What it Means to Be a Blockchain Lawyer

Data & Research / 16.07.2021

A growing interest in cryptocurrencies and blockchains is steadily rising as individuals shift from the traditional financial system to the digital currency world. Blockchains, in particular, present impressive solutions focused on recording, maintaining, and securing data on a public ledger. 

Despite introducing a practical data management feature, blockchain technology is still under heavy examination across the financial industry and beyond. Thus, it makes various regulators hesitant with the blockchain’s applications and capabilities as they are delegated to assure the banking industry’s stability. 

Blockchain lawyers play a vital role in ensuring investors, developers, and other significant shareholders understand the legal stand of blockchain technology and its applications in a country. 

The Legal Side of Blockchains

As advocates, blockchain lawyers represent their clients during proceedings and generally manage their legal requirements. The distributed ledger is designed to be an anonymous and tamper-proof solution that instills the value of transparency to all users.

Therefore, a DLT-based lawyer needs to have broader experience in specific fields, including finance, law, cybersecurity, and digital currencies. 

Legal representatives already realize the significant impact blockchains have on the financial sector. Asides from employing anonymity and immutability, blockchains eliminate the chances of hacking as it is adequately managed through consensus mechanisms. 

Even with all the merits, various jurisdictions either oppose the ledger’s application or set up strict laws which may inhibit its implementation. 

The Tasks of Blockchain Lawyers

Legal advisors offer guidance on various matters, which include:

Creation of Crypto and Investment Funds

Launching new blockchain-based projects usually require massive amounts of capital to run and sustain them. It, therefore, drives these projects to conduct fundraising activities such as ICOs whereby users purchase the platform’s tokens. 

At this point, blockchain lawyers step in to provide legal support on any crypto volatility or regulatory concerns that may emerge. For example, an effective investment funding plan could achieve success through lawyers with experience with securities regulations and interpret specific provisions stipulated by financial watchdogs.

Blockchain and Smart Contract Implementation

Blockchain lawyers direct clients on blockchain integration, auditory terms, and implementation of smart contracts as per a nation’s legislation. In addition, the legal advisors also emphasize more on the importance of user’s data privacy as provided by the law.

Litigation

Litigation is a dispute-solving mechanism designed by two opposing parties. During litigation proceedings, blockchain lawyers defend their clients in courts based on a region’s laws. Among the issues that may lead to litigation include fraudulent transactions, regulatory procedures, mergers, and acquisitions. The judges or jury later give a final decision that aims at benefiting the affected parties.

Other services that blockchain lawyers offer include:

  • Advising investors on the tax imposed from trading gains, lending, or even airdrop donations.
  • Developing an asset protection framework for investors.
  • Guidance on corporate development with blockchains and how to conduct intercompany deals.
  • Legal advice to miners on a blockchain who are more susceptible to scrutiny from regulatory bodies.
  • Providing in-depth insights on anti-money laundering policies and the outcomes of engaging in illegal trade within the blockchain.

Regulatory Problems Within the Blockchain

DLT-based technologies typically consist of validators situated in different parts of the world. Thus, not a single entity can be accountable for any illicit activity in the decentralized architecture. This fact alone leaves regulatory bodies and lawmakers with the challenging task of recognizing blockchains as a trusted source of identity. 

Despite bringing immutability features that ensure no party makes any changes, regulatory bodies may require an additional level of verification that proves ownership of a particular asset. 

Without a stable framework that shows genuine proof of ownership, countries may limit the use of blockchains and directly impact entities such as the asset management industry and their legal representatives.

Types of Blockchain Law Firms

Below are examples of well-known firms equipped with blockchain lawyers:

Oberheiden P.C.

This blockchain firm acts as a crypto and blockchain representative body for its clients in the U.S and the world. The firm is headed by Nick Oberheiden and works in conjunction with individuals who formerly worked with the SEC and IRS

Oberheiden has an impressive track record of supporting its clients against the risk of federal prosecutions. In terms of compliance, the firm engages investors and other entities on the importance of adhering to procedures and policies which counter the risks of violations. 

Goodwin Firm

Goodwin is a digital currency and blockchain technology practice founded in 2015. The firm handles any issue relating to public securities laws, intellectual property, government scrutiny and enforcements, digital token fundraising, and many more. 

Essentially, lawyers at Goodwin offer advisory services to innovators and investors in the fast-growing blockchain sector. The firm also guides its users on some of the leading projects in the DeFi industry. Goodwin previously worked with Coinbase exchange, representing it when the platform was under pressure from the IRS to release its customer’s trading details. 

Aside from Coinbase, the firm offered its services to popular platforms within the crypto space, such as Blockfolio, Circle, Digital Currency Group, and Tezos Foundation.

Takeaway

Legal representatives in the blockchain industry provide valuable insights which assist platforms in cooperating with the existing guidelines. In addition, lawyer’s multidisciplinary experiences give them an immense advantage of combating any strict regulations set up by various governments and financial agencies. 

As a relatively new technology with almost ten years, blockchains have proven to be an effective data management system for industries to adopt. Therefore, in collaboration with other legal consultants, blockchain lawyers extend their services to clients hoping that the world embraces DLT-based ecosystems.

Adam is an outgoing young lad who likes adventures and discovering new things. Despite his boring life, he loves writing about cryptocurrencies and exploring what blockchain technology can do for the coming digital world where all adventures will be virtual.