Last March 22, I had the pleasure of attending a regular Blockchain UA conference in Kyiv. One of the benefits of this event is that it gives you a flavor of what is going in the industry from three different perspectives: business, products, and technology so attendees can follow these three separate streams of speakers and panels at separate stages at the same time.

As far as financial institutions are concerned, I would mention three major “take aways” from this conference:

  • “digital assets” as a new investment class: one of the major topics for discussion was that broadly speaking ICOs are over. Hence, the industry is evolving and looking for new opportunities to attract funds. Among the new techniques discussed were so called “exchange coin offerings” or ECOs and asset tokenization. The former are perceived by the market as less attractive from the developers’ perspective, because exchanges make their own selection of projects, which would act as an underlying asset for their own ECOs. In other words, it is up to the exchange to decide which project to pick for the new tokens offering. But, from the investors’ perspective the risks are much lower because the exchange would normally conduct an extensive assessment of the respective projects. At the same time, one could argue that this model is somewhat controversial, because to invest in a start-up one has to purchase a token issued by the exchange (so, there is a potential for manipulating prices of such tokens because it is not linked to any hard currency). The latter is seen as a major long term trend. Given that tokenization permits to tokenize virtually any asset, this technique significantly simplifies and makes less costly an investment in a jurisdiction where investment is normally subject to high regulatory burden and cost. Nevertheless, the legal risks are also there. Hence, at least from the perspective of the US law, real asset token may be viewed as “security”, therefore potentially subject to respective registration.


  • products and technology: both directions are evolving and there are lots of developments at this side. I noted one interesting start-up, which is working on a bank account solution combining both conventional banking and “digital assets” reality. In other words, it will allow to a consumer to operate both in the traditional financial world and in the new “crypto” world from one account complying with the applicable regulations.


  • blockchain for business: blockchain based solutions are still not very widespread and/or popular within the business community. This is probably due to lack of well known successful services/products. In addition, developers also acknowledge that there is still a lot of confusion with  regards to implications of dealing with public and private blockchains. Thus, business usually is not willing to buy solutions based on the public blockchain, because it is perceived as not secure enough. Hence, it is often necessary to pursue educational efforts to clarify essential differences between these two and why public blockchain based solution may be more favorable.


To sum up, the speed of change in the financial sector is enormous. It is mainly driven by technology. Most likely, regulators around the world will struggle to keep up with the change. Those who engage with the industry right now will probably collect the “low hanging fruit” and will benefit long-term. This may lead to regulatory arbitrage whereby the respective projects may tend to go to the jurisdictions which took such proactive steps. Ukraine is about to join this trend and become one of the jurisdictions bringing in regulatory certainty to the industry such as Gibraltar, Malta, Switzerland, etc. (i.e., the Ukrainian Ministry of Economy is about to approve the concept of a policy for the regulatory treatment of virtual assets).

Masym Hlotov

Maksym Hlotov handles most of Baker McKenzie's payments practice in Kyiv and advises on all aspects of payments law. He acts for a number of service providers within the payments industry — assisting them in their regulatory, contractual, consumer protection and public policy needs.