It used to be said that August was a quiet month for the markets – but apparently no one told that to the boosters of blockchain and cryptoassets, at least in Chicago. The month of August 2018 has no fewer than three significant conferences, each with its own special flavor, kicking off with “Block (Legal) Tech: A conference about the future of the law” on August 9. Hosted by the Law Lab at Illinois Tech Chicago-Kent College of Law and FinTEx, the event gathered experienced lawyers in the cryptoasset space and regulators for a day-long look at the past, present and future of U.S. law and regulations, particularly where it applies to cryptocurrencies.
Not being a lawyer myself, many portions of the event either had too much detail to be of general interest or consisted of pitches or positions that, frankly, may look ridiculous in the not too distant future. For both reasons, I’ll stick to the highlights of what caught my attention:
- Steve Palley of Anderson Kill began his presentation with a biblical reference, not always the best idea but entirely appropriate here. He cited Ecclesiastes 1:9 which says, to paraphrase, that there is nothing new under the sun. While the technology and the terms that describe it may be new, the truth is that the same principles that apply to our existing laws are going to be applied to the crypto world. Put another way, the law of gravity still applies. You can choose to ignore it but, in the end, you can’t escape it.
- Angela Walch from St. Mary’s University School of Law is troubled by terms like “immutable,” “decentralized,” and “trustless,” which are thrown around loosely in crypto circles. It is the job of lawyers to challenge and validate that words are true, and there is a lot of doubt about many claims by crypto touters. Particularly troubling is the fact that some of this language is being promulgated in laws with an Arizona statute being particularly egregious, even more so because it is now being copied in other jurisdictions.
- Drew Hinckes, general counsel at Athena Bitcoin, noted that the incumbent cryptocurrency exchanges have their work cut out for them as price deltas have contracted and their customer service leaves a lot to be desired. They will need to work on their efficiency and their bedside manner going forward.
- Karl Muth, CEO at FRST, noted that only 11 countries in the world perform crash tests on automobiles but the rest of the world benefits from the results. The same may apply as developed nations address regulatory issues in crypto and develop the rules of the road that will ultimately apply across the globe.
- Preston Byrne from Tomram LLC was easily the most outspoken of any of the day’s presenters. Some of his bon mots included:
- In the not too distant future, saying “digital assets” will be as anachronistic as saying “digital watch” – they will be one and the same. (I confess that I looked down at my analog watch and considered that I am far behind already and the future promises more of the same!)
- Regulators are likely going to stop publishing and start punishing pretty soon.
- The concept of a sandbox was a cop out for the FCA (British regulator) because they didn’t have a clue or jurisdiction so they punted.
- ETFs won’t happen any time soon because lots of bad behavior has to stop first. People will be going to jail.
The balance of the day featured some fantastic content, including a panel on crypto hot topics moderated by Colleen Sullivan of CMT Digital as well as substantive comments from regulators, including Jess Cheng from the IMF, Amy Hartman of the SEC and the head of FinCEN (Financial Crimes Enforcement Network of the U.S. Treasury Department). However, as one attendee commented, the day was both energizing and overwhelming and that pretty much sums up where I was by 3 PM.
At the end of the day, I was reminded of advice that I always gave to my children as they grew up: the law is a good friend to have when you need it but at other times it’s best not to get caught in its nets if you can help it. With my kids, that meant staying away from the police after curfew or when doing something stupid, but in the case of the crypto world it may well be that it won’t be possible to avoid the law anymore. Some crypto-purists have argued for an extralegal world that transcends existing local, national and international law – but those options are looking more and more limited. Like it or not, the lawyers have grabbed hold of cryptoassets and they’re not likely to let go.