asset ecosystem's efficiency and security. The Draft Principles address the legal relationships between parties and intermediaries involved in digital asset transactions. They establish that parties using intermediaries are subject to certain rights and obligations, including the duty to provide accurate and complete information, the obligation to comply with the intermediary's rules and procedures, and the right to receive information about the digital assets held by the intermediary. Intermediaries, in turn, have specific duties and responsibilities, such as the duty to maintain appropriate records, the obligation to execute transactions in a timely and accurate manner, and the responsibility to ensure the confidentiality of clients' information. The Draft Principles also tackle the liability of intermediaries for losses or damages resulting from their actions or omissions. They guide the circumstances under which intermediaries can be held liable for failing to fulfill their duties and the potential limitations of their liability. 6. Enforcement To provide legal certainty and predictability in cross-border digital asset transactions, the Draft Principles emphasize the importance of determining the jurisdiction and applicable law governing disputes arising from these transactions. They encourage parties to agree on the choice of jurisdiction and applicable law, taking into account factors such as the location of the parties, the digital asset systems involved, and the nature of the dispute. The Draft Principles call for developing harmonized rules and cooperation among jurisdictions to facilitate recognizing and enforcing judgments and awards in digital asset-related disputes. This approach aims to enhance the legal certainty and predictability for parties engaged in digital asset transactions. Link to the Draft Principles: https://www.unidroit.org/wp-content/uploads/2023/01/Draft-Principles-and-Commentary-Public-Consultation.pdf The evolving landscape of digital assets and the emerging legal framework present both opportunities and challenges for Web3 projects. Prokopiev Law Group is well-positioned to help Web3 projects navigate these legal requirements by offering expert advice and tailored solutions. Our team of experienced professionals understands the complexities of digital asset regulations and is committed to staying up-to-date with the latest developments. By partnering with Prokopiev Law Group, Web3 projects can confidently move forward, ensuring compliance with the applicable legal framework and fostering a responsible and sustainable digital asset ecosystem. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

The European Union has proposed a new regulation to create a comprehensive regulatory framework for crypto-assets. The proposed regulation, the Markets in Crypto-Assets (MiCA) regulation, seeks to establish rules that will enhance investor protection, ensure market integrity, and promote innovation in the crypto-asset space. The scope of MiCA is broad, covering a wide range of crypto-assets, including utility tokens, asset-referenced tokens, and e-money tokens. It also covers a range of crypto-assets-related services, such as custody, exchange, and issuance. The regulation sets out requirements for these services, such as authorization, prudential requirements, and conduct of business rules. In this article, we will provide an overview of what MiCA is, what it aims to achieve, and its potential impact on the crypto industry. MiCA's Scope and Applicability MiCA covers a broad range of crypto-assets, including: Tokenized traditional assets, such as securities and bonds Asset-referenced tokens, such as stablecoins Utility tokens, such as those used to access a particular service or product Payment tokens, such as cryptocurrencies used for making payments MiCA applies to crypto-asset service providers (CASPs) that operate in the EU, regardless of whether they are based within or outside the EU. A CASP is any person or entity that provides any of the following services: Custody and administration of crypto-assets on behalf of clients Operation of a trading platform for crypto-assets Exchange of crypto-assets for fiat currency or other crypto-assets Execution of orders for crypto-assets on behalf of clients Placement of crypto-assets MiCA regulates various types of services provided by CASPs. These include: Custody and administration of crypto-assets: MiCA sets out requirements for the safekeeping, segregation, and administration of clients' crypto-assets. Trading platforms: MiCA introduces rules for the operation of trading platforms, such as transparency requirements and market abuse prevention measures. Crypto-to-fiat and crypto-to-crypto exchanges: MiCA sets out requirements for the conduct of these exchanges, including customer due diligence and anti-money laundering measures. Crypto-asset offerings: MiCA regulates the issuance and sale of crypto-assets to the public, requiring prospectuses or offering documents to be provided to investors. Key Provisions of MiCA The Markets in Crypto-Assets Regulation (MiCA) includes several key provisions regulating crypto-asset service providers' (CASPs) activities in the EU. Licensing Requirements. MiCA introduces a licensing regime for CASPs operating in the EU. The license is granted by the EU member state's relevant national competent authority (NCA) in which the CASP is established or intends to provide its services. CASPs must meet specific requirements to obtain the license, including organizational requirements, compliance with anti-money laundering and counter-terrorism financing regulations, and capital requirements. Capital Requirements. MiCA also requires CASPs to hold a minimum level of capital. The capital requirements depend on the type of services provided by the CASP. For example, the capital requirement for a custodian service provider is higher than that for a crypto-asset exchange. Custody Requirements. MiCA imposes specific requirements for CASPs providing custody services for clients' crypto assets. These requirements include segregating clients' assets, risk management, and insurance obligations. Market Abuse and Insider Trading. MiCA prohibits market abuse and insider trading in crypto-assets. CASPs must have in place appropriate measures to prevent and detect market abuse and insider trading. MiCA's provisions aim to enhance investor protection, ensure market integrity, and prevent financial crime in the crypto-asset market. Potential Impact of MiCA MiCA has the potential to impact the crypto industry in the EU significantly. Here are some of the key ways it could affect crypto-asset service