Uber’s Court Case: The Treatment It Deserved

Published 28th December, 2017 on Themarketmogul.com

by Andrea Bianconi 


The EU Supreme Court of Justice’s decision on Uber is likely to spark diverging opinions. However, the decision is legally sound. Uber also fully expected the decision and had already started complying with regulations applicable to taxi services in most European countries. This puts Uber back where it should have been since its beginning – a “smart app taxi company” which should comply with applicable regulations like all other companies do.


Although the decision has yet to be published on the website of the ECJ (1), the legal grounds were already laid out in the Advocate General’s opinion released in May 2017 (2). Essentially, the issue was to decide whether the services offered by Uber would be considered ‘information society services’ – and therefore benefit from the principle of the freedom to provide such services in the EU – or instead would be equivalent to those of traditional taxi companies.


The Advocate General had already established in May that Uber is “a composite service”. This means that one part is performed by electronic means through an app which intermediates between clients needing a ride and those who have a car and are willing to provide one. The other part is by definition not performed with electronic means and consists in driving the client. The view was also that the two services are not separate, but actively integrated by Uber which (i) imposes conditions on the drivers (ii) grants financial rewards (iii) exerts quality controls and (iv) effectively sets the fares applied.


Hard to Defend


Thus, Uber found it hard to argue that it is not a taxi company. Similarly, looking at Opodo for example, a company that sells flight tickets via an app, it is clear that it is not an airline because the two activities – selling the ticket and flying the plane – are clearly separate. And whoever operates the aeroplane is a fully regulated airline. So the surprise here is not the decision of the ECJ, but simply how long it took to finally bring some justice to all the taxi drivers who had to pay expensive licenses and make investments to run a regulated business before being put out of business by an unregulated and illegal player.


Will they now be compensated? Are their lawyers now smelling Uber’s blood and sharpening their knives for a court fight to finally get fair and just compensation? If some think that this is the end of the Uber business model – and generally for the centralized intermediary economy enabled by the internet – they may well be right, but for the wrong reason.


The Death of the Uber Model?


Even before the ECJ’s decision, the Uber model had already been dead. And this deadly blow was dealt by the flourishing Blockchain economy. It is just a matter of when, rather than if, Uber puts taxi drivers out of business and B-Uber (a futuristic blockchain-based Uber) will put Uber out of business (3). Then, finally, legitimately licensed taxi drivers will provide services directly to their customers without the need for intermediaries. Customers will gain because they will be safer in professional hands and will benefit from lower market prices.


Taxi drivers will also gain, because they will have more money in their pockets and will be free from the Uber-like intermediary. The state will also gain, because there will be more people who will want to invest time and money for a licence to be a taxi driver and work independently. It is also likely that tax revenues for national governments will increase, compared to what is currently paid by Uber and its fleet of unlicensed private drivers. Thanks to Satoshi and the decentralized blockchain economy, everybody will gain – apart from the “Ubers” of today.


1. It will soon be published here http://curia.europa.eu/juris/recherche.jsf?cid=402964 search for case n.  C-434/15

2. https://curia.europa.eu/jcms/upload/docs/application/pdf/2017-05/cp170050en.pdf

3. "Blockchain Revolution" - 2016 - Don and Alex Tapscott

Tips for the ICO due-diligence

Published 15th December 2017 on Cryptodaily.co.uk- Chaining.ru

by Andrea Bianconi 

Twenty years ago it was the IPO (Initial Public Offering) frenzy. Most of those involved in today's ICO´s were probably too young to recall the end of the 90´s. It was exciting time. Then, suddenly, it popped... and it did not end well.


Whether today there are more ICO´s than then IPO's is hard to say, but today there are on average 20-30 ICO´s per month. This is a lot of work to do for an investor who is willing to catch the "golden egg" among the many less than mediocre business ventures, quick buck schemes or just plain scams.

Being careful and doing a proper due-diligence are the key words today, like yesterday. So where to start with the due-diligence for an ICO (Initial Coin Offering)?


Well there are mainly 3 areas to look into: (a) the technology behind the business, its current state of development, the milestones yet to reach and the foreseeable problems which may delay or prevent its full development; (b) the business model itself, how and when will it break even and be profitable, the Team behind it, the advisors behind it, the funding, the market and competition, etc; and (c) lastly (but not least) the legal issues. Leaving aside (a) and (b) for which articles and comments abound, let's look at the legal due-diligence.

