• February 2020
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Everything Cryptocurrency Companies Have to Know Before Hiring a Cryptocurrency Lawyer

In 2018, cryptocurrency regulations can perhaps best be described in four words: uncertain and still developing. Many have pointed out that cryptocurrency provides a great example of how the law lags behind economic realities. Even as crypto has been taking the world by storm, regulations have been scrambling to catch up. On the one hand, this relative unregulated space offers its benefits: the fast-paced change and innovation is likely a consequence of the general impression we’ve had until recently: that crypto is unregulated.

However, the lack of a coherent body of cryptocurrency law has had its victims: many consumers and large companies have been victims of securities fraud and even theft without much recourse within the law. All of that is changing, and rapidly: the SEC has stepped in to start regulating cryptocurrencies, in particular Initial Coin Offerings (ICOs). Advertising and marketing regulations (such as those contained under the Fair Trade Commission Act) have been applied to cryptocurrency companies. And as various jurisdictions are coming to terms with the reality of cryptocurrency law, the legal requirements in various jurisdictions can vary widely.

The result? You probably need a cryptocurrency lawyer. Whether you are a large cryptocurrency company hosting an exchange, a small startup planning on an ICO, or an individual investor: the legal risks are too high to ignore, and too uncertain to tackle on your own. This is what to keep in mind when looking to hire a cryptocurrency lawyer.

Hiring a Cryptocurrency Lawyer on a Project/Case Basis

Depending on your circumstances, you might only need a few consultations from an experienced lawyer. If you are an individual investor, you will need to ensure that your crypto transactions are reported correctly for tax purposes. According to the IRS, cryptocurrencies are treated as property, and taxed as such.

Individual investors are also advised to get legal advice on white papers before investing in an ICO. There have been many fraudulent ICOs in the recent past, and despite the efforts to get regulation caught up, we can expect more fraud in the future.

If you do need legal assistance, a cryptocurrency lawyer is a necessity. This is one of the fields in law where a lawyer with general litigation skills might not be your best bet: you need someone who understands the world of crypto, and who is able to translate the realities of that world to a court.

Hiring In-House Counsel

If you are a cryptocurrency company with ongoing activities in the world of crypto, your best bet is to appoint in-house counsel. The legal risks that you assume with an ICO, or by issuing smart contracts, for example, are substantial. Once-off consultations are likely not going to be sufficient in your case, especially because this is a field of law that changes so rapidly. Ensuring that you comply with state and federal regulations, tax law, securities law, privacy law, and consumer protection law is already sufficient reason to appoint full time legal expertise at your cryptocurrency company.

There is an even more important reason, however: being successful in the world of crypto is not only about staying within the law. It is also about being strategic within the law. For instance, did you realize that the choice of jurisdiction for your ICO can change your company’s prospects significantly? Do you know whether or not, and why, your token might be classified as an utility token and not a security? Do you structure all your crypto transactions in a way that is most beneficial for you from a tax perspective?

These are not mere matters of knowing the law well enough not to break it. This is about knowing cryptocurrency law well enough to navigate it. For your cryptocurrency company, therefore: consider hiring in-house counsel.

These are some of the things to keep in mind when you are looking to hire a cryptocurrency lawyer:

Look for Someone With a Background in Securities Law

Most coins are considered securities by the SEC. Almost all ICOs are treated as securities offerings. Even if you wish to have your coin considered a utility token and not a security, you will need intimate knowledge of securities law to prove that. In almost all cases, therefore, and especially if your company is pursuing an ICO, prioritize your lawyer’s knowledge of securities law.

Look for Someone with In-Depth Knowledge of Crypto

And, ideally, in-depth knowledge of your cryptocurrency company’s strategic use of crypto. This is one of the key reasons why finding a crypto lawyer is so essential: there is no natural overlap between knowledge of crypto and legal expertise. You need to find a candidate where those do overlap.

Look For Someone Who Loves to Learn

The only thing we know for certain about cryptocurrency law at the moment is this: it is bound to change. A lot. Find someone who will enjoy staying on top of all the newest developments and figuring out how those developments should impact your business.

Look For Someone Networked

This is not an essential, but can be a great bonus. If you can appoint a lawyer that is connected in the legal world, and especially the regulatory world, you have a strategic advantage over companies on the “outside”, so to speak.

Look no Further than LawTrades

The cryptocurrency lawyers on LawTrades can provide proactive online legal planning to keep your Bitcoin or other cryptocurrency running smoothly during potentially rocky times. Our cryptocurrency lawyers are licensed across the country and are able to provide both the local regulatory support and the broad corporate guidance cryptocurrency companies and investors need to succeed. Get in contact today!