Legal aspects of the online business eCom21

Юридические аспекты онлайн-бизнеса на eCom21

Legal aspects of the online business eCom21: from state control over the cryptocurrency to the protection of personal data

One of the main themes of the conference eCom21, which will be held 16-17 November in Riga will be the coming changes in regulation of online business. Some of them involve drastic changes that will affect virtually all participants in the industry.

The main trends in this area on the forum will tell the head of the Legal Department of the Bank Rietumu Yaroslav Zamullo, who will speak at the session “Regulation and legislation”.

The advantages of timely adaptation

“Each of the previous conferences, we have considered major changes in the legislation that require attention of market participants. Including: the licensing of payment systems in the EU countries, the legal risks in e-Commerce and the practical requirements of banks when making relationships with service providers, legal risks of doing business via the Internet, the single global standard for exchange of tax information. Time has shown that all of these things seriously affected the development of e-Commerce”, – says Yaroslav Zamullo.

Юридические аспекты онлайн-бизнеса на eCom21Jaroslav zamullo, head of the Legal Department of Rietumu Bank

If you take a change of legislation in relation to service providers, it is in recent years have tightened significantly. 5-6 years ago these companies compared to banks felt very loose, and today their activity is strictly regulated, and they are forced to keep a lot of stringent requirements related to KYC (Know Your Customer) and AML(Anti-Money Laundering). Undoubtedly, the same in the near future is waiting for miners, mining crypto currencies, and traders in these currencies.

A single standard for the exchange of tax information is also already caused significant changes in transnational business, e-Commerce, which previously were poorly controlled from the point of view of taxation, and this trend will continue to gain momentum.

“The ordering of the law governing online business – this is a normal civilized process that will continue. Therefore, it is important to consider popular trends and in a timely manner to accommodate the business. Ignoring this will result in significant losses in the future,” stresses Jaroslav Zamullo.

According to the expert, of the latest global trends in the sphere of regulation there are three main, which for next year will have the greatest impact on the market. This European Directive MiFID(II), aimed at strengthening control over transactions with securities; regulation about the protection of customer data; and, perhaps, the “hottest” topic – the regulation of cryptocurrencies.

More transparency in securities

Directive MiFID(II)regulates the securities market, but since the vast majority of these transactions today are performed online, it is directly related to electronic Commerce.

“Generally speaking, this Directive is aimed at protecting clients’ interests, increase the transparency of transactions, the avoidance of insider transactions. As a result, the market will become more clear and understandable for analysis and oversight. It is expected that these measures will help in the future to minimize the possibility of the formation of the infamous bubble, when investors in huge volumes traded derivatives, which do not have real security – but clearly it was only after the collapse of the market”, – explains Yaroslav Zamullo.

Directive MiFID(II)put forward new requirements to legal entities – investors and professional participants of the financial market. In particular, each of them must obtain a special code Legal Entity Identifier(LEI), without which operations in the securities market next year will be impossible.

Tougher will be governed by the order and amount of information about transactions with securities which professional participants represent their clients. This applies to information about the Commission, which should be as transparent as possible, the interests of the client in transactions, disclosure of full information about the nature of the transaction, analysis of specific forms of investment interests of the client, etc.

As noted by the representative of Rietumu Bank, these innovations are virtually impossible for brokerage firms and banks the possibility of “hidden profit” from operations. And impose on them the obligation to provide very large amounts of reports in a short time, which will require substantial effort.

New on protection of personal data

Another important document that you need to pay attention to is the European regulation General Data Protection Regulation (GDPR)on the protection of customer data when they are received, storage and sharing. Unlike a Directive, a regulation is mandatory for all market participants regardless of included it in the national legislation of a particular country or not. Thus, it is immediately after the entry into force in may next year will affect all entities online business.

“The global volume of customer data obtained in electronic form is growing at great speed. New technologies make it possible to read copies of passports and other documents to identify a video, to biometric parameters – all of this information is on electronic media and its wrong use can result in not only discomfort, but also a threat to humans. The main objective of the regulation is to neutralize these risks and to ensure that the information provided is used only for its intended purpose – to provide specific services”, – says Yaroslav Zamullo.

With this purpose are prohibited from obtaining excess information is governed by the number of its electronic and physical copies,regulates their storage and use.

Provided for violations of phenomenal fines as a percentage of turnover, which for large companies can result in tens and hundreds of millions of euros. Therefore, says the head of the Legal Department of Rietumu Bank, it is very important to send forces to the fulfillment of these requirements, even if the company operates outside the EU: “As practice shows, this concept spread very quickly, and we can predict that after a while this trend will be joined by other States. In addition, the international nature of e-Commerce to consider the latest requirements of legislation of a very far-sighted. Today, this will greatly simplify the interaction with European partners, but tomorrow may be a precondition for such cooperation.”

The blockchain as a mechanism of state control

However, the most radical changes in the future, according to Yaroslav Zamullo, will cause the regulation of cryptocurrencies: “Now it is one of the most fashionable and at the same time, controversial issues in electronic Commerce. We see a diametrically opposite attitude of different countries from the legalization of bitcoin in Japan to a total ban in China. Russia is also wary of the currency, but a few days ago the government announced the possibility of creating their own state – of cryptorama. This step considers and Estonia, which had previously announced plans to launch estoina”.

The expert is convinced that in any case the regulation of the cryptocurrency market is not far off. And one of the main risk here is the possible emergence of a state of cryptocurrency, then the future of the independent bitcoin can become, to put it mildly, vague.

“In my opinion, in a situation with bitcoin now are essential factors for the analysis which this year was awarded the Nobel prize in Economics. Her laureate Richard Thaler conducted a study of the economic behavior and effects of psychology, included a psychologically realistic assumptions in the analysis of economic decision-making. All this we can see by considering the phenomenon of the growth rate of bitcoin. We all know that this currency lacks any security does not exist people and organizations that would have carried a responsibility to her, and yet the exchange rate against Vietnam traditional currencies, backed by the state, is constantly growing. This creates big risks”, – says Yaroslav Zamullo.

The expert also predicts that the use of Blockchain technology at the state level will lead to fundamental changes in the financial system. And one of the main factors here is the ability to track the history of movement of each currency unit, the virtual “coins”, which in this system is unique.

“This principle Blockchain provides a fantastic opportunity for total control over financial flows. And if now this system that is not controlled by anyone, provides its users complete privacy, in the future the situation may change exactly the opposite. Obviously, there are no obstacles, but the desire and decision of world powers to take the world of cryptocurrencies under control,” concludes Jaroslav Zamullo.

For more information on these and other issues will be highlighted at the session “Regulation and legislation” on the first day of the conference eCom21– November 16.

 

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