BQX is a Functional Token that allows users to access the Bitquence Platform and services that provides users with critical functionality to assist user in managing their wallets, keys and coins. Some call this vision “the myetherwallet for everyone”
The First Decentralized Platform with Compliance in Mind
Securing BQX tokens in advance funds ongoing development of the Bitquence platform, which is designed from day 1 with consumer safety, security and regulatory compliance in mind. The vision of the “first decentralized platform with compliance in mind” invests and keeps in mind the future processing potential of the platform.
Tokens will be consumed as the platform executes transaction involving key creation, storage, coin diversification, etc. So for example if 100,000 users do an average of 1000 token-consuming events each, that would be 100M token consumption events. The market is currently predicting broad usage of the Bitquence platform in this fashion. The token may increase in value with adoption of the platform, because it represents the consumption of more services/transactions, similar to Ethereum or Ripple. Token demand will also generate Liquidity, which will be used to benefit consumers using the platform in the form of cheaper transactions. As there is more liquidity, prices should lower for consumers.
Branded Token and Service
Because the BQX token has the same branding as the platform, Exchangers will act as Distribution Channels for Bitquence providing brand awareness and customer acquisition for the platform.
Why does this matter?
This matters to users and all those across the entire eco-system as this means we are supporting the viability of a platform whose mission is to protect consumers in every way possible while enabling them to manage and build wealth in the new economy in safe and compliant ways. However, more importantly, this mission is being made a reality not by promising any rights or returns often involved with a security but rather through the issuance of a pure Functional Token in BQX that only offers access to those critical services most in need by global consumers.
To create such a Platform, Bitquence believes nothing less than our full commitment to transparency is a necessity, whether involving our services, costs or the rights that come with holding the BQX token. As such, we want to share with all interested parties a detailed explanation and assessment as to the function of the BQX token. Let’s begin by first reviewing the legal assessment of the BQX token.
BQX Token Regulatory Assessment
The Bitquence Token, BQX, is a Functional or Utility Token that only grants token holders the rights to access certain services, which are represented by unique private keys associated with individual users. Similar to more commonly used API Keys, the BQX Functional Token enables holders to utilize certain of those services that will be made available on the Bitquence Platform. Functionality is inherent in the BQX Token and occurs programmatically within the Bitquence Platform.
it is important to be clear that BQX Tokens do not represent shares, or any equivalent ownership stake, in the company whatsoever. BQX Tokens do not grant holders rights representing any of the following items:
Ownership or equity interest in a legal entity or partnership;
Voting powers or influence over the company;
Entitlement to a share of profits and/or losses, or assets and/or liabilities;
Control over access to company funds;
Provide a holder with any type of creditor or debtor status; or
A right to repayment of purchase price and/or payment of interest, including dividends.
As a result of the structure and nature of the token described above, one can reasonably conclude that the BQX Token does not represent a “security” as defined by jurisdictional rules of law as it is solely a Functional Token that represents access to certain services, and does not offer an expectation of profit in any way.
However, rather than conclude this analysis based on the above high level analysis, let us dive into further details:
Was there an investment of money to acquire BQX tokens?
Yes. BQX tokens were pre-sold in a crowdsale for value represented by digital currency (Ether).
However, participants were informed thoroughly and explicitly that token ownership only represented the privilege to access services available on the Bitquence Platform, which due to unforeseen problems could theoretically never be developed. In theory, the Bitquence management team could have simply taken the money and ran with no legal recourse. This is partially why token buyers asked for things like management photos, team photos and the bios of Bitquence management – to ensure the team was legitimate. Tokens sold during the crowdsale were not made available to residents of Singapore or United States.
Was the investment in a Common Enterprise?
No, as BQX tokens were sold in conjunction with the deployment of Smart Contract Code on the Ethereum blockchain. Thus, participants were not completely dependent on the actions of Bitquence developers as they could participate in the network while further development of the full Platform was ongoing.
Additionally, any indirect benefits of holding the BQX token depends entirely on the efforts of individual holders, as benefits vary depending on the amount of effort each individual puts in when utilizing certain services.
Were participants promised, directly, indirectly or otherwise, anything of value that left them with an expectation of profit? And By the efforts of others?
No, as token ownership does NOT:
Represent equity interest in a legal entity, of any type;
Entitle holders to a share of profits and/or losses, or assets and/or liabilities;
Give holders a status of a creditor or lender;
Give holders a claim in bankruptcy as equity interest holder or creditor;
Give holders a right to repayment of purchase price and/or payment of interest;
Give holders the ability to control the development team’s access to funds;
Give holders the ability to vote on significant decisions for the platform;
Additionally, the BQX token was only:
- Marketed as a sale of tokens which gave holders the right to access and use services available on the platform;
- Enabled holders to have access to specific functionality that would only be available to token holders;
- Where all functionality is inherent in the BQX token and occurs programmatically as the BQK token is built with all the necessary technical permissions and token holders do not rely on manual actions of any third party.
