In this episode, lawyers Hailey Lennon and Preston Byrne discuss the current state of crypto regulation in the US and explain why being “crypto literate” will benefit lawyers.
Hailey and Preston practice with Brown Rudnick’s Digital Commerce group. Hailey counsels fintech and crypto companies on regulatory requirements and Preston advises technology companies on corporate and commercial law issues.
Both Hailey and Preston have deep crypto experience from both private practice and also as in-house counsel for crypto and blockchain companies. This episode touches on the SEC’s enforcement actions against crypto players and the importance of decentralized tools.
They also discuss the potential loss of talent and innovation in the US due to lack of guidance and the importance (and difficulty) of educating others about the industry.
The duo also explain why it is important for lawyers in many practice areas to be “crypto literate” and possess a working knowledge of blockchain concepts. They point out that crypto is not a legal discipline, but is a market sector needing the same type of legal work other businesses do.
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I’m Chad M the founder of Legal Services com recipient and this is technically legal podcast about legal Technology Innovation in the legal industry and the impact Tech is having on the law in this episode I have a conversation with two lawyers from Brown and rudnick’s digital Commerce group Haley lennin and Preston
BT they fill us in on why it’s good as a lawyer to be crypto literate and we also explore the current regul landscape for Crypto if you’ve been listening to this podcast for a while you can probably tell that I’m a big believer in blockchain technology and I think it’s really important for people in legal to have a working knowledge of blockchain and crypto Concepts the reason I believe this is because I think the technology
Is going to change the nature of many legal relationships and not just Financial relationships we’re already seeing it seep into intellectual property law and also in the way organizations are set up and governed unfortunately lately for reasons both deserved and undeserved crypto and other blockchain uses are getting a bad RP
Over the last several months you’ve seen the implosion of several large crypto companies as a result of shady dealers and general bad business practices and as a result not surprisingly governments worldwide are becoming more aggressive into efforts to get a handle on crypto companies so to put things in
Perspective and hopefully shed some light on why blockchain technology is important regardless of the current esteem in which is held by some I asked two top-notch crypto lawyers to come on the show they are Haley lenon and Preston burn and they both practice with brown and rudnick’s digital Commerce
Group I wanted to talk to them not only about the current state of crypto regulation on which they advise clients every day but I also wanted to talk to them about why the technolog is important and why lawyers in general should care about it I like the way
Presson sums it up he points out that crypto is not a discipline like litigation or m&a work but it’s a market sector and this Market sector needs the same type of legal work that other businesses do like they need IP lawyers they need tax lawyers and they need
Other kind of commercial lawyers so as we will hear if you’re a lawyer who works in these areas it’s good to become as what Preston describes as crypto literate because there’s a lot of clients out there with large Investments behind them who need good advice and as Preston tells us sometimes they’re just
Not getting it both Haley and Preston have deep roots in the crypto World from the early days and both took a similar path they both started out at large law firms they took a little detour went in House at crypto and blockchain companies but they both ended up back in big law
As we will hear both of them were excited to get back to Law Firm so they can get a holistic view of the entire industry of view they couldn’t necessarily access when they were inhouse because their jobs were solely to help with the company specific legal
Needs so I as a Young attorney wanted to go inh housee and as a second-year attorney I went in house to a company called dollar X that did wholesale currency exchange along the Mexico border and so I sort of unintentionally fell into this whole world of financial crime anti-money laundering um ofac and
Act the physical transportation of money and that’s when I first got really interested in Bitcoin because it solves a lot of the friction and problems of you know moving physical cash across borders and so I was fortunate to kind of fall into in-house roles in the crypto space early on I started a
Silvergate bank which is a major cryptocurrency bank that is no longer with us as of a few weeks ago and from there really sort of had a bird’s eye view of the whole industry and I love that because as an attorney I got to see the legal issues that all these
Different types of crypto companies were dealing with as they were coming to Silver date to obtain a banking account I then moved to bitflyer in coinbase and um but Preston and I have now worked together for three years we have a thriving crypto fintech uh legal
Practice and part of the reason I wanted to go back into the law fir world was to get that Bird’s eyee view again that I had at Silver dat bank so I was in House at coinbase and it’s amazing experience but you only see the issues coinbase is
