Although a new and lightning-fast evolving subject, blockchain and cryptocurrency issues have broken records in making it into the regulatory arena. What’s most unfortunate is that the technology itself has not been the culprit in wrongdoing, but that those who have misused it for financial gain.
Understanding the law of blockchain and cryptocurrency begins with appreciating the complexity behind this important evolution in programming. Having worked with blockchain firms, it’s essential to see where the legal hurdles exist even though the regulatory landscape is not distinctly marked.
Virtual currencies are defined as digital representations of value or unit of account that are exchangeable but without legal tender. Virtual currencies can also be further defined as convertible value to real currency. Currently, the most common form of cryptocurrency utilizes alpha-numeric public keys (or addresses) to represent individual holdings based on anonymous or pseudonymous ownership, and stores transactions/holdings on a distributed ledger. At the time of this writing, virtual currencies have been loosely categorized as commodities under US law.
Clients who are active in blockchain platform technology must understand that traditional legal duties exist for developers and stakeholders who offer services within this industry. Issues such as data stewardship, legal compliance, warranty and industrial liability, as well as basic contractual duties all remain despite the novelty of blockchain and cryptocurrency.
For clients who wish to aim their platforms towards tokenization and digital assets, an entirely well thought out perspective is needed before scalability makes it difficult to make changes. The formal filings that come with ICO’s bear possibly more scrutiny than most any other securities and commodities related business. Therefore, the overall business structure and unique platform position should be evaluated for legal and regulatory investigations.