In parallel with the above fact pattern, Bitquence was consistently adamant about informing all interested participants through any and all mechanisms about the risks involved in both development of the platform and those inherent with virtual currencies, coins and tokens. We believe that our approach offers a model for others as it has been extremely transparent while never deviating from those attributes critical to maintaining a Functional Token status that only enables access to certain services available exclusively on the Bitquence Platform.
Another important fact pattern associated with the BQX Token Sale is the characteristics of the token sale itself. During our token sale we had 3,633 individual participants who contributed an average of approximately 3.89 Ether each. This metric is important for two reasons, it is indicative of our people powered mission and it also means we had a lot of support involving small amount contributions, which in many jurisdictions would fall well below those limits set for crowdfunding activities involving the general public. Although this is irrelevant because of our Functional Token classification, this fact pattern is important to highlight as keeping contributions to smaller amounts meant our customers were not exposing themselves unnecessarily but rather making a consumer decision to purchase tokens to secure access to services and functionality they deemed desirable, which is extremely important to us.
What does all this mean?
This means that BQX is a functional token that does not meet the definition of a security in any jurisdiction, whether according to The Howey Test in the United States, Securities law in Singapore, or elsewhere.
Why is the relevant to the entire ecosystem?
During the early days of any new industry or business concept, it is not uncommon to find an environment where confusion and misinformation is widespread. Nowadays, these more typical problems are compounded by the existence and proliferation of “fake-news” in a technological age where the speed and reach of information flow can spread across the world in milliseconds.( We only need to look to this past Friday to understand how powerful misinformation can be )
For Blockchain technology and cryptocurrency industry, these issues are profound especially as we try to overcome a tarnished past brought on by the behaviors of certain bad actors. However, our past is not our greatest obstacle as occurrences of fraud, deception and legal violations persist. Unless we as an industry can root out these bad actors, the environment we operate in will remain severely challenged as this will only continue to draw intense legal and regulatory scrutiny across the globe while triggering increased levels of fear and uncertainty with the very consumers we keenly covet.
The scrutiny the cryptocurrency industry faces is powerful for many reasons, however, some are less openly discussed than others. In our view, unless we begin to have an open dialogue, we will never eradicate bad behavior from our ecosystem and risk the sustainability of our young industry. To help our industry avoid this fate, Bitquence has committed itself to having an open dialogue. We begin that today by openly discussing why BQX is a Functional Token and why this classification matters.
Functional Tokens vs Tokenized Securities
Today our global business climate can be best classified as being in a constant state of panic. Most of this panic is self induced often involving the fluidity and flurry of rules and opinions coming from jurisdictional financial regulators and/or bodies across Europe, Asia and the Americas. We believe most of this turmoil is self induced because some in our industry introduce products and services to the public without understanding the full ramifications of these actions. Nothing is more relevant than the issuance of Tokens, as many issued tokens, past and present, are not Functional Tokens but rather Tokenized Securities. Until recently, this distinction was overlooked by many as firms rushed to distribute their tokens broadly across the entire eco-system unknowingly causing other service providers to be exposed to heavy legal scrutiny and financial risks. The introduction of these unnecessary risks and legal exposures, threatens all of us as we now find ourselves in a situation where our customer distribution channels have been or are at risk of being choked off as Exchangers struggle to understand the token classification of all new and existing Tokens. Bitquence is not immune to these risks, which is one of several reasons why we are today revealing the legal analysis of our token to assist our distribution channel partners in overcoming their operating challenges.
Lastly, as many of you know, we purposefully excluded Singapore and United States residents from participating in our Token Sale. This decision was not made because we felt our Functional Token would not be valid within those jurisdictions but rather simply because we wanted to remove these jurisdictions from participating while the regulatory positions remained fluid. Due to the subsequent policy stances and positions that occurred over the last month in both the U.S. And Singapore, we believe it is now appropriate to publicly announce that these restriction NO LONGER apply to the BQX Token.
Although we understand that the information in this post will not remove all of the complexities faced by any Distribution Channel partners, we do believe it provides sufficient details about Bitquence that can be used as a model for our industry while being fully transparent to all. Our analysis and opinions here are supported by a much more extensive and elaborate legal and regulatory assessment that has been performed over the last several weeks. It is this rich analysis that provides the clarity we all need to make the Bitquence vision a reality.