Dealing with you know you have one client that’s your client at our legal practice we see all of the trends that are happening in the crypto and blockchain areas and um I I enjoy having that Bird’s ey view again so you said Bitcoin was what got you interest into
Into crypto what was was the first time you heard about it like how’d you get looking into it I had never really seen the friction of crossborder payments and um currency exchange and the transportation of physical currency and in about 2012 I started hearing more about Bitcoin mainly from my Social
Circles someone I was dating at the time some friends were talking about it and read the white paper and it just it just kind of spoke to me because you know I’m of the generation where the internet came into existence and email and say things like that and I’ve never seen
Technology that sort of advances the way we move money so that’s when I first started hearing about it and then when silvergate came along they sort of said the same due diligence and anti-money laundering concerns that you have at a company like dollar X that is doing wholesale currency exchange along the
Mexico border that’s a lot of the same compliance and legal questions we as a bank are going to need to answer um and so there was just sort of this natural progression into that law having a lot of overlap with traditional finance and Preston what’s your Genesis
Pla how do you get into crypto world there’s actually also a dating component hay and I of course you know we both we both uh share our dating Misadventures um so it actually started with a girl at a terrible awful breakup in 2012 28 years old and so I decided
After that I was like you know what I’m going to do one thing a year I’m going to focus on I was a banking lawyer I was like I’m going to focus on one thing a year that isn’t banking law cuz I know banking law isn’t it and then I’m going
To see if that’s my thing so the first year out I worked on housing policy and Housing Finance policy in England and Wales wrote a bunch of papers and articles about it got pretty well known in the UK housing policy scene and after a year of that I was like okay that that
Stopped my forever what’s next and then the next thing was what about this Bitcoin thing and that was it it just took I trained and qualified at a firm called Berwin Leighton paisner now Brian Cave then I moved to Norton Rose Fulbright uh which is a big Federal firm
With 5,000 lawyers still friends with everybody there I’m one of my supervising partner a fellow named Shawn Murphy was like like a third-year associate he’s like Preston you’re really really good at all of the fun stuff and you’re really rubbish at all of the stuff you’re supposed to be doing
As an associate it co-founded the firm’s cryptocurrency group and was pushing that that was in 2014 what I wound up doing was leaving to do a startup that was we were one of the first D I think the first Dow in code um and also the first permission blockchain startup in
2014 did that for a few years wish you say Dow distributed autonomous organization the idea of a dow is something that comes up a lot in sort of legal Tech circles it means distributed autonomous organization the term actually was originated in the year 2013 with a guy named Dan larer and Charles
Hoskinson uh and uh and that would they called it a distributed autonomous Corporation and the idea was that Bitcoin kind of runs itself as a money system so why couldn’t you have another automated Software System running itself uh you to do other things like a corporation or a lending operation or
Something like that so they proposed that we built one of the first ones uh in 2014 it was May or June of 2014 and then um yeah and then we got a VC ringing us up and saying hey why don’t you turn this into a business I’ll
Give you a million dollars and you can start to the company and double your salary and it’s like yeah well it sounds good see you and so so left big law and did that for a few years then came back opened my own practice and just started
Building a book of crypto clients so you’re both now brown red Nick you’ve been there for a year or two right yep so y a little under here and so Haley as we talked about before you’re more regulatory focused Preston you’re more business side you work in some other
Other practice so let’s start with you Haley you run into me to barbecue I’m asking you what type of law you do what kind of clients you’re looking for who are they it’s a funny question to get actually because there’s this misconception by some people that crypto
Is like the Wild Wild West are unregulated but actually the companies that are intending to do things the right way and would engage with a law firm like R rudnik are actually super heavily regulated so if you take an exchange for example we’ll take coinbase I focus on state level money transmitter
Licenses and the New York bit license New York was the first and only state to date that actually created its own crypto Bitcoin license that companies need to obtain to Service New York customers and so when I was in House at bitflyer which was a Japanese exchange
Looking to expand into the US I helped them get all those 50 state money transmitter licenses and the bit license that’s sort of that’s the state level on the federal level these companies are dealing with finson which is under the treasury that deals with anti-money laundering ofac that deals with teror