Assuming that an Investment Fund, VC Firm, Business Angel or just a small investor is happy with (a) and (b) above it will start its legal due-diligence and it will be looking for something that "sets the alarm bells ringing". These are the main things to consider:


- Transparency: transparency is very important because it is a tell sign that an issuer may try to hide something. Lack of transparency can be spotted in corporate documents such as the Whitepaper or in the corporate structure and choice of jurisdiction, in the level of discretion in allocating the funds raised (Tezos?) and the level of safeguards for the investors.


- Rights attached to the Tokens/Coins: this is key. Little attention is to be paid to the given name of the Token/Coin but a hard look is to be given to the Whitepaper to understand clearly which rights, if any, are attached to it. There is so much confusion around Tokens/Coins that their names mean nothing. Despite the given name, there are essentially two classes of Tokens: those which have no rights attached to it and those which have (various) rights attached to it. If so called "Plain Vanilla Tokens" are being bought then there will be no rights attached to it. They are bought only to speculate on the future price movements of the Token itself. Short of demonstrating a fraud of the issuer or the issuer's failure to comply with applicable laws and regs, the investor is unlikely to have recourse against the issuer. It is different if Tokens/Coins with rights attached to it are being bought: for example voting rights or a right to share the profits/dividends of the business or to use the services of the company. Leaving aside the complex question of whether these can be considered Securities according to the applicable law (in which case it is for the issuer to comply with Securities laws by releasing for example the Prospectus etc), a hard look is to be taken at how practically one can benefit from or enforce its rights. For instance how discretionary is that a dividend will be paid, if there is a Smart Contract set up to pay dividends, or what services will the Token buy. If something does not look right then better to ask questions and make oneself heard in the social media, ask the Team to address and clarify the issue. After all they are there to answer investor's questions and get their money right? If not satisfied with the answers better to back off. Bear in mind that because as of today in most jurisdictions those Coins/Token have no clear statutory legal qualification, the investor's rights will depend on what the contract states. Therefore the clarity of the wording of the contract (i.e. the Whitepaper) is of paramount importance.


- Recourse: this also key. Take a hard look at the issuer's corporate structure. Is the issuer based in a reputable jurisdiction or hides somewhere in a small Caribbean island or in a jurisdiction where the investor will have more trouble going after him? Very important is also how and where the funds raised are deposited. How the issuer can access the funds and how they will be used. Are the funds used to "cash-out" others or to pay previously incurred costs instead of the future development? Without an Escrow in place to guarantee that the funds will be disbursed only at the reaching of certain milestones there is a serious risk that, if something goes wrong, the investor will be not able to recover its money. The same is clearly valid in case the funds have to be returned to the investors (for example if the soft cap is not reached). If there is an Escrow, then again is key to look into the details of the legal agreement and to know who the Escrow agents are and how reputable they are, the governing law and jurisdiction.


Switching sides finally, the ICO issuer will have to balance the maximum possible level of transparency with the need of limiting its compliance requirements to limit costs and reduce potential liabilities. Not easy. Experience tells that if the business, the team and the product/idea behind it are strong they will not fear choosing a more regulated jurisdiction. That will attract professional investors and boost the ICO value in spite of the increase in cost compliance. Because the ICO lies in a grey area which may fall within the application of more draconian Securities and Banking Laws across all EU jurisdictions and the US, It is advisable for the issuer to approach the local regulators to seek at least some informal opinion as to whether the Token/Coins issued will fall within said applicable laws and regulations. Given the current lack of regulation, a lawyer's legal opinion is not worth the paper on which it is written. In talking with the regulators there is nothing to lose, all to gain. Cutting corners can also be expensive and dangerous. As more serious money pours into ICO´s, regulators worldwide are starting to pay attention. In case of breach of Securities Laws and Regs there can be heavy fines and possibly also jail time. In particular the US authorities are legendary for the extraterritorial (mostly illegal) overreach of their judiciary. But also the Germans will come down heavy on the offender who has sold Tokens to German investors if those Tokens are deemed to be Financial Instruments or Investments under the applicable laws. Disclaimers not to target a certain market will only do if no evidence can be found of doing otherwise. And today a slight oversight can easily happen: a few compromising words on the web page, a Youtube video of a sales pitch which was supposed to remain private between the issuer and its investors, a tweet, etc.




In conclusion, an investor should use common sense, read all the corporate documents, ask questions and engage the Team on social media, figure out the worst case scenario and the possible avenues should he need to recover money in a foreign jurisdiction, seek legal advice and be careful, if something does not smell right better to back off, there are plenty of opportunities to get involved and only a very few are worth it.


An issuer should use extreme caution in the light of the recent SEC Statement (1) (which was totally expected). It is also to be expected that the EU Regulatory Authorities (likely ESMA) will follow up with some guidance to confirm the very same common sense legal principles set out by the SEC.


So this means the ICO Party is over? Sure not, but there is going to be much less booze and drunken around.


