Legal Considerations for Businesses Considering Cryptocurrency or Blockchain Technologies
Presentation Date & Time:
October 16, 2018 - 9:00 AM
Name: Justin Steffen
Organization: Jenner & Block, LLP
The legal landscape in the blockchain and cryptocurrency space is evolving almost as rapidly as the underlying technology. In July 2017, the SEC issued its DAO Report. In the subsequent months, the SEC, CFTC, and other regulators’ interest in the cryptocurrency space intensified, and subpoenas and enforcement actions have followed. Mirroring regulators’ interest in the space, a crypto world once devoid of litigation was flooded with lawsuits brought against industry participants such as Coinbase, Tezos, Overstock, and others. Even traditional institutions like JPMorgan have been sued in crypto-related lawsuits. Neither regulation, litigation, nor legal risk will abate anytime soon. Businesses interested in the blockchain space, however, can take a number of steps to prepare themselves for impending legal deluge. Specifically, to avoid some common pitfalls, companies should consider the following:
1. Compliance Programs and Collaboration with Regulators: By implementing an appropriate compliance program or by engaging those entities that regulate (or may regulate) the company, industry participants can avoid or minimize their
legal risk. There is no need for an exchange to have to weather insider trading allegations or for a company to have to face an SEC inquiry for the sale of unregistered securities.
2. Disclosure and Dialogue: Recently, a number of more established and larger companies have invested in the blockchain space. Depending on the size of the company’s investment and the risk involved, appropriate disclosures can help to
guard against the securities and class action suits down the road. Likewise, educating customers cannot eliminate legal risk, but explaining your own products and policies may blunt legal actions should things turn sour.
3. Due Diligence and Drafting: When acquiring or investing in a company with crypto-assets or when negotiating with companies that have interests in blockchain technology or cryptocurrencies, appropriate due diligence and informed contract drafting can help your company appreciate the attendant risks and to minimize unexpected issues and liabilities.
4. Insurance: Although insurance does not minimize risk on the front end, it can help defray costs on the back end. D&O, CGL, and other policies may be available to help manage costs in the event that an investigation or litigation cannot be avoided.
5. Blockchain for Change: In addition to guarding against risks related to investment in crytpocurrency and blockchain, companies can pro-actively use blockchain technology to help eliminate legal issues. In Delaware, for example,
companies can issue stock on a blockchain. This would enable companies to better track the ownership of company stock and could facilitate easier shareholder voting.
Justing C. Steffen Biography:
Justin C. Steffen is a litigator for Fortune 500 and FinTech companies, a technophile, and a legal futurist. By day, Justin is a partner at Jenner & Block LLP in the firm’s Litigation Department. Jenner & Block is an AmLaw 200 and Vault 100 law firm, and its LitigationJustin C. Steffen is a litigator for Fortune 500 and FinTech companies, a technophile, and a legal futurist. By day, Justin is a litigation partner at Jenner & Block LLP—an international AmLaw 200 law firm based in Chicago and a renowned litigation powerhouse. Justin is co-founder and a leader of the Jenner’s FinTech practice group and is also a member of the firm’s Financial Services Litigation, Markets and Trading, and Bankruptcy Litigation practice groups.
Justin routinely represents clients in large, “bet-the-company” litigation and internal investigations. Recently, Justin defended a subprime lending subsidiary of a large multinational corporation in a three-week, $1 billion Federal trial. He also assists online lenders, payments companies, and blockchain/cryptocurrency companies navigate the evolving regulatory environment and with their dispute resolution needs. Justin, for example, recently advised an online lender about its loan sale and servicing agreements, represented a large payment company in connection with its product launch, and advised a number of businesses on the legal risks related to cryptocurrency and blockchain implementation.
By night, Justin is a technophile, legal futurist, and blockchain devotee. Justin frequently educates, speaks, and writes on cryptocurrencies, blockchain, and other financial technologies. In past months, he spoke at the 2017 Fin(Legal) Tech Conference, the FinTank Chicago Blockchain summit, to the Chicago Bar Association’s Financial Institutions Committee, and to the CBA during member appreciation week. In the coming months, he is scheduled to speak to the CBA’s Professional Responsibility Committee, at Lend360, and he is co-organizing a day-long, legal-themed blockchain conference, the Block(Legal) Tech Conference.
Justin is the founder and Chairman of the Chicago Bar Association’s recently-formed Financial and Emerging Technologies Committee and a member of the Innovative Digitalized Products and Processes Subcommittee of the American Bar Association’s Derivatives and Futures Law Committee. In addition, Justin has written extensively on blockchain, publishing articles in Law360, FinTech Weekly, and LegalTech News, and he has been interviewed by Inside Counsel and Financial Advisor for articles relating to blockchain and cryptocurrency.