Bloomberg Law
Jan. 18, 2023, 9:45 AM

Crypto Still Holds Promise for Lawyers, Despite the Crash

Richard Tzul

Investors may have pulled away from cryptocurrency after the crash, but law firm partners—banking on increased business opportunities—aren’t recoiling.

As crypto technology continues to innovate, with regulatory and compliance challenges on the horizon, demand for legal services will increase, they said.

“Despite the recent market crashes this year in the price, the advancements in the technologies continue,” said Robert Musiala, a partner at BakerHostetler. “And what I’ve observed over time is that blockchain technology is absolutely here to stay.”

Crypto expansion may get delayed, he said, but it won’t stop. The technology will continue to evolve, with products like nonfungible tokens finding new uses and more tie-ins to the metaverse emerging, he said. Simpler digital assets like Bitcoin will become more integrated into the traditional financial system. All of those, he said, create new legal needs.

Notably, there’s a growing need for enforcement defense services responding to the efforts of governments to crack down on the sector, said Musiala, who is co-leader of BakerHostetler’s blockchain practice.

The firm has a team of about 100 attorneys dedicated to digital assets and data. It offers several services including lobbying, anti-money-laundering and Bank Secrecy Act compliance.

The so-called crypto winter—a sustained downturn in the market—has taken the Bloomberg Galaxy Crypto Index down by more than 75% from its late 2021 peak. Despite that, the market will grow, agreed Judith Rinearson, a K&L Gates partner who specializes in emerging payments. And with a growing market, demand for legal services will also increase.

“If anything, certainly it looks like there’s going to be a lot of new legislation in the coming year,” said Rinearson who has spearheaded her firm’s blockchain practice initiative. “And because of that, these companies are going to need lawyers more than ever.”

K&L Gates provides a full range of services related to crypto, including real estate, trademark and patents, she said. That means clients requesting assistance in anti-money laundering could be offered tax or other areas. The firm has plenty of business opportunities made possible by crypto, she said.

Crypto firms need for help in navigating the uncertain rules of compliance is another driver of demand for legal services, Rinearson said. And clients from outside the US need help in entering the market, she said.

Even dysfunction in the industry can bring opportunities for law firms, Max Dilendorf, a partner at Dilendorf Law Firm, noted.

Dilendorf’s firm currently represents clients against crypto exchanges who lost their money to cyber-attacks.

“I would say that’s a very hot area right now,” he said.

Long-Term Value Proposition?

Michael Simkovic, a University of Southern California law professor who specializes in financial regulation, said that in the near term there would be plenty of work for law firms’ bankruptcy teams, with many crypto firms seeking to reorganize in the aftermath of the market downturn. But the longer term is less certain, he said.

The most convincing case for cryptocurrency has been demonstrated in its potential to accelerate and cut costs of money transfers and international transactions, Simkovic said. But some of that—no one is certain how much—is possible only because the industry is evading regulations, he said. And that can’t be a permanent strategy, he noted, because compliance will eventually be enforced.

“Cryptocurrency firms basically have to answer the question, ‘What is the value that they provide that existing financial institutions cannot provide just as well,’” he said, and the answer can’t just be that they skirt regulations.

The FTX crash is a singular case and doesn’t indicate that crypto technology itself is unviable, said Jeff Strnad, a Stanford law professor who teaches courses on blockchains and cryptocurrencies. FTX was a centralized exchange, he notes, contrasting it with Uniswap, a decentralized exchange that operates with no third party mediating transactions.

While the FTX debacle appears to have little to do with the underlying crypto technology, the scandal has affected funding to the sector, he said. Crypto projects have been pulled or have had funding cut, meaning startups have less money to afford lawyers, he said. Technological developments will also be delayed, but not stopped. Eventually, he predicted, the funding will come back.

Regulatory Flux

Government regulation, a major driver of law firms’ work, remains undeveloped, Strnad said. That means crypto projects face a gray area rife with potential problems.

Startups may be uncertain about whether their products qualify as securities—and therefore fall under the jurisdiction of the Securities and Exchange Commission—or if they would instead be classified as commodities and fall under the oversight of the Commodity Futures Trading Commission. In fact, the two agencies are themselves angling for primacy in crypto regulation, and Congress and the courts haven’t weighed in on the question in an authoritative fashion.

Under the circumstances, the attorney’s role is to outline multiple scenarios stemming from that ambiguity. The extra possibilities that attorneys need to explore, Strnad said, mean extra work, and therefore more business.

Even if regulatory oversight becomes clearer, however, clients may still be confused about what the restrictions are or how to comply.

“If I’m advising a CEO or something like that—they’ve got to do this,” Strnad said of crypto firms hiring legal aid. “You don’t want to go out there and just close your eyes.”

To contact the reporter reponsible for this story: Richard Tzul at
To contact the editors responsible for this story: Jeff Harrington at; David Jolly at

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