What is a compliance review?

In our guidelines about submitting a coin to Bittrex for listing, we have a clear statement that describes what is or isn't permitted on Bittrex.  Bolded for emphasis, "Note that we cannot list currencies where its primary purpose is to support illegal gambling, illegal drug sales, or any other activity that is illegal in our jurisdiction.  We also cannot list currencies that would be construed as a security such as digital currencies that promise/market profits or represent shares of a company.  At our discretion, we may require an additional compliance fee for listing.  These happen in the extraordinary cases where your coin's use case is extremely complex and requires significant research by our staff to determine suitability."

These rules were broad guidelines developed to minimize the legal risk to Bittrex and our users from an over zealous government regulator or prosecutor.  But as business models for blockchains evolved, we felt that the rules could have the unintended consequence of stifling innovation.  

Instead of telling developers "no", we began to offer an option of a compliance review that would help defray the cost of the research needed for inclusion on Bittrex.

The research can consist of any combination of the following (and possibly more):

1) Background checks on the principle owners of a business launching a blockchain

2) Verifying that a company is registered; i.e. if you say you are registered in Dubai, we may check that you are

3) Understanding the business process; i.e. if you say you are handling gold and storing it securely, we're going to walk through every aspect of that process

4) Code reviews of technology that we're not readily familiar with; for instance, if you write a whole blockchain client in Erlang, we'll have to hire experts to help code review it with us

5) Applying the Howey test to your token to understand whether or not it is a security

6) Determining if the token violates any CFTC guidelines

7) Understanding how/if US laws apply to your token.  

 

The compliance review fee is non-refundable and does not guarantee inclusion in Bittrex.  You may fail.

 

Frequently Asked Questions:

Who has been reviewed?

Breakout Coin

Digix Global

Xaurum

eBoost

2 others are in process

 

What types of businesses typically require a compliance review?

Gold.  It turns out that most commodities laws exist because people get scammed by gold a lot.  

Gambling.  This should be obvious.  There are legal ways to run an online casino.  Just because its illegal in the United States does not mean you can't have a gambling business.  But we have to review it top to bottom.

Securities.  Anything on our first pass that looks like it fails the Howey test will need a compliance review before we add it to Bittrex

 

Does this mean those blockchains/businesses are blessed by Bittrex?

No.  This means that we evaluated the legal risk of listing those tokens.  You still need to do your own research on whether you believe holding those tokens is the right decision for you.  Do not consider a compliance review from Bittrex as either legal or investment advice.

 

Why do you charge a fee?

We used to do this type of research for free.  But at $500 an hour from our lawyers, the consultants we keep on retainer, and our own time, it was adding up.  Some tokens had exceeded $10k in costs before we'd decide not to list them.  

 

How much is the compliance review?

They are a minimum of $5,000 but can be higher depending on how complex your business model or blockchain is.  Contact us and we can put together an initial quote.

 

As a coin developer, does that mean we get legal advice?

No.  The information that is generated from this work is purely for Bittrex's internal use.  We evaluate our risk.  You need to hire your own lawyers and consultants to understand your personal risk.  Having said that, we will typically provide advice to you on how to get your token to a level of risk we are comfortable with.  We can also refer you to talented lawyers, commodities/securities experts, and blockchain developers.

 

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