Cryptocurrencies have changed the way that we do business, and we are only in the early innings of the game. Crypto has gone from being a curiosity to a mainstream form of payment. Today, the market cap of global cryptocurrencies tops $1 trillion. Bitcoin and Ethereum alone make up three-quarters of a trillion dollars of market cap.
As cryptocurrencies take hold, there are many legal issues with which you need to contend. Since crypto is such a new area, there may not be any sure answers. Many legal issues are novel, and you need an experienced lawyer who is well-versed in the area. A crypto attorney could help you anticipate legal issues and deal with the ones that arise. Crypto law spans numerous disciplines and practice areas. At Traverse Legal, we take a broad-based approach to help our clients.
Laws and regulations for the cryptocurrency industry are rapidly changing. The problem is that there is no one set law that states which regulator is responsible for what. As a result, you have a patchwork of regulations and sometimes, overlapping regulations. There are different federal agencies involved, and states sometimes have their own rules.
In addition, the regulatory landscape is continuously shifting as crypto becomes more mainstream. When there is a new and revolutionary industry, regulators often struggle to catch up, but when they do, they can impose all sorts of new rules. Interpretations can change by the day, and you need a lawyer who keeps abreast of all the recent developments and is able to tailor their legal advice to you accordingly.
Cryptocurrency is also subject to federal and state income tax rules. There are unique considerations for crypto tax issues. Again, the IRS gives regulatory guidance about taxation issues that you must know, so you can plan accordingly. Income tax returns can be highly complex when you accept payment or pay in cryptocurrency.
Crypto is taxed as income, and it is a taxable event when you sell it. One of the key issues is whether crypto is taxed as a long or short-term asset. Your crypto attorney will know in detail how the IRS treats crypto to give you advice for your tax planning.
Cryptocurrency investments may fall under federal securities law. Then, you would need to follow the Securities Act of 1933 and SEC regulations. In addition, investments in crypto could require fund registration, or they may invoke the oversight of the Commodity Future Trading Commission.
You have potential liability in a crypto offering when it is considered to be a security. You could always be sued under federal anti-fraud law. There are always lawsuits in this area. When you hire an attorney to help with your cryptocurrency offering, you can reduce your chances of being held liable. An attorney can help you properly structure your offering and ensure that you have made all the necessary disclosures properly.
Like any new disruptive technology, there are often novel legal disputes involved with crypto. Although crypto litigation reached its height in 2022 with the market crash, the number of cases has again skyrocketed recently in light of the high-profile FTX bankruptcy. Here are some examples of disputes that have reached litigation or arbitration:
Crypto disputes are increasingly being sent to arbitration. For some, this is a more cost-effective way of resolving disputes when time is of the essence. Regardless of where your case is decided, you need a knowledgeable and tough attorney to argue your position.
When you have customer accounts that hold crypto, you have additional regulatory obligations. There are federal anti-money laundering laws and regulations that you must follow. However, existing federal laws do not neatly fit crypto. In addition, you may have a legal obligation to know your customer. Federal AML rules can be complex, and they require an experienced attorney to help you develop policies and procedures to follow them. There may be additional regulations about money transfer, both at the federal and state level, that you would need to follow. What raises the stakes for AML compliance is that you could even be subject to criminal penalties or large fines.
If you do business in cryptocurrency, you cannot afford to be without legal counsel. The attorneys at Traverse Legal are knowledgeable in blockchain and crypto issues, and we can help our clients in this emerging area. You can schedule an appointment to speak with one of our lawyers by sending us a message online or calling us today at (866) 728-2197.
Traverse Legal’s Attorneys are globally recognized for their experience and results in the legal areas of: Complex Litigation, Internet, Trademark, Copyright, Cybersquatting, Drone, Defamation, Trade Secret, Non-Compete, and Business Law.