Kodak to create its own cryptocurrency

18th January 2018 Business Crime

US company Eastman Kodak has announced its plan to create its own cryptocurrency, the KodakCoin. The coins are an integral part of the company's new blockchain-powered rights management platform, known as KODAKOne. The company hopes that the platform will be used by photographers to facilitate the licensing of their work and to collect payment.

The platform's underlying blockchain technology provides a permanent and unalterable online ledger of rights ownership. Both professional and amateur photographers will be able to register their new and archive work on this ledger, then license their work within the platform. Once a sale has been made, payment can be made to the rights owners immediately. The KODAKOne system will also trawl the web, searching for unauthorised usage of registered images.

Similar models are appearing in the music industry. For example, the streaming music site Musicoin has been described as a cross between Soundcloud and Bitcoin. Musicians can upload their recordings to the Musicoin blockchain and receive payments instantly, in the cryptocurrency Musicoin, when their tracks are played. PRS for Music, the collection society that represents UK-based songwriters, composers and music publishers, joined forces in 2017 with two other collection societies, the American Society for Composers, Authors and Publishers (ASCAP) and the Society of Authors, Composers and Publishers of Music (SACEM) in France, to develop a blockchain project which aims to make the payment of royalties to music rights owners more efficient. More information can be found here.

KodakCoin has been developed in partnership with London-based Wenn Media Group. The initial coin offering (ICO) will be open to accredited investors from 31 January 2018. An ICO is the process by which digital coins or tokens are offered for sale to the public. The value represented by tokens can vary between ICOs, and in some cases the token may be best described as a prepayment voucher for services on a particular platform. Alternatively, owning a token may provide a right to dividends and voting privileges. In this way, ICOs can be similar to Initial Public Offerings (IPOs), in which companies offer their shares for sale to the public.

Kodak's press release states that their ICO is issued under the US Securities and Exchange Commission (SEC) guidelines. It is no surprise that such a prominent company would ensure that its ICO adheres to the regulations in force in the jurisdiction. In the UK, it is the Financial Conduct Authority (FCA) that regulates activities such as IPOs and investment-based crowdfunding, where people invest in shares or debt securities. If your proposed ICO involves regulated investments, or your company is conducting regulated activities, you may be breaking the law if you do not have authorisation from the FCA.

Mike Rainford, partner in JMW's Business Crime department, says 'There are two ways to deal with the FCA's regulations; you can carefully plan your ICO so that it does not fall within the purview of the FCA, or you can assume that the FCA regulations will apply, and ensure that your ICO abides by those regulations. In either case, expert legal advice should be sought.'

If you're considering an ICO, or have other concerns about your use of Bitcoin or other cryptocurrencies, call the JMW Business Crime team on 0345 872 6666.

 

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Evan Wright is a Partner located in Manchester in our Business Crime & Regulation department

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