OilCoin: First Legal Cryptocurrency
OilCoin: First legal cryptocurrency is here! Till date all the cryptocurrencies were backed by technology prepositions or ideas. There was hardly any cryptocurrency which was based on any physical asset. This seems to be changing soon. US regulators are breaking the silos and coming up with a new cryptocurrency named “OilCoin”, which would be backed by a physical asset. As the name suggests, OilCoin will be based on oil reserves. In brief, OilCoin is the marriage between digital dreams and regulated reality.
What is it?
The objective of OilCoin is to tokenize oil, where each token will represent the value of one barrel. The OilCoin White paper suggests that the OilCoin will be supported by an undivided interest in a bundle of oil assets which includes physical oil, oil futures and interest in oil producing properties.
The assets will hold the aggregate value of all the OilCoins in circulation. If one possesses OilCoins, the owner can only exchange the digital currency in exchange for oil barrels and other oil associated assets.
The price of an OilCoin token will approximate and move in tandem with the price of a single barrel of oil. If the demand for OilCoins causes the price to rise above the barrel of oil then additional OilCoin will be issued and proceeds will be invested in additional oil reserves. The document argues that by linking each OilCoin token to existing and verified real world assets, OilCoin enables holders of digital and fiat currencies seeking to preserve wealth, lock in gain and/or avoid loss to acquire, hold and transfer intrinsic value in digital token form.
OilCoin has been structured with a view towards becoming the world’s leading safe-haven tokenized store of value. Download our white paper at https://t.co/3n3kbRgMD4 to learn more about the #OilCoin project. #oott #blockchain #ico pic.twitter.com/TMttm5WOcS— OilCoin (@OilCoinProject) December 13, 2017
At $1.7 trillion in annual transaction size, the global oil market is the single largest and most actively traded and liquid commodity market in the world and is larger than the annual GDP of many countries. It is 10 times the size of the traditionally accepted reserve gold market and is larger than all global raw metal markets combined thereby providing unique intrinsic support for the development of a globally accessible digital currency.
One of the major reasons for oilcoins to come into circulation is to meet the increasing demand of global oil market. The aim is to expand the OilCoins and the supporting oil reserves in tandem to maintain an approximate equilibrium between the USD price of a single OilCoin and an oil barrel in the global market, bearing in mind the interests of the OilCoin buyers.
Technology-wise, OilCoin will be driven by Ethereum-enabled blockchain technology to provide a robust and decentralized method of verification, tracking and exchange. The Ethereum blockchain will provide an auditable and cryptographically secured global ledger and will facilitate transactions with other familiar currencies and assets. In addition to the Ethereum blockchain, OilCoin will utilize audit methods to ensure that issued tokens are supported by sufficient oil reserve assets always. OilCoin will provide incentives to purchasers and sellers through customary sharing of transaction fees in the form of issuances of additional OilCoin.
Who are bringing it?
Leadership team of OilCoin comprise of prominent leaders like Bart Chilton (former CFTC Commissioner), Darius Brooks (TPG Capital Veteran), Daniel Eisner (noted corporate lawyer), Michael Pahlke (Global head of technology for Credit Suisse Group AG), and many more.
Legality & Taxations
The OilCoin team has been aggressively engaging with regulatory authorities around the globe, with the goal of making OilCoin the safest, most trusted and widely accepted cryptocurrency in the world. It firmly complies with US laws and regulations and is going to be suitable for both institutional and retail users. It is also compliant with the US securities and commodities laws.
According to OilCoin, the distinctive entity structure will provide a simplified approach to taxes for investors who are seeking to hold investments in oil. Presently, US based oil Exchange Traded Funds (ETF) are subjected to annual taxes & reporting obligations, on the income made with oil ETF holdings.
On the contrary to ETFs, OilCoin is said to be treated as property for US Federal income tax purposes and will not allocate income related to OilCoin’s operations (including supporting oil reserves) to OilCoin holders. As a result of which, long term U.S. OilCoin holders will not be subjected to annual tax, but instead will be taxed only upon the sale of the token.
Similarly (and unlike U.S. based oil ETFs), ownership of OilCoin does not levy non-U.S. residents to U.S. tax obligations. The separation of the tax attributes of OilCoin from the tax attributes of its supporting oil reserves, OilCoin creates a new financial instrument with possibly advantageous tax treatment and return profile for both, U.S. and non-U.S. investors.
ICO for OilCoin is expected to be out by January 2018. It is believed that the OilCoin ICO represents a unique risk/return opportunity that would have great appeal to U.S. and global investors seeking a highly experienced management team, a clearly defined and executable strategy, and a 'picks and shovels' way to participate in the hyperbolic growth of cryptocurrencies and blockchain-enabled applications.
OilCoin would provide investors lower volatility as compared to the wild rides which other crypto currencies are providing. As a commodity-backed digital currency, OilCoin will be a reliable store of value and medium of exchange. As an oil-denominated currency, it will also be free from the inflationary pressures and cross-currency volatility experienced by fiat currencies. Moreover, it is believed that the after-tax return profile for U.S. OilCoin holders will be superior to oil ETF's for sophisticated, commodity-focused investors.