I’m sitting in the enormous, antiquely-furnished boardroom in the London offices of a major international law firm, tallying up how much my client, a blockchain startup, will pay for this two-hour meeting.
We have the senior securities partner ($1400/hr, USD for simplicity), a tax partner ($1200/hr), and the recently-promoted “blockchain expert” senior associate ($700/hr). My client is spending roughly $6600 to learn that U.K. securities law makes the public sale of a security token nigh undoable, and we’ll be using our U.S. holding company for the issuance after all (I knew this of course, but the lead investor insisted that we pay for the confirmation).
Senior Partner goes on at length about how his firm is at the forefront of legislative development vis-a-vis the blockchain space in the U.K., they are advising no less than the FSA and the House of Commons on how the law should be modified to fit the new technology. So it’s interesting when he admits that he had not known that in the U.S. we’ve lately begun to distinguish between utility tokens (still an iffy proposition per the SEC) and actual securities tokens.
Later, at lunch, my client points out that he had taught Senior Partner, U.K.’s leading expert on blockchain law, everything he knows about the blockchain space some two months ago, when they were first introduced.
AVOID THE ONE-STOP SHOPS
If a lawyer or a law firm offers to be your one-stop solution for blockchain legal counsel, run for your life. It does not matter how small or big the law firm, no single shop can pretend at expertise in every legal and technical discipline, and in every jurisdiction that a blockchain organization, decentralized by its nature, will require.
Large firms, especially, have their uses: cover your ass by hiring them to write the highly risky securities and tax opinions (assuming they agree to do so rather than shunting the risk to one of their boutique cousins) — they’ll also have certain highly esoteric expertise (e.g., international cryptography export regulations) that small vendors will not have. But otherwise, look for cost-effective boutique firms with proven blockchain projects under their belts to help you navigate the regulatory minefields in each separate jurisdiction where you’ll be doing business. Limit your exposure, and costs, with large firms by sticking to one-off highly specific projects with them.
In other words, you’ll be hiring and managing multiple firms.
HIRE A LEGAL ADVISOR
You need one person to, hopefully, help you identify the cost-effective experts in each jurisdiction (not to mention identifying which jurisdictions would actually be implicated by your business goals) and then to manage those experts. This is your legal advisor.
Typically, this person will be a lawyer with years of international and regulatory experience under their belt. He or she will likely no longer be doing traditional “lawyer work” because their legitimate blockchain knowledge has made them such a valued commodity in a space full of poseurs that they command a premium for giving good advice. (This advisor will also be a good resource for evaluating the costs v. benefits of spending money on legal in certain “blockchain testy” jurisdictions; or advising on how to properly avoid those jurisdictions altogether.)
Names are no longer very important in this space, what with the retail investor syndicates more or less inactive during the bear market. What you need is someone who:
(i) Knows the technology;
(ii) advised several major projects;
(iii) knows good legal vendors in numerous major jurisdictions;
(iv) has a good understanding of international and corporate tax structures to be able to identify the types of vendors you will need; and
(v) will be willing to actually work and manage those vendors after hiring them for you.[1]
Let that person strategize, hire, and manage the rest of your legal needs. You focus on the tech. You’re welcome, and good luck!
[1] This last point is key; we’ve seen too many “pay me to add my name to your website” advisors in the space. The one positive externality of this bear market is that companies are better scrutinizing the value-adds of their team members.