Sanctions we have cftc and SEC that both in their own ways regulate this space in the way that they Define certain cryptocurrencies so if you think of uh Bitcoin as a commodity that would be regulated by the cftc uh other cryptocurrencies the SEC has said are securities so they regulate that and so
My day-to-day is helping companies on the front end manage obtaining licenses or complying with these Federal Regulators or companies who come to us later in their you know life cycle who didn’t engage with us sooner and are now having issues in terms of enforcement actions by the SEC cftc other um sort of
Inquiries or examinations so any state or federal regulation that touch on crypto or fch is sort of my bread and butter when I started at silvergate in 2013 2014 there were regulatory and news updates every month or two now we’re starting to get these new breaking news
And issues in the Space daily weekly um it’s you know trickling into the traditional banking system and so my job’s gotten a lot busier recent months so Preston you’re at the same barbecue I See You by the ceg I go over there I say hey Haley told me you’re an
Attorney you’re into crypto and I tell you I’m uh I’m an notrue I’m trading the ticketing on the blockchain that’s going to unse Ticket Master tell me can you work with me like who you looking for what are your clients is it a fit most of the corporate legal issues that
Blockchain startups face are not unique right they’re the same kind of issues that any other startup would face if it were starting up I don’t have you know a singularly unique perspective on that but as someone who raised a bunch of money from Venture capitalists and who
Did that before and frankly did so on kind of kind of bad terms so you know I understand what it’s like to be on the wrong side of the deal that for me is very valuable in advising these clients and helping to plan out the first couple
Of years of their existence ideally a startup really shouldn’t need too much contact with lawyers for the first three years right so you do formation you’ll do the equity comp you’ll do the employment agreements you’ll make sure that all the IP is where it’s supposed to be and then once all that’s done
Really they shouldn’t be seeing you unless they get sued which means they’ve done something wrong or they’re raising money which means they’ve done something right which is fantastic so those are really the two situations sort of at the early stage that we deal with we also have later stage clients where my
Practice tends to revolve more around commercial contracts so and that is I think a little more crypto specific because you have to deal with allocating certain risks that are crypto specific that might not arise in certain other contexts like what happens if you’ve got an nft on this blockchain and then the
Chain Forks right you got two different versions of the chain where do you run it and stuff like that what happens if you know there’s some catastrophic failure what happens if you know there’s key loss or destruction so you have to allocate those kinds of risks and it’s
Again it’s not terribly complicated the blockchain piece of it is maybe 3 to 5% of the lawyering that needs to go in but it’s the 3 to 5% of the contract that’s most likely to go wrong given the subject matter right so it’s you’re looking for those edge cases that uh
That specifically relate to blockchain we also do a lot of social media work but that’s another topic for for later in the discussion and so we have a lot of experience advising social media companies on things like law enforcement issues and you know subpoenas and Global terrorism and and things like you know
Botnets being operated by hostile threat actors from overseas so that’s a totally different Arena of my practice which just kind of evolved organically on its own and there’s some crypto overlap in that most tech companies regardless of the sector that they in want to have some exposure crypto of some kind and
It’s social media especially right because there’s talk of putting a social media platform on a blockchain social media is a really big bucket right it’s a publishing service that allows people to connect with each other at scale as a consequence you can convey all kinds of information you know reviews about
Products offers for sale you know that sort of thing and so it’s a logical Next Step that you want to integrate money into that application so that people can talk about without becoming a money transmitter right obviously you don’t want the social media company stepping in and becoming a money transmitter
Although we think companies like Twitter for example are going to do exactly that right so that’s musk wants to do is he wants to turn Twitter into something like a WeChat so he wants to turn it into sort of a western WeChat which has everything right you don’t need to go
Anywhere else to do anything else it’s Amazon and PayPal and Twitter and Facebook and Gmail all wrapped into one so yeah crypto has a social media Dimension because of that money component money is just you know a communication about inputs pricing inputs essentially and it’s been a
Communication tool for long time so how we integrate that with other applications a very you know very logical area for crypto startups to look at so before we get into regulatory nuts and bolts and the state of things with blockchain and crypto right now why should lawyers care generally why should
They care about blockchain technology and and crypto in general why should they care because there are clients who are printing huge amounts of money getting huge amounts of investment who need good advice uh and sometimes they’re not getting it so there still is room in the space for lawyers who are
Pragmatic but conservative to offer the right kind of advice and steer clients the right way and it depends on where you are in your practice if you’ve got a very successful if you’re a late stage lawyer you know mid-50s 60s and you’re you’ve got you’re a bankruptcy
Practitioner there’s not a lot of reason for you to start pivoting into software licensing although there’s certainly you know a benefit to being crypto literate if you’re going to go out and get bankruptcy work if you’re a young lawyer right like first five years or in law
School there’s just so much crypto work out there that and it’s pervasive right it’s not crypto is not a discipline in the sense that litigation or particular subsets of litigation or m&a or licensing are disciplines right crypto is a market sector which has within it a requirement for every single legal
Discipline there is you know you need IP you need litigation you need employment you need HR you need taxation all of it so it’s just a market segment where regardless of what specialism you decide to go into there are clients to be had in crypto as long as you’re literate in that
Marketplace when we come back in just a second haly impressed and get into the current regulatory landscape of crypto and they also tell us why that if Regulators are not careful they’re going to push Innovation away from American Shores I’m Chad M and you’re listening to technically
Legal this podcast is brought to you by precipi a legal services company powered by technology recipient helps legal teams tackle legal operations electronic document review and process automation recipient Services include manage document review subpena compliance cyber incident response and also helps legal teams provide clients with process-driven legal support to learn more visit
Percipient.ai and Preston in just a second but before we do I want to let you know if you want to subscribe to the podcast you can catch us wherever you get podcasts Apple Spotify Google Stitcher Etc if you want to get a hold of me you can find me on LinkedIn you
Can find me on Twitter or email me at Cain precipi and.co that’s c m n precipi and.co all right let’s get back to my conversation with crypto lawyers Haley Lennon and Preston burn they’re just about to get into the current regulatory landscape of crypto and tell us why that
If American Regulators are not careful how they handle things they’re going to push Innovative companies away from America for many years the crypto industry has sort of viewed the FCC as the aggressive regulator in the space it goes back to very old case law coming from a Supreme Court case called the hoe
And the hoe test came from that case and the Howie test really is a four-prong test to determine if something is an investment contract or a security that should be registered as such uh with the SEC and finra and so because the SEC you know has is still using this old case
And this old test there is a lot of room sort of for factual interpretation based on many of the current sort of statements coming out from the SEC they feel that most if not all cryptocurrencies besides Bitcoin hit those four prongs of the hoe test and would be considered Securities they’ve
Also gone farther into you know doing enforcement actions against companies that do things like lending or a promise of Promise of some sort of interest rate when there’s a lending component so the SEC has become you know a very big focal point in in the industry and is often
Times the regulator that clients are coming to us focused on wanting to do things the right way wanting to um you know either avoid the us or figure out ways to be in in the US and and be on the right side of the law with the SEC
The confusing thing is what like you said there is friction between the cftc and the SEC both Regulators have ulterior reasons to want to have more jurisdiction over this space including that they will be granted more budget and more Staffing to oversee this industry so you see the cftc and the SEC
Sort of disagreeing about where that line is drawn in the sand for different cryptocurrency projects and you even see conflicting opinions between those two so you know there was an action by the cftc this week where they listed a few different cryptocurrency as Commodities it’s pretty clear that some of those the
SEC views as Securities and we really haven’t seen a lot of case law or um you know sort of arguments made by these Regulators justifying what something is and that’s the biggest sort of friction point a good example of somewhere where we’re seeing more traction is the sec’s
Uh litigation against uh Ripple based on their crypto currency xop from that we’re starting to see a lot more Discovery and um arguments made and you know it really should be on the regulator to justify their opinion if something is or is not something that needs to be registered with them but
It’s um it’s a point of of contention for many in the industry it’s it’s difficult for these companies to to man you mentioned the cftc this week came down with some actions spefically there’s one against binance yesterday here in Chicago and then a couple weeks
Ago SEC sent a Wells notice to coin base but in the end aren’t both of these agencies asking for the same thing like hey if you’re going to offer this product or service on the market you need to follow our rules and jump through our Hoops aren’t they both
Saying that at some level with these actions I think with the SEC The Situation’s a little less clear than it is with the cftc cases the cftc has broad jurisdiction to intervene in in Commodities products and commodities are virtually anything in the case of the SEC the problem is they essentially
Deferred any enforcement and indeed made noises to the effect that crypto tokens which were launched in the manner of an initial coin offering much like many of the coins they’re going after now chiefly ethereum they said that was totally fine and legit and that was Bill Hinman back in
2017 gave a big you know big speech out in San Francisco after Andre and Horowitz blew a lot of smoke up as you know what saying listen um you know listen I don’t think this is security because we have this sufficiently decentralized test right and so a lot of
Lawyers in the space looked at that and said cool green light Open Season let’s go launch uh you know that was the statement that launched a thousand icos because basically people said well it’s going to be sufficiently decentralized so we can do an Ico explain that though this sufficiently decentralized because
They said Bitcoin and ethereum back in the day they might they subject to debate now are sufficiently decentralized so maybe they don’t have to be regulated as much so explain that the test which is relevant here is the hoe test which Haley mentioned earlier
And the howi test is three and a half to four pieces depending on how you count them basically the Hoy test says if there’s a contract transaction or scheme involving the investment of money into a common Enterprise with the expectation of profits arising from the efforts of a
Promoter or a third party then that scheme is an investment contract uh and investment contract is regulated as a security under Section Five of the Securities Act of 19 33 so basically all of those components have to be present for something to be an investment contract if you can knock one of those
Limbs out then you have an argument that Howie no longer replies so if there’s no investment of money right then you don’t have an investment contract under howi there’s no common Enterprise you don’t have an investment contract under Howie if there’s no expectation of profit there’s no investment contract under hoe
So the Ico boom back in 2017 took the TAC that basically there was no expectation of profit because these things that people were buying were utility coins which were intended for consumptive use rather than investment use right and so the SEC at the time was like oh maybe that works now of course
They’ve taken somewhat of a different view so with some of these with ethereum the argument was that even though ethereum was launched via an Ico and at the point of its launch would have been an investment contract for the purposes of the 1933 act the transactions which
Were taking place later on right five six seven years later were not investment contracts and it was no longer appropriate to call Ether an investment contract because there were no longer those four elements uh which are required for there to be an investment contract so recently the New
York attorney general uh Tish James has brought a lawsuit against kucoin in which it’s alleged that ether is in fact uh an investment contract and her argument is so if you look at the investment of money right people are buying it sheg that’s your investment of money expectation of profits why are
They buying it because never go up common Enterprise why is that there well let’s look at what the ethereum foundation does there’s a foundation it’s centralized it exists it exercises a huge amount of influence over the direction of the protocol and its development as evidenced by the fact
That its developers steered the protocol from proof of work to proof of stake and so they argued listen all that tells us that this thing is still an investment contract and the transactions are still transactions in investment contract contracts when they’re being sold by the foundation which means guess what
Statute hasn’t run if they’re continuing to dump tokens on the market and Gary gensler’s made similar noises so basically the SEC kind of punted on it back in 2016 2017 they really only went after the most egregious frauds back then and so as a result tons of money
And resources and effort went into the Ico space and the protocol layer one protocol development space because people took you know took their cues from the SEC and they said well listen not enforcing against anyone so we’re just going to go in there anyway now the SEC said actually we’re going to enforce
We’re going to go enforce against all of you we’re going to do it as aggressively as possible and we’re going to enforce against the exchanges and granted back in 2017 I was one of the people and Haley I think was somewhat skeptical as well but we were we were among the folks
I was really skeptical that icos were not Securities I said listen it’s very very likely that these things are securities just because the regulator isn’t saying it doesn’t mean it’s not true I got rinsed for it by particularly the Ethereal guys there was a whole bunch of consensus lawyers who were very
Very very mean to me and I very much enjoyed being able to tweet tis James’s lawsuit after tag of the wall in the replies being like hey guys five years later I’m right you may be rich and retired because you invested in at least I was right so I did see a couple
Reddits with with comments about yeah I mean the key is the way the SEC seems to be looking at things in the current climate is that this argu argument that tokens have utility may be true but if the proceeds from the sale of the tokens are then being divied up between for
Legal fees and marketing and building out the protocol and bringing more value in return to those tokens you know the SEC is very skeptical of that but to Preston’s point with any Regulators there’s a long taale of enforcement right so enforcement actions that become public may have been going on behind the
Scenes for years and as a result the SEC has gotten a reputation for regulating through enforcement action because instead of taking a proactive approach of saying this or that or telling exchanges how to become and approving applications for exchanges to become regulated broker dealers and ats’s it feels as though
Sometimes the SEC is doing enforcement instead so I think that’s the biggest struggling point for companies in the space but also practicing attorneys right because you we can’t wave a magic wand and clear up everything for clients and that’s often times frustrating conversations for us to have because we’d like
To well it’s starting to even hit the Judiciary right I mean just the last week week before the judge in the Voyager case said hey SEC you came in here made all these allegations you didn’t show me anything and I go look for precedent or any kind
Of you know guidance and it’s not there do you think now the fact that judges are coming out and saying this stuff that will have any impact on Regulators to maybe be more proactive rather than just enforcing I feel like we’re getting to some sort of friction point I’m not
Sure how soon something will happen but you know the ability for there to be companies operating in the space comfortably here in the United States I think is important and I think there’ll need to be some sort of congressional action or intervention to sort of get everything in order I don’t know when
That’ll happen that’s another question I have where do we go both of you both Preston Haley you both mentioned that the hoe test that Securities laws that we’re talking about that govern the situation like Ho’s from the 1920s early 1900s these security regulations are 30s into the 40s like when will that change
How will that change what will be the impetus for that change to maybe update the regulations themselves so the Securities Act was 33 um you know in response to the Great Depression and Franklin deler Roosevelt deciding to take over all of American society with the government but how’s 46 I believe
Now I’m not sure that hoe goes anywhere at least not in the United States because that would require an amendment to the Securities act which basically removes investment contracts from its scope or an amendment which basically says that certain crypto products aren’t covered by it I don’t think that’s
Really feasible because that would just open that would rip open a giant hole in the Securities regime which I don’t think the US government’s prepared to give up right what would be better right would be a disclosure regime which is separate or parallel to things like reg
CF and leg a and reg D and which says listen let’s call it you know regc right regulation crypto which would have something like a light touch but nonetheless honorous enough disclosure regime where if you’re launching a crypto token right you have to make it
Very clear you get no rights you have no dividends you have no this you have no that this is how the thing works here’s the code here’s the white paper and here’s some actionable representations which you can bring again here’s how we’re going to use the funds and all
This other sort of stuff rather like there is for reg CF and then not have the restrictions around one of the the big problem is that if you treat crypto as a security there are all these restrictions around trading crypto and where you can do it and how you can do
It and with whom you can do it and when you can do it that kick in which really are very incomp compatible with the idea of digitally native you know disintermediated decentralized money if you need to go on to an ATS or a Securities Exchange to trade crypto you
Can’t hold it directly on your wallet and you’ve got to be kyc for every transaction that isn’t really crypto what that is is that’s you’re holding some coupons to crypto which is held on an exchange which is non-fungible with crypto everywhere else in the world so essentially they’re trying to put a
Square peg into a round hole and it’s not going to work which is uh which is the problem I agree with that I don’t think it’s that we’re going to sort of change the um direction that we’ve been heading in I’ve actually seen a trend in
Clients coming to us and being much more open to the idea of okay let’s become registered I think that companies eventually are going to have to decide if they leave the us or become registered as a you know security offering as a broker dealer ATS and those things are doable they’re a heavy
Lift it’s expensive and takes time and resources but it’s doable but there has to be a interest from the SEC to actually approve these things and provide guidance when something doesn’t fit into the process like it would as a traditional security so I think that that’s the biggest hurdle that we’re
Still sort of facing how much of a risk is America at to lose talent to lose Innovative companies because there’s just lack of guidance and it’s already happening there’s no risk it’s just it it’s it’s happening it’s underway there’s tons of movement and we’re seeing this with multiple clients right
So obviously we’re not going to say which ones we’re not going to say how but we’re seeing a lot more business in Latin America we’re seeing a lot more business in Africa Africa in particular yeah you one in four human beings on the planet is going to be African in 2050
It’s going to be one and three by 2100 um so essentially right the growth that you would expect from a novel technology right or the adoption of a novel technology is not going to come out of the United States and Europe it’s going to come out of places like Africa
So that’s where we’re seeing old movement and not to go too off topic but I think part of that I view it as an extremely negative thing for the United States I think part of it is the United States meanwhile in the background is trying to figure out Central Bank
Digital currencies and how to fit the technology of Bitcoin or cryptocurrency into something that is still more centrally controlled and so you know a lot of what’s happened in my opinion over the last year the Biden executive order came out tasking different Regulatory Agencies to go explore the
Risks and the benefits of cryptocurrency the reports that have come out seem to focus only on the risk um and only on sort of the negative narrative around cryptocurrency and I I do think that that’s a shame because in the United States I think we value innovation um
And a lot of what happens in the traditional banking systems like the rails are archaic it takes you know three to five business days and all this time and friction to move money and do crossb payments you know there is a use case for Bitcoin and some other
Cryptocurrencies and I wish that we in the United States were more open to that but because this podcast is legally focused what I’ll say is that the amount of work there is to be done for clients who do want to stay in the United States who do want to find their path forward
Here and unfortunately the companies that potentially did things the wrong way on the front end with other legal council and are now dealing with bankruptcies or litigation that is stemming from some of those things there’s a ton of work to be done and the two things I I think that the crypto
Industry is always looking for are more banking partners and more lawyers many lawyers are inhouse and um for me I don’t think that I would enjoy being a lawyer if I hadn’t found this specific area it’s something that makes me excited every day to work on and that’s great we need lawyers like
You guys but lawyers who actually like their jobs exact found our but lead to something else you touched on it here isn’t it incumbent at some level for the crypto industry for the blockchain industry to educate more and to the extent they can all the time because I at the top levels
Of government there are people that you can just tell when they speak and talk about crypto and blockchain they have a profound misunderstanding of the technology so how do we address that how do you address the education piece you don’t I mean I’m a little controversial
About that I don’t think you make them I don’t think you tell them to understand I don’t think you get them to learn I think you force them to understand uh and the way that you do that is by building better decentralized tools that can ignore their controls and ignore
Their ramps and ignore everything it you know decentralized way so that you’re not engaged in regulated activity your users aren’t engaged in regulated activity but the protocol continues to function and it will ignore you know any force that the regulator throws at it that’s a very very difficult if you go
The eye of the needle there it’s very very difficult to thread that so it’s very tough to do and a lot of people don’t do it correctly right so they’ll say well we want to have this decentralized app but we also want to have a shitcoin pardon my French packed
Onto the back where we issue ourselves 90% of the Supply right you’re not doing it decentralized then so if you’re doing it Satoshi style right or there’s some layer two companies which are building things which they don’t control or contributing code to things that they don’t control I think that those tools
Will wind up simply by force of a option the laws will change and wrap themselves around them because people will be forced to understand if if it turns out that to do business in Africa you need to have access to the unfettered access to the lightning Network guess what
People are going to figure out a way to get unfettered access to the lightning Network and the politicians are going to follow so I’m not a big proponent in getting politicians to write rules I’m a very big proponent in forcing them to acknowledge that the rules are
Irrelevant the only thing I would add to that is I think there’s sort of two different groups in the crypto industry that Propel the industry forward and one is the builders right the people that keep their head down and are working with attorneys and different company
People to to weave that Needle and to find that right balance engagement in DC for me is another aspect I agree with Preston you can’t force someone to understand or appreciate this technology I would actually say that a lot of the government officials or Regulators that
Seem to not really get it they do get it they just have ulterior motives that are at play behind the SE agreed but but some not naming names I feel like some of them really don’t really don’t the motive the motive is there well the
Problem is is that and it it’s even a problem as you know with going back to your if I walked up to you out of barbecue half the time I don’t immediately tell people what I do because what comes to mind for Regulators government and people who don’t know anything about this industry
Is only those headline news the big scams the big things that blow up even the messaging about Bitcoin not being energy efficient these like narratives around it only being used by criminals being anonymous being all those things are what make the headline news not the great use cases of other countries and
The things that are being built in the United States the right way and for the right reasons um and so that’s hard right because when Regulators have those things to point to there’s a lot of other things they could be looking at so educating or explaining those aspects I think can
Have some value one of the terrible things about being a lawyer in private practice is that you can’t talk about any of the cool stuff you see yeah haly referred to as the bird’s eye view a friend of mine who went in house very very well-known crypto lawyer of a went
Inous uh I I saw him in Dubai a couple weeks ago and he’s like so has Private Practice I was like good and he’s like you know what I I kind of miss it I was like well what do you miss he said I miss the God’s eye view right words I
God because why way to say it you get to see what’s going on across 70 80 90 different companies but you’re seeing it three years ahead of schedule right before anybody knows about it when a company’s raising its series a and it’s got 5,000 users right it’s got so many
Doublings ahead of it before it’s going to become part of the public Consciousness and so one thing that we get to see is we get to see a lot of early movement right from you know the United States to Africa the United States to Latin America development of
Layer 2 protocols that nobody uses or is heard of right so all that kind of stuff is just absolutely amazing and it’s a huge cause for optimism but of course the rest of the world they just look and all they’ve heard about is FTX right and right and Celsius and three arrows and
So those are the stories which get the headlines but like FTX went down it was pretty shocking for me when it went down because s SPF was so prominent But ultimately like it really not a particularly interesting company from a technological perspective it was just you just another exchange just like
Every other exchange happened to be run by an America and you also see the legal Trends so you see the confidential investigations that the SEC is doing years before it turns into an enforcement action or a settlement um and it allows us to give without sharing client confidence it it gives us the
Ability to adapt our legal advice for future clients by saying this is not an area you want to get into what how how can we sort of change the offering in a way that is more in line with your goals to do things the right way and stay out of
You know the bullseye of these Regulators because there’s different ways to do that so I think that that’s one of the interesting and exciting things our Practice Group does Steven P leads our practice group and to be able to all three of us to be on a call with
A client and be able to help them manage what they’re trying to do has been really exciting and like Preston said some of our clients start off small and seeing these companies grow with us in part because of the legal advice and help we’re able to provide is really
Rewarding to see see companies doing things the right way it also means I’ll be able to send my dog to college when they it bigger you that’s important but that is important well cool Haley Preston I really appreciate your time I know you guys are really active on
Twitter so if people want to find you there where do they go and also if they want to learn more about your individual practices where do you want to go yeah I’m on Twitter as Haley lenon BTC H AI l e y l e n n o n BTC and brown Rudnick
Our information and bios are on the website we also have a good overview of our digital Commerce Practice Group there we would be happy to connect with any listeners yeah and on Twitter I’m Preston J burn that’s burn Bravo Yankee Romeo November Echo and uh if you want
To connect with me there and happy to chat if you tweet morm pictures of marmit at me uh that’s the easiest way to get my attention and get a follow so if you want me to follow you just like reply to one of my tweets with a picture
Of a Marmet on it and that’s a guaranteed follow it’s how we became friends so okay that’s a wrap for today’s episode as always we really appreciate you listening if you want to subscribe you can find us on most major podcast platforms like apple Spotify Google
Stitcher Etc also if you like us enough I hope you leave us a favorable review Thanks again for listening until next time this has been technically Legal W