(1) SEC Statement of 11-12-2017 https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11

What if … Bitcoin is not a bubble?

Published 11th December, 2017 on Cryptodaily.co.uk and Chaining.ru

by Andrea Bianconi 


For most mainstream media and financial commentators Bitcoin is "just a bubble". Sure, despite most of them knowing very little about it, suffice to look at its parabolic chart and it is clear that it is like the Dutch Tulip bubble in 1636, just another mania.


But what if...


What if for instance Bitcoin is behaving today like Gold behaved in the 70´s after Nixon broke the Bretton-Woods Gold-Dollar standard and reneged on the US obligation to exchange 35$ with one ounce of Gold? 10 years later one ounce of Gold peaked at 677$ , which is almost a 20 times increase. Afterwards, while the monetary madness increased in the following decades and peaked with the Great Recession when all the Central Banks made the world awash with new credit, one ounce of Gold peaked at 1.825$ in August 2011. That's a 52 times increase. (1)


What if Bitcoin is not a bubble but more like the people´s revolt against a fraudulent monetary system based on infinite credit creation. Against the erosion of the people´s honest savings caused by the Central Banks´ aberration of zero or negative rates. Against this crony capitalism and "socialism for the wealthy" which has increased wealth inequality to levels not seen since 1929 and made the debtors and the issuers of credit (i.e. the banksters, the speculators, our governments and the political elites) rich at the expenses of honest workers, entrepreneurs and savers?


Think about it:


Bitcoin was created in January 2009. In a note, its creator was referring to the bailout of English banks by the then Chancellor. The reference is not casual. It is a "time stamp" that defines more than anything else the rational and the intent behind the genesis of Bitcoin: the repudiation of the fraudulent monetary system we live in. The creation of a Money which cannot be debased at will. Bitcoin´s money supply is fixed by mathematics and cannot be changed. Unlike Fiat money issued by central authorities it is capped since its inception. Who should people rather trust to issue Money the Fed, the ECB, whatever government, whomever politician or a mathematical algorithm? Who knows Monetary History would rather err on the side of math (and Gold). (2)


Bitcoin is "democratic", in the sense that it does not advance the interest of anyone, it does not belong to anyone and specially not to the "elites". Unlike Fiat money, which is the privilege of the Banksters who benefit from seniorage and create it fraudulently thanks to the fractional reserve system. Anyone can mine Bitcoin - even if one must note that the investment required in terms of computing power and energy is now getting into another league.


Bitcoin is world money, it does not belong to any particular State, and it does not confer anyone the "Exorbitant Privilege" cited by De Gaulle which the Dollar confers to the US. Since the end of the ´60s the US has massively abused this privilege by printing its currency to advance its imperial conquests both militarily and economically.


Bitcoin cannot be sized, cannot be confiscated by governmental decree like Roosevelt did with Gold. Short of a simultaneous ban by all the governments worldwide or a worldwide shutdown of the internet it is difficult to see how its use could be stopped. Shutting down local servers or nodes or miners does not prevent the distributed ledger to continue to perform its functions.


Bitcoin is just the tip of the iceberg. Blockchain technology which lies at the heart of Bitcoin is the real disruptor. Thanks to Blockchain based applications, finance can be finally "democratized" and taken away from the powerful grasp of the financial elites. Millions of unbanked people around the world will have the opportunity to access capital to invest, to create new businesses and raise their standard of living. The world desperately needs something like Bitcoin to "lubricate" an "economic renaissance" based on Blockchain applications.


Bitcoin is also more than what appears. Like any Blockchain application is a "living" thing. It represents a "society". Its citizens are the investors who mine it, the users and consumers who spend it, the developers who contribute to its technical advancement. Like any society Bitcoin lives by consensus. When consensus lacks then society breaks down. See for instance the forking of Bitcoin Cash, which some (otherwise) bright monetary economists reduced to the arbitrary "doubling" of its monetary base as if a bank spin-off could be done by doubling the deposits out of thin air (3). Sure this is arguable, but it misses both the important technical reasons behind it and, most importantly, the fact that the deciding factor for the future success or failure of Bitcoin, or any other Crypto or businesses based on open Blockchain technology, will be the societal consensus behind it. Most commentators who only think of Bitcoin in financial and monetary terms completely miss this point.


