Should crypto law be the next frontier for aspiring lawyers and legal types? As blockchain technology makes its presence felt in more areas of the finance, banking and tech world at large, the need for regulation is growing. At this stage, legislation is piecemeal at best. As per CNBC’s 2018 guide to crypto laws around the world, Bitcoin and its peers are considered everything from legal tender to a ticking time bomb. With the regulatory landscape still finding its level, anyone looking to specialise in this emerging sector would have to keep abreast of the ever-changing dynamics.
Despite the air of uncertainty, investments in crypto-based start-ups are increasing. Reviewing the market, TechCrunch noted that fundraising for crypto companies is up by 40% in 2018. In line with this increased interest from venture capitalists, investment bank NKB published a report on Cardano in June 2018. Designed to be as much of regulatory exercise as a review of Cardano, the report took NKB’s “standard procedures from traditional finance” and applied them to the “newly developing crypto economy”.
Applying Financial Regulations to Emerging Technology
What’s interesting about the report is that Cardano isn’t a marquee cryptocurrency. Recently added to the eToro trading platform, Cardano coin (ADA) is currently trading at 0.1592 (at the time of writing), which is significantly lower than the 6590.85 BTC was trading at on the same day. The fact investment banks are now considering less well-established blockchains like Cardano is clearly a sign of the times. While politicians have been busy arguing over the legality of the market leader Bitcoin, those with an interest in the financial side of things have taken broader strokes.
For those in the legal sector, this clearly throws up some interesting opportunities. The problem, however, is how will all of this promise manifest itself in reality. Regulating the financial world is tough enough on its own. In the UK, the Financial Services and Markets Act 2000 (FSMA) forms the foundation of the banking sector’s regulations. However, because the UK is still part of the European Economic Area (EEA), there is a slew of European Union regulations that run parallel to the FSMA. For example, banks and investment companies must abide by (EU) 596/2014 on market abuse as well as (EU) 648/2012 which sets out guidelines for trading OTC derivatives.
A Tough Task for All Concerned
"Grimes County Courthouse, Anderson, Texa" (CC BY 2.0) by Patrick Feller
What the current landscape shows it that regulating financial companies isn’t easy, especially when they trade in multiple jurisdictions. Even with clearly defined currency lines, the matrix of clauses and subclauses is extensive. When you try to apply a similar methodology to the crypto world, you instantly run into the issue of universality. At its core, all coins are designed to be universal. Indeed, one of the founding principles was that it offered cross-border payments. Then, on top of this, you have the issue of anonymity. Although investment firms are currently more interested in the blockchain side of cryptocurrencies, the dynamic is still in place. This, again, makes establishing a set of laws difficult.
Finally, there’s the issue of national attitudes. While every country can agree that fiat currencies are useful, not all of them have the same stance on cryptocurrencies. How would a law applicable in a pro-crypto country apply to a non-crypto country? Coming up with a solution to these issues and more clearly won’t be easy. For the aspiring lawyer, this makes specialising in cryptos a tough gig. Although it’s clearly not an impossible task, it’s one that’s almost impossible at the moment. As the industry grows and evolves, things will undoubtedly find their way. However, as it stands, the regulatory path for the crypto world is anything but clear.
