CoinPoint spotted legal pundits doing wonders in the industry (pt.2)
Following our 1st “chronicle” related to legal experts, CoinPoint has spotted crypto enthusiasts who have mind-boggling prognosis for industry’s pathway legal-wise, and share their knowledge and input on trending topics.
Both Philipp Sauerborn and Joseph F Borg have been in the legal line of work for a long time now, and with their councils ample of crypto start-ups and entrepreneurs added unsurpassed features to their projects.
Joseph Borg is an advocate and Partner at WH Partners, heading the Blockchain , Gaming and Gambling advisory section of the firm. Before joining WH Partners, Joseph was a Chief Regulatory Officer at the Malta Gaming Authority. He was also an Elected Member on the Board of Trustees of the International Associations of Gaming Regulations (IAGR).
Having finished private education, Philipp began working for international law companies, in particular Price Waterhouse Coopers and Ernst & Young in Zurich. He joined the tax consultancy St. Matthew in London, one of the leading German law firms in the UK and experts in corporate, business and tax. During 2011 Philipp moved to Malta and began working for international law firms and consultancies, the latest being DR Werner & Partner which he joined in 2013.
CP: The crypto market is moving forward very fast. In different jurisdictions, there are different legal limitations alongside opportunities. Which countries do you see the best locations to run crypto-related businesses with respect to regulations? Why are these places the best in your opinion?
Joseph: Malta, because it is the first country with a comprehensive regulatory framework that does not only focus on cryptocurrencies but also on the technology. Lithuania, on the other hand is very well placed because it has focussed significantly on the fintech industry.
Philipp: Very subjectively I have to say Malta, mainly for the reasons that I know it best and other countries not too well. Having met with government official and lobbyists here, I can underwrite this, the people are on fire for it.
Objectively, for blockchain / DLT innovators, leaving crypto currencies a little bit on the side, Malta and Switzerland are probably the best, as they seem to have the most sustainable approaches by not only focusing on ICOs, coins, token or exchanges but on a framework for blockchain technology itself, far beyond crypto. Malta is probably ahead currently.
For ICOs and companies in the crypto financial services like brokers, wallets, exchanges, OTC traders the regulatory approach is very different in many countries. Those who have regulation, such as Estonia, Gibraltar, Malta, Swiss, Liechtenstein took their own view of the future into account, on how this will be best regulated with main stream adoption.
It is my view that with main stream adoption you need main stream regulation, and there are tested and robust frameworks out there. With main stream adoption, main stream players like banks, funds, payment providers, intermediaries, insurances, will join the party and they must abide to their regulations, at least on a high level.
And this type of main stream regulation, at least in principle, is very much harmonized across the globe in developed countries all after the 2008 crash. So logically, even if it might feel a little bit overregulated, the way forward is one adaption of an existing main stream regulation.
Malta as pretty much adopted a MiFiD 2 standard and in terms of AML went beyond the current EU standards (which in return are the strictest in the world) which I think is a good approach. It might not be the right choice for everyone, in terms of conditions, obligations and rules, but then again: Not everyone would get a license in the classical financial services, for a reason.
In any case, only small countries will be able to adapt to the very fast changes of this industry, so at least for now, the basket countries is limited anyway.
CP: One of the main engines in 2018 is the ICO market. But lately, it looked like it is about to lose its hot air in the crypto ecosystem. Considering different factors, how do you see the ICO market during 2019? What you think made this niche so big recently? And what do you think made such niche lose its power in the last months or so?
Philipp: I hear many people saying the ICO market is dead. I think the ICO speculation is dead and that is good. I think what we saw in the buildup of the climax of 2017 was not the or a market but a scam, forged in the fires of online marketing, greed and FOMO.
This lead in return to a “bad picture” of ICOs in general and to the conception the STO’s will somehow heal it.
ICOs are still a very good instrument for actual businesses with actual products and actual communities and actual investors backing them. Yes, there will be fewer but compared to what? 95% scams? In net figures I think the “real” ICOs will increase.
