By Duncan Cameron via Iris.xyz
To get cryptoassets right, a multidisciplinary approach is needed. Lawyers and advisors need to work together with consultants and technologists. Professional services should create environments to enable growth, not create more obstacles.
Professional services now demand multidisciplinary teams. Legal finesse or commercial acumen on their own are no longer enough. We’re in an age where industries are converging and lawyers, accountants and financial planners need to have a far broader understanding of technology, economics and global trends.
Lawyers need access to consultants; accountants should be working with technologists, and financial planners should be engaging entrepreneurs and developers to truly understand client’s needs and offer innovative solutions.
One of the biggest grey areas are cryptoassets. When I say cryptoassets I’m referring to any cryptographically secured asset or currency residing on a blockchain (or similar data structure) such as Bitcoin, Ether, Ripple, and many others. Many of my colleagues today are being asked difficult questions about cryptoassets and frankly the level of industry knowledge and understanding isn’t quite there yet.
Let me provide two examples.
Commercial agreements
“ … shall not retain more than $100,000 worth of Bitcoin or other like-assets in any single cold storage wallet on premise at location [X].”
This is a clause I read recently in a commercial agreement between two financial service providers. A lawyer drafted this.
Here’s what bothers me.
- Value of assets. We all recognize that cryptoassets are notoriously volatile. We’ve already seen Bitcoin swings of up to +35% in less than 24 hours. There’s little indication here of timing when valuing the assets and if at any point in time the value surpasses $100,000 is there liability? To draft a clause like this, at least a macro-level understanding of token economics and theory should be present and additional guardrails put in place for valuation methods and timing.
- Cold storage wallets. There appears to be a misunderstanding about the role of cold storage wallets and the “housing” of assets. Cryptoassets are not “stored” in wallets. Wallets hold public/private keys to enable users to sign transactions on a blockchain. After all, crypto is still just digital internet money with no physical asset to point to. It seems there is a trend towards attributing traditional custodian-style thinking (i.e. “I’m holding the wallet, therefore I’m holding the assets”) to digital assets which, at a fundamental level, is probably incorrect.
Read the full article at Iris.xyz.
