chevron-down Created with Sketch Beta.
August 04, 2021

Annual 2021: Time to regulate cryptocurrencies? – Or not

Cryptocurrencies continue to proliferate, with a total market value of over $2 trillion as of April 2021.

Many hundreds of companies currently support the development, investment and trading in these virtual currencies, but not everyone is sold on this relatively new form of currency.

The whys and why nots and pros and cons of cryptocurrencies will be discussed by an expert panel during an ABA CLE Showcase program, “Cryptocurrency Law: The Wild West or the Financing of the Future?” to be held Thursday, Aug. 5, from 1-2:30 p.m. EDT during the 2021 ABA Hybrid Annual Meeting in Chicago.

Panelists will discuss the legal and regulatory regimes — or lack thereof — that govern this space, and whether further regulation is necessary or even possible. The panel will touch on the ways the advent of cryptocurrency is impacting the many areas of law and will discuss how further regulation might be accomplished.

The program will be moderated by Michael Leotta, a partner in Wilmer Hale’s Investigations and Criminal Litigation practice in Washington, D.C. He currently serves as a national chair of the ABA’s White Collar Crime Committee and as a co-chair of its Financial Institution Fraud/Money Laundering and Patriot Act Subcommittee. He will be joined on the panel by Michelle Bond, the CEO of ADAM, a private, nonprofit, membership-based association of firms operating in the digital asset industry; Katherine Dowling, who serves on the executive management team and as general counsel and chief compliance officer of Bitwise Asset Management, the world’s largest crypto index fund manager; and professor  David Yermack, who is the Albert Fingerhut Professor of Finance and Business Transformation at New York University Stern School of Business in New York, New York.

Leotta, who served in the White House Counsel’s Office under President Barack Obama and as an assistant U.S. attorney prosecuting fraud and public corruption for the District of Maryland, shared some of his thoughts about the rise of cryptocurrencies and what he hopes are some of the takeaways from the panel discussion:

Many say that cryptocurrencies are the new financing of the future. Do you agree with that?

In the more than a dozen years since the launch of Bitcoin, digital assets including cryptocurrencies have become increasingly influential. 

Professor David Yermack believes that the underlying blockchain technology will be as important to financing in the future as double-entry bookkeeping is today.

Blockchain offers the potential for financial transactions that are transparent, verifiable and immutably recorded.  It also carries the potential for abuse and misuse, but like the internet itself, this is not a technology that is going away.

Some in Congress, such as Sen. Elizabeth Warren (D-Massachusetts), say cryptocurrencies need more regulation. What are the concerns about regulation, or lack thereof, and what do you think needs to be done?

There are concerns that unregulated digital asset activity can enable fraud and market abuse and can lead to losses for U.S. consumers. 

These are real dangers.  Moreover, many in the digital assets industry agree that there are gaps and ambiguities in the current regulatory regime that disadvantage U.S. companies compared to their foreign competitors.  

If regulation is done well, it can not only protect consumers, but it can also clarify these gaps and ambiguities in a way that will allow the U.S. digital assets industry to innovate and mature. 

Warren says digital currency is not a “good way to buy and sell things and not a good investment and is an? environmental disaster.” Is she correct?

I don’t want to put words in Senator Warren’s mouth.

Certain digital assets are highly volatile, which can impede their use in trade; others such as stablecoins, however, have values linked to the value of fiat currencies like the U.S. dollar. 

There has been a lot of news about the environmental impact — in terms of electricity use — of certain cryptocurrency mining.

But not all digital assets are mined in this energy-intensive way.  Different kinds of digital assets have different characteristics and uses and must be evaluated on their own merits.

What areas of law are being impacted by the advent of digital currency?

Digital assets are impacting many areas of the law and as they become more widely adopted, their influence continues to grow. 

Numerous examples come to mind:  Financial services and anti-money laundering regulations rush to keep up with the impact of anonymous transfers of value through cryptocurrencies.  Non-fungible tokens allow artists better to internalize the value of their work. Stablecoins and other cryptocurrencies are used in international trade.  Criminals and hackers are using cryptocurrencies to collect ransom for stolen data or to pay for illicit goods and services.  Blockchain technology offers the potential more efficiently to settle traditional securities transactions. Cryptocurrency mining operations can be so energy intensive as to have major environmental impacts. Like any other asset, digital assets pose interesting tax questions about what is income. 

This list could go on.

What do you want the audience to take away from the program?

I hope the audience will gain a better appreciation of the breadth and promise of digital assets, and the impact this technological innovation is likely to have on all of our law practices.

“Cryptocurrency Law: The Wild West or the Financing of the Future?” is sponsored by the ABA Criminal Justice Section’s White Collar Crime Committee.