But, like with any going publics, you need more than a piece of paper and an idea. You need a working product and organization that exists independent of a token issuance.
Again, I think the retail trust will be generated through bigger players like banks, VCs and family offices joining — but guess what will provide them the trust to invest in the first place- you guessed correctly: regulation.
So logically, we should not ask for less regulation but for more sensitive regulation which is suitable for main stream adoption.
STO’s, to conclude on that, (and I mean REGULATED STO’s) are much MORE regulated than ICOs. So, thinking this is the quick fix for 2019 is naive. It will be a very powerful instrument in its own merits.
Joseph: I don’t believe ICOs are dead. However, the shake-up caused by the 2018 crash will change the ecosystem considerably.
CP: How important is the legal aspect for the operation of the blockchain-based companies? During 2018 not so many start-ups invited lawyers into their advisory team, and situated their business ONLY in crypto-friendly jurisdictions. Did this lack of legal expertise cause major disruptions on the market, and what can be done about it?
Joseph: I do not think that start-ups haven’t invited lawyers into their advisory teams but rather i believe that lawyers were afraid to sit on the advisory teams, at least publicly.
Philipp: Only law can provide the regulation and naturally you need lawyers for that. Therefore, with more regulation there will be more lawyers. We do see however already, that specialization and continuous training is required — not only naturally but (at least in Malta) also by law.
So, the provision of legal advice for blockchain technology cannot be provided be your average corporate lawyer but requires, among other experts, a specialized technical lawyer.
On the other hand, for legal advice on regulatory aspects to crypto financial services, you will require regulatory expertise from that angle. In Malta this is provided by VFA agents. They do not need the depth of technical knowledge as the technology lawyers but a good understanding of the basics. This is not only required by law but also tested, licensed and certified on an ongoing basis by the authorities. Therefore, at least in Malta, if you talk to the right persons, the lack of legal expertise for this specific sector should be reduced.
CP: What are the three best advices you would give to a blockchain start-up if they had no legal endeavors whatsoever?
1. Think mainstream
2. Get used to regulation, forget the wild crypto anarchy.
3. Do not expect a quick bug.
Consult a good law firm.
Have patience to do things right rather than concentrating only on getting things done fast.
Get seed funding before you even think of launching an ICO.
CP: There are now a lot of blockchain solutions ready to be adapted in various industries. In what way do you see (or want to see) blockchain solutions being put into practice in your daily legal work? How do you think will this technology help your business? Can you provide an example of such a company?
Philipp: Very very easy answer: AML / KYC on chain. 50% of our costs in terms of staff, technology, training, interaction, monitoring etc is “wasted” on the analogue methods due to lack of trustlessness. One system where at least the basics are stored on a public blockchain and with subject persons having access to that to verify who you are, your source of funds etc. DREAM!
Joseph: Blockchain could be great for document management within a law firm. I haven’t seen any development in this sense to date, though.
CP: We saw tremendous technology advancements with the emergence of blockchain. Developers and programmers are doing everything in their power to cope with the changes and understand the new versions. Using the same model of advancements, how do you see law catching up with the winds of change?
Joseph: Law has to be technology neutral otherwise it can never catch up because technology will always outpace regulation.
Philipp: From a technological point of view with a voluntarily accreditation of DLT / blockchain systems and FULL ON backing of a government. My view is, that there might be lot of standards and protocols out there currently, but that will thin out with mass adoption, as it has happened many times with many competing technologies before in the age of computing and digitization.
Software developers or the companies that contract them, will in the future consider legal and regulatory aspects at much earlier stages, as they do currently as well for non-blockchain related topics as well. Imagine the amount of thought now going into data protection post GDPR before a software company even starts a project.
CoinPoint is a premium marketing agency founded in 2013. Owned by CoinPoint Group Inc., the agency is now working with a number of all-scale businesses in the crypto space. With a wide range of clientele from cryptocurrencies markets, blockchain, and fintech, CoinPoint has already opened offices in Europe and the Asia-Pacific. With these headquarters strategically positioned, CoinPoint stays on top of the latest trends and innovations across the globe.