Bradley attorney Carol Van Cleef was quoted in Law.com discussing the complications of cryptocurrency.
According to Van Cleef, cryptocurrency invites a plethora of legal issues that even the rule makers are struggling to wrap their heads around. She cautioned attorneys at a University of Miami Law Review tech conference: “Before you jump into this area, make sure that you understand the law correctly.”
“Don’t get too far over your skis in advising clients without making sure that you understand the law appropriately, and make sure that you’ve got the appropriate mentors that understand the law,” Van Cleef said. “It’s often a lot of pressure when you’re advising startup companies, in particular, to give them the answer that they want, but sometimes the answer that they want is not the right answer and it’s going to lead them to potentially more harm.”
Van Cleef pointed to the ill-fated E-gold system, which was an international digital currency backed by gold. Created in 1996, it attracted the wrong sort of attention from the U.S. government, which brought money laundering and illegal money transmitting charges against its founders. At sentencing, after a 2008 plea deal, the judge acknowledged the system itself the defendants had created wasn’t illegal but lacked the necessary controls to stop criminals from abusing it, according to Van Cleef.
It’s a cautionary tale for attorneys interested in cryptocurrency today, according to Van Cleef, as it demonstrates what can happen when creators of new technology unleash it without taking certain precautions.
“She [the judge] said to them that they had bad lawyers,” Van Cleef said. “I would be very careful in how you’re advising and making sure that you have the right set of experiences in which to advise those clients.”
The E-gold case could have gone “very differently,” in Van Cleef’s view, if attorneys had found a way to “bring examples in from other areas so that it didn’t look so scary.”
“I think this has sometimes been a problem with the crypto space,” Van Cleef said. “Cryptocurrencies, blockchain technology is another iteration of technology, but there’s a lot of things we’ve had in the past that we can look to for guidance, and that’s a very important thing to keep in mind.”
There are also huge concerns around Stablecoins, digital currencies that aim to attach their market value to an external reference, such as the U.S. dollar or gold. Nonfungible tokens, likewise, present an abundance of legal questions, and it’s unclear whether they’re securities or not.
However, Van Cleef said, “It’s not as hard as it seems to discern what laws do apply. The real issue, I find, more often than not, is that the clients don’t want to listen.”
The complete article, “‘Don’t Get Too Far Over Your Skis’: What Lawyers Need to Know About Cryptocurrency," was published by Law.com on February 8, 2022.