But more importantly, what if Bitcoin is a sign. The most worrying sign of the implosion of the current monetary system awash with debt and credit creation. All mainstream media point to the absence of inflation. But honestly, who buys that? Yes consumer price inflation is contained, although the reasons for that and the data officially circulated by the authorities are dubious at best. But what is the impact of monetary inflation on asset prices? They are through the roof. It is like the "everything bubble". Just name it, real estate, arts, classic cars, stocks. The artificial compression of interest rates and the massive credit creation pushes all this credit into the hands of the elites, not of those who may want to invest in new machinery for their small business and increase production thereby paying the lender an honest rate of interest. Of course not, this credit moves from one asset to the other in a speculative manner and the effect is for everyone to see: this is like an "hyperinflationary" asset price environment. The American politician Ron Paul asked more of 70.000 of its constituents what they would rather want if someone made them a gift worth the equivalent of 10.000$ and they had to keep it for the next 10 years. The answer was 54% would rather want to hold Bitcoin, 36% Gold. Only 8% would hold 10yrs Tresuries and only 2% would hold a Dollar credit note. No need to comment.


Since the beginning of the 19th century the world has transitioned, not without pain, through four different monetary systems. From the Pure Gold Standard which contributed to the longest time of financial stability and prosperity in modern history from ca. 1820 to the first world war (1915), to a system of floating exchange rates where most countries abandoned the Gold Standard to run the printing presses to finance the two world wars from 1915 to 1944. Then came Bretton Woods and a period based on the Dollar-Gold standard until it was unilaterally repudiated by Nixon in 1971. Since then it is the current regime of Fiat money creation and artificial compression of interest rates. Four monetary systems in less than 120 years. That is an average duration of 30 years each. The clock is now ticking and more likely than not the time for a new monetary reset is fast approaching.


Since that time when 1 ounce of Gold could be bought with 35$, it takes today, 16th December 2017, circa 1260$. This means that Gold has appreciated in dollar terms in each of those 47 years an average of 76% per year. But since Gold is the true Money and the Numeraire, it must be emphasized that it is not Gold which "goes up or down" but it is the purchasing power of the US$ that is being destroyed. And the same is true for the Euro, the Yen, the Cable and all the other Fiat currencies. Just take the trouble to do what nobody seems to do. Get any chart in any currency and plot it against Gold and look back 30-40 years. Bill Gross, rightly worried about the risks with the current status of the monetary systems, in his latest monthly newsletter (4) writes: "Someone asked me recently what would happen if the Fed could just tell the Treasury that they ripped up their $4 trillion of T-bonds and mortgages. Just Fugetaboutit! I responded that that is what they are effectively doing. “Just pay us the interest”, the Fed says, “and oh, by the way, we’ll remit all of that interest to you at the end of the year”. Money for nothing – The Treasury issuing debt for free. No need to pay down debt unless it creates inflation. For now, it is not. Probably later."


As the monetary madness continues, Bitcoin is up intraday 29%...


In conclusion, what will happen to Bitcoin is impossible to forecast, if it will take 1M$ or 1$ to buy 1BTC in the future, but two things seem pretty sure: first, dismissing Bitcoin as a "bubble" is likely made out of "ignorance". Meaning, literally ignoring what Bitcoin is and what stays behind it. Second, that we are certainly transitioning to a new monetary system, because the current fraudulent one has been running for too long and the signs that it is now exhaling its last breaths are plenty to see. What the role of Bitcoin (or other Cryptos or Gold for the sake of it) will be remain to be seen. What's sure is that Blockchain applications and an honest money based on Blockchain will revolutionize the current system and they are here to stay and shape the future of mankind. For Bitcoin there are still many challenges ahead, its scalability, its energy footprint, technical issues, the risk of regulators´ crackdown and the societal consensus behind it, just to name a few. But if not Bitcoin, it will be another digital world money, not controlled by the elites but belonging to all mankind and to benefit all.


1. 47 years of Monetary (hyper) inflation at work: how many US$ you would need to buy one ounce of Gold since 1970.  The dramatic loss of purchasing power starts clearly when the US started its massive debasement/credit expansion in the ´70s to finance its wars.   The US$ is called "Money", fact is it is a credit note, a debt instrument of the shortest duration which carries no interest and from the graph certainly not a "store of value".

2. Now it depends from which angle one looks at this chart (i.e which is the Numeraire, the US$ or Bitcoin?). Is this then the Bitcoin bubble or Monetary Hyperinflation at work: how many US$ you need to buy 1 BTC. Sure, different time frames from Gold above, but the parabolic price increase and the loss of purchasing power of the US$ credit note looks alike.

3. "The forking Paradise" by Monetary Metals https://monetary-metals.com/the-forking-paradise-gold-silver-report-3-sep-2017/


4. https://en-us.janushenderson.com/retail/bill-gross-investment-outlook-potpourri/?utm_campaign=Bill_Gross_Investment_Outlook&utm_medium=Email&utm_source=Salesforce&utm_content=Retail


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