Global Legal Insights - Global Legal Insights - Blockchain & Cryptocurrency Regulation 3

Another year has passed and virtual currency and other blockchain-based digital assets continue to attract the attention of policymakers across the globe. A lack of consistency in how policymakers are addressing concerns raised by the technology

is a major challenge for legal professionals who practice in this area. Perhaps equally challenging is keeping up with the nearly infinite number of blockchain use cases. In 2017 and 2018, it was the ICO craze. In 2019, the focus shifted to security tokens. In 2020, decentralized finance (or DeFi) attracted over several billion dollars' worth of investment. So, while ICOs are still being offered and several groups continue to pursue serious security token projects, we should expect DeFi to draw scrutiny from regulators, such as the U.S. Securities and Exchange Commission (SEC). Once again, legal practitioners will be left to counsel clients on novel issues of law raised by the application of laws and regulations enacted long before blockchain technology existed.

Of course, capital raising is only one application of the technology. Bitcoin, which remains the king of all cryptocurrencies, was intended to serve as a form of digital money. Arguably, it is this use case that has seen the most attention from governments around the word. The European Union enacted more stringent anti-money laundering (AML) regulations impacting virtual currency exchanges operating in the EU. U.S. regulators and state government officials continue to enforce money transmitter statutes and BSA regulations applicable to money services businesses. In the U.S., the state of New York, which was once thought to have over-regulated the industry out of doing business in the state, is now attracting applications from blockchain companies to become state-chartered trust companies. The charter may provide relief to virtual currency exchanges and similar businesses seeking to avoid the nearly 50-state patchwork of licensing statutes.

Institutional and large enterprise companies continue to expand into the space. It is no longer just FinTechs and entrepreneurial clients who need counsel on blockchain-related matters. Whether a small start-up or Fortune 100 company, clients need counsel in areas beyond compliance with government regulation. In some cases, intellectual property rights must be secured, or open source licenses considered to the extent a client's product incorporates open source code. Blockchain technology adopted by enterprise clients may involve a consortium of prospective network users, which raises joint development issues and governance questions.

As with the first two editions, our hope is that this publication will provide the reader with an overview of the most important issues across many different use cases and how those issues are impacted by laws and regulations in several dozen jurisdictions around the globe. And while policymakers continue to balance their desire to foster innovation, while protecting the public interest, readers of this publication will understand the current state of affairs, whether in the U.S., the EU, or elsewhere in the world. Readers may even discover themes across this book's chapters that provide clues about what we can expect to be the hot topics of tomorrow and beyond.