Bloomberg Tax
Free Newsletter Sign Up
Bloomberg Tax
Welcome
Go
Free Newsletter Sign Up

How Budding Lawyers Can Prepare for a Career in Blockchain World

June 22, 2022, 8:45 AM

From litigation to business, from intellectual property to so-called “smart” contracts—which are generally not legal contracts—practicing as a blockchain lawyer is a multi-disciplinary practice. Three keys will help lawyers prepare for a career in the blockchain world:

  1. Understand the tech
  2. Find a practice
  3. Participate in the community

Understand the Tech

Blockchains are, at their core, trust machines that replace traditional intermediaries with technology that minimizes cost, adds transparency, and adds security to transactions.

A critical first step for any lawyer looking to enter the space is to understand how blockchains work. That knowledge not only provides a baseline for any blockchain-based practice but will also allow lawyers to talk with their clients in a language those clients understand.

Find a Practice

After understanding the tech, the next step is to identify an interesting blockchain-based practice and get up to speed on the law. Unlike most areas of practice, in blockchain, multiple regulators often claim jurisdiction over blockchain activities, and there is little-to-no actual “law” on point.

“No one really knows what is going on in crypto law,” said Jake Chervinsky, head of policy for the Blockchain Association. “We’re sort of making it up as we go along.”

Blockchain lawyers often have to glean the law from regulatory announcements or other areas of law drafted well before blockchains were created. In practice, that means looking to more settled areas of law and reasoning by analogy or using public policy arguments to provide useful advice to clients.

As an example, look to financial regulation.

The purchase, sale, and transfer of cryptoassets may be regulated by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and/or the IRS. None of those agencies have provided clear regulatory authority for crypto. Instead, they have made pronouncements, often with no precedential value, indicating their position on various issues. In the US, to make matters worse, different types of crypto are treated in different ways by regulators:

  • The SEC treats some crypto as securities and regulates both the issuance and secondary trading of securities.
  • The CFTC treats some crypto as commodities and regulates not only crypto commodities, but also crypto derivative markets and some asset-backed lending products.
  • The IRS treats crypto as property for tax purposes and has issued a number of pronouncements and rulings addressing both taxpayers’ duty to report crypto transactions and how such reporting should be done.

Depending on the activity, crypto transactions may fall under the regulatory scope of the Bank Secrecy Act, which may mean that entities have to register with Treasury’s Financial Crimes Enforcement Network (FinCEN), as well as one or more US states where they do business. In general, such registration will also require the entities to implement anti-money laundering, know your customer, and combat the financing of terrorism programs.

Because crypto is global by nature, clients may face regulatory obligations in multiple foreign jurisdictions. For example, the European Union’s General Data Protection Regulation (GDPR), which regulates privacy and other matters relating to the development and adoption of blockchain and distributed ledger technology, imposes additional, and at times conflicting, regulation for companies that offer products to US and EU customers.

Outside of the purely financial practices, attorneys can find numerous other blockchain-based practices, including:

  • General business: Blockchain-based businesses face many of the same business needs as traditional businesses. Lawyers need to work with clients on how to pay and accept crypto as payment for products and services, how to custody funds received, and how to manage smart contract risks.
  • Finance: Because so many blockchain platforms are involved in decentralized finance (DeFi) or centralized finance (CeFi), lawyers have to ensure DeFi and CeFi borrowing and lending transactions not only comport with existing law and regulation but also make sure the platform minimizes smart contract, custody, and other risks so the platform can operate safely.
  • Intellectual property: Many issues in crypto involve intellectual property, including patents for blockchain technology, and the copyright issues involved in creating and selling non-fungible tokens (NFTs). The rules for many NFT copyright issues can be found in a platform’s terms of service, and lawyers are integral to the drafting of those documents.
  • Litigation and dispute resolution: Blockchain and crypto create many issues that require traditional litigation advocacy skills, from representing clients in administrative, civil, and criminal matters to internal and external investigations on behalf of clients.
  • Tax: Crypto tax lawyers have to deal with compliance issues regarding the tax implications of transactions for which the IRS has not issued any guidance—for example, are staking rewards payable in the staked token taxable?—as well as representing clients in audits and ensuring proper reporting of activities.

Participate in a Community

In the blockchain space, “proof of talent” is often more important than credentials. Because many conversations in the blockchain space take place virtually, lawyers need to engage in those spaces and demonstrate their expertise and passion. That means writing—not necessarily long law review articles or academic pieces, but pieces that address open issues and reach the community. The venues for such pieces can be bar journals or online publications such as Medium but more often are non-traditional venues such as blog posts, Discord messages, and tweets. Those to-the-point writings help others navigate the space, broaden a lawyer’s brand and reputation, and build the community of people who could be potential clients.

Chervinsky, one of the most well-known lawyers in the space, got his footing in crypto law by regularly tweeting his thoughts on legal issues. He turned his tweets (and his insightful legal analysis) into a career that has included work at Compound Labs X and his current position as head of policy at the Blockchain Association.

Finally, I encourage lawyers to join communities of interest by attending conferences or meetups. The audience at such events is mostly developers or entrepreneurs and is desperately in need of legal talent. In my experience, simply by showing up as a competent lawyer, opportunities will present themselves.

Nihit Desai, a 20-something partner at a boutique law firm, told me on a phone call June 15 that “the conferences I’ve attended have brought me new clients and valuable relationships, allowing me to grow my practice.” I share that view and encourage attorneys looking to enter the practice to show up and engage as a way to build a practice.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Del Wright is an author and professor at the University of Missouri-Kansas City School of Law, where he teaches finance, business, securities, tax, blockchain and crypto. He previously was a federal prosecutor and an attorney at Skadden, Arps, Slate, Meagher & Flom LLP. His current research focuses on the regulation of blockchain technologies, as well as tax and entrepreneurial law.

We’d love to hear your smart, original take: Write for Us