providers, investors, and consumers: Impact on Crypto-Asset Service Providers: MiCA introduces a comprehensive regulatory framework for crypto-asset service providers in the EU. While this may lead to increased compliance costs and administrative burdens for some, it also provides a clear set of rules and expectations for operating in the market. Potential Benefits and Challenges: The new regulatory framework under MiCA will bring a level of certainty for crypto-asset service providers and investors, potentially reducing regulatory fragmentation and making it easier to operate across the EU. However, compliance with the new requirements, such as obtaining a license, meeting capital and custody requirements, and addressing market abuse, may prove challenging for some providers. Moreover, there is a risk that regulation could stifle innovation in the crypto space. Potential Implications for Investors and Consumers: MiCA could lead to a more transparent and secure environment for investors and consumers, potentially increasing adoption and investment in crypto-assets. However, some providers may exit the market due to the regulatory burden, which could limit options for investors and consumers. Prokopiev Law Group and MiCA Compliance The team at Prokopiev Law Group is well-equipped to assist clients in navigating the complexities of the MiCA regulatory framework. Our experienced lawyers can provide cost-effective guidance on how to comply with the new regulations and analyze their impact on your business. If you're seeking legal support in understanding the EU regulatory framework for crypto-assets, including MiCA, please don't hesitate to contact us. We're here to help you achieve compliance and succeed in the changing landscape of the crypto industry. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

Initial Public Offerings (IPOs), Initial Coin Offerings (ICOs), and Security Token Offerings (STOs) are all ways for companies to raise capital. However, they differ in their legal structures and the securities they offer investors. In this article, we will explore the differences between these three fundraising methods and the legal risks associated with ICOs. IPOs An IPO is a traditional fundraising method involving a company offering shares of its stock to the public for the first time. Depending on the jurisdiction, the company must register with the Securities and Exchange Commission (SEC) or another respective authority and comply with its regulations before going public. This process can be expensive and time-consuming, but it provides transparency and credibility that can attract many investors. ICOs ICOs, on the other hand, is a relatively new way for companies to raise capital. They involve the creation of a new cryptocurrency or token, which is sold to investors in exchange for other cryptocurrencies like Bitcoin or Ethereum. ICOs exploded in popularity in 2017, but many were later found fraudulent or poorly executed. As a result, the SEC has cracked down on ICOs, and many companies now prefer other methods of distributing their tokens, such as airdrops or private sales. Legal Risks of ICOs ICOs are not regulated in the same way as IPOs, and there is no guarantee that the sold tokens will have any value or be redeemable for anything. In addition, the SEC has determined that many ICOs are selling unregistered securities, violating federal securities laws. Companies and individuals involved in these ICOs could face significant legal penalties, including fines and criminal charges. STOs STOs are a newer form of fundraising that aim to address some of the legal concerns surrounding ICOs. Companies issue tokens representing ownership in a real-world asset, such as equity in a company or ownership of a piece of property. STOs are subject to SEC regulations, meaning they must register with the SEC and comply with its rules. Conclusion IPOs, ICOs, and STOs offer companies a way to raise capital, but they differ in their legal structures and the securities they offer investors. While IPOs provide transparency and credibility, they can be expensive and time-consuming. ICOs offer a quicker and easier way to raise capital but come with significant legal risks. STOs aim to provide a middle ground by offering a more regulated and secure way to raise capital through tokenization. As the regulatory landscape surrounding ICOs and STOs continues to evolve, new trends in token distribution have emerged. One such trend is the use of airdrops, which involves distributing tokens to a large number of individuals for free rather than selling them through an ICO or STO. This method has gained popularity as a way to partially bypass the legal risks of selling unregistered securities. However, airdrops come with legal and regulatory challenges, such as ensuring compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. As the crypto industry continues to evolve, it will be interesting to see how token distribution methods evolve. If you are considering an ICO or STO, consulting with an experienced securities lawyer is vital to ensure your company complies with all applicable laws and regulations. Prokopiev Law Group's team of experienced lawyers can provide cost-effective guidance to help you navigate the complex EU regulatory framework. Contact us today to schedule a consultation. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

Decentralized Finance, or DeFi, is an emerging field within the cryptocurrency space that seeks to provide financial services without traditional intermediaries such as banks or brokerages. DeFi is built on blockchain technology and operates on decentralized networks, meaning no central authority controls the system. Transactions on DeFi platforms are processed through smart contracts, which are self-executing computer programs that automatically execute the terms of an agreement when specific conditions are met. One of the key distinctive features of DeFi is that it allows for financial services to be decentralized and permissionless. Anyone with an internet connection and a cryptocurrency wallet can participate in DeFi platforms without needing a traditional bank account or KYC (Know Your Customer) procedures. DeFi platforms offer various financial services, including lending, borrowing, trading, insurance, and asset management. One of the most popular DeFi applications is decentralized exchanges (DEXs), which allow users to trade cryptocurrencies without needing a centralized exchange. Another popular DeFi application is lending protocols, which allow users to lend and borrow cryptocurrencies in a decentralized manner. Incentive structures play a crucial role in the success and sustainability of DeFi services. Unlike traditional financial systems, DeFi platforms are decentralized and rely on complex incentive mechanisms to encourage user participation and engagement. These incentives typically come in rewards, such as tokens or interest, designed to encourage users to provide liquidity, stake their assets, or participate in governance. However, the effectiveness of these incentives can also present significant risks, as improper incentives can lead to market manipulation, exploitation, and even the collapse of the entire DeFi ecosystem. As such, it is crucial for DeFi projects to carefully design and implement their incentive structures, taking into account the unique characteristics and challenges of this emerging sector. While DeFi offers many advantages over traditional financial services, it poses significant legal and regulatory challenges. One of the main legal risks associated with DeFi is the lack of regulatory oversight. Because DeFi platforms operate in a decentralized manner and no central authority controls the system, it can be difficult for regulators to enforce existing laws and regulations. In addition, DeFi platforms are vulnerable to smart contract bugs and hacks, which can result in the loss of funds. There have been several high-profile DeFi hacks in recent years, which have resulted in millions of dollars in losses for users. As DeFi continues to grow and evolve, regulators will likely take a closer look at this emerging field and develop new regulatory frameworks to address the legal and regulatory challenges posed by DeFi. Prokopiev Law Group has extensive experience in the blockchain and cryptocurrency space, including in DeFi. Our team of experienced lawyers can provide cost-effective guidance to help navigate the legal and regulatory challenges associated with DeFi. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.

Decentralized Autonomous Organizations (DAOs) are a hot topic in the blockchain world, offering a new approach to organizing and governing businesses. But while DAOs can be incredibly flexible and efficient, they also come with unique challenges that require careful legal consideration. One important consideration is choosing the proper legal structure for a DAO, which can impact its operations and legal responsibilities. One option for structuring a DAO is to use a Foundation, a non-profit legal entity that can hold and manage assets, set rules and policies, and engage in legal agreements on behalf of the DAO. Some of the key functions of a Foundation include: Holding and managing assets: A Foundation can hold and manage assets such as cryptocurrency, real estate, or intellectual property, which can be used to fund the DAO's activities or distributed to its members. Setting rules and policies: A Foundation can create rules and policies that govern the operation of the DAO, such as how decisions are made, how funds are allocated, and how disputes are resolved. Representing the DAO in legal agreements: A Foundation can enter into legal agreements on behalf of the DAO, such as contracts with suppliers or service providers. Using a Foundation as the legal structure for a DAO can provide several benefits, such as greater clarity and stability in the DAO's governance and legal protections for its members. However, it's important to note that legal and regulatory risks are also associated with using a Foundation, such as potential tax implications or compliance with securities laws. TL;DR: more about DAO Foundations functions One of the possible functions of a DAO Foundation is to provide a decentralized governance structure for its members. Decision-making power may be distributed among members instead of being held by a centralized authority. The governance structure is implemented through smart contracts and voting mechanisms, which allow members to propose, discuss, and vote on proposals transparently and democratically. The DAO Foundation ensures that all members have an equal say in decision-making and that decisions are made based on the members' collective agreement. This function of a DAO Foundation not only provides a fair and democratic decision-making process but also increases the transparency and accountability of the organization. DAOs and foundations can set their own rules and policies to govern how organization's external and internal affairs. It allows the organization to establish a clear framework for decision-making, which can be crucial in ensuring its long-term success. The DAO may need to decide who is eligible to participate in its decision-making processes, what kinds of decisions can be made, and how conflicts between members will be resolved. It may also need to establish funding, membership, and voting procedures rules. One of the advantages of using a DAO Foundation is that it allows for greater flexibility in setting these rules and policies. Because the organization is not subject to traditional corporate governance requirements, it can create more customized decision-making processes that better suit its needs. Additionally, because smart contracts often encode these rules, they can be automatically enforced, which can help prevent disputes and promote transparency. Representing the DAO in legal agreements is another critical function of a DAO foundation. As a legal entity, the DAO Foundation can enter into contracts and agreements with third parties, including vendors, service providers, investors, and other organizations. By representing the DAO in these agreements, the foundation can ensure that the DAO's interests are protected and its operations are compliant with relevant legal and regulatory requirements. This function requires the foundation to thoroughly understand the legal landscape surrounding the DAO's operations, including the applicable regulations and contractual requirements. It also requires the foundation's expertise to negotiate and draft legal agreements that accurately reflect the DAO's needs and priorities. * * * To ensure that a Foundation-based DAO is legally compliant and successful, working with experienced legal professionals who understand the unique legal and regulatory landscape of blockchain and cryptocurrency is essential. At Prokopiev Law Group, our legal experts can help you navigate the complex world of DAOs and ensure that your organization is structured in the most effective and compliant way possible. Contact us today to learn more. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. Any action taken based on the information discussed should be reviewed with a professional. The author is not liable for any loss from acting on the information discussed.