Cryptocurrency and Blockchain Law
Cryptocurrency and Blockchain
The Intersection of Internet, Law, and Finance
Are you contemplating or pursuing a business start up using cryptocurrency or a digital token such as Bitcoin, Cardano, USDC, Litecoin, or Ethereum in the State of Colorado or elsewhere? Bitcoin and many cryptocurrencies are already subject to myriad tax laws, securities regulations, and Financial Criminal Enforcement Network (FINCEN) regulations. Do you want to use cryptocurrency smart contracts in your business but not get burned as an investor? Are you interested in creating a digital currency wallet application but want to make sure you aren’t running into legal problems with your customers or the federal government? Cryptocurrency and decentralized finance (defi) has created a whole new series of businesses and models around digital tokens. The Denver, Colorado based cryptocurrency attorneys at Front Range Legal Services can offer proactive advice to protect, promote, and maintain your cryptocurrency, NFTs, or digital token related business during the boom times and the down times. Various alternative cryptocurrencies, bots, exchanges, wallet providers, NFT creators, NFT marketplaces, digital miners, cryptocurrency investors, and smart contract services need knowledgeable attorneys and counsel to navigate the complex financial regulations and their ambiguities.
Our experienced cryptocurrency attorneys are licensed to provide both local regulatory support and the broad corporate guidance cryptocurrency businesses require to succeed. The cryptocurrency attorneys at Front Range Legal Services are also experienced in other relevant areas of law to your business including formation, employment law, intellectual property, and general creative content and software acquisitions and transactions.
Laws related to cryptocurrencies and blockchain are ever-changing, and most lawyers choose not to keep up with them because they do not quite fit into any traditional areas of law. As a result, it is valuable for cryptocurrