As potential investors contemplate getting into the blockchain and cryptocurrency market, Jackson Walker Corporate & Securities partner Michael Laussade discussed some of the practical and legal implications surrounding these issues. Prior to jumping into this complex, technical area, there are multiple legal pitfalls to consider, including the potential for fraud and white collar issues, and how startups and existing businesses are leveraging these modern technologies for their operations.
Greg Lambert: Hi, everyone. I’m Greg Lambert, it’s January 28th, and this is Jackson Walker Fast Takes. The business purposes for blockchain and cryptocurrencies has been discussed for a number of years, but with the current value of cryptocurrencies like Bitcoin trading at over $30,000 recently, I wanted to bring in Jackson Walker partner Michael Laussade to discuss some of the relevant issues surrounding the business usage of these two modern technologies for tracking events and for alternative currencies.
Mike, thanks for taking the time to talk with me.
Mike Laussade: Absolutely. Great to be here.
Greg Lambert: So, let’s start with Bitcoin since that’s been all in the news lately. What trends are you seeing when it comes to Bitcoin in business or client interest around it?
Mike Laussade: We’re seeing a lot of the same client interest that we saw exactly three years ago when there was a similar run-up in prices and grabbing headlines. The first level of interest is always around trading cryptocurrency. It comes from some of these clients that have been in cryptocurrency for a long time and have specific questions about security laws or the tax implications when they’re trading in and out of securities. We’ll sometimes be getting questions from more traditional investment clients that are looking to move into the space and want a little bit more guidance on what’s going on from a regulatory perspective with these kinds of digital assets. Then we have some people that are new to both investing and crypto and happen to have gotten in at a time, and they find themselves suddenly having significant stake and these kinds of assets and need to engage a lawyer. I’ve gotten calls from very large fund clients; I’ve also gotten calls from college students. A college student called me out of the blue, and I said, ‘Well, how’s college going?’ ‘Actually, I’m sitting in my sociology class right now talking to you and trading cryptos.’ So, it gives you an idea of sort of the challenges on that front right now.
Greg Lambert: Yeah. Now, one of the things that you hear, especially being on the lawyer side, is that this is also an area where a lot of fraud may occur. What are you seeing as far as fraudulent activities surrounding Bitcoin?
Mike Laussade: Unfortunately, we see quite a bit. We’ll get calls from people that initially are asking for advice about an investment that they’re in and just some advice around how they deal with a particular contract, and then you slowly realize that the investment they’re in is not really an investment at all and that they’ve been sucked into a Ponzi scheme. There’s so much activity out there. I mean, especially right now with so much of the news and everybody looking to make money from home, we’re seeing tons of activity in the U.S. and abroad targeting U.S. investors to get pulled in these schemes. It’s really the same classic scenario of ‘Send me some money, I will turn it into more money – oh, we’ve turned your money into more money, we now just need you to send a little bit more money so that we can send you all that money we made.’ It’s really unfortunate, and it’s happening in a really broad level. So, I work with our White Collar folks to help guide people through that, and sometimes even refer matters to enforcement agencies at the state and federal level.
Greg Lambert: Mike, let’s change gears a little bit and talk about blockchain. How are you seeing blockchain being used in businesses, both small and large?
Mike Laussade: From my perspective, we’re still in really early stage. The clients that we’re interacting with are still really in an exploratory phase when it comes to using blockchain to enhance existing technologies or develop new ones. Much of the excitement around Bitcoin is not just Bitcoin or cryptocurrencies themselves, but the promise of blockchain technology in general and how it’s going to allow us to create distributed versions of existing technologies. And that’s because so much of the energy in the space comes from. But the challenges there around making the technologies work, finding the talent pools necessary to build the new technologies, I think have made a lot of that come to fruition more slowly than perhaps people expected or hoped. Much of the market seems to be in much of the same place that it was three years ago, the last time that cryptocurrencies were making huge headlines like this.
Greg Lambert: Yeah, I think there’s been a lot of promise of what blockchain can deliver, but it seems to have been more of a solution that hadn’t quite caught up with the problem at this point. Are you seeing that?
Mike Laussade: That’s right, and right now what you’ll see are lots of solutions that market themselves as being blockchain-based or using blockchain technology. And perhaps they do, but if you really ask the question of why does that really need a blockchain, it can sometimes be difficult to answer. The beauty of something like Bitcoin is it is truly distributed—no one controls it. When you have a blockchain-based solution that is still living on a network completely controlled by one company, you have to ask what purpose is this new technology really serving. Is it really improved improving performance or security or privacy? Or is it just a sexier way to talk about it so then I may buy the product?
Greg Lambert: Well, what about legal issues? Are you seeing any legal issues being addressed with how blockchain is being adopted?
Mike Laussade: Certainly, every technology that we talked to somebody about that is looking to incorporate blockchain or is entirely blockchain-based application to a range of questions around privacy or a bit of more than a cryptocurrency currency realm, of a whole host of financial regulations and securities regulations that may be implicated. But then we also have kind of a traditional startup issues that come up when someone is really on the front end of developing a new technology – all of the typical questions around who owns the company, who owns the IP, how do you get this technology to market? All those questions are still there, and often need a lot of working through. So, it’s always a little bit of new and a little bit of old.
Greg Lambert: Well, Mike Laussade, thank you very much for taking the time to talk to me today.
Mike Laussade: My pleasure. Thanks so much.
Greg Lambert: Thanks again to Jackson Walker Corporate & Securities partner Michael Laussade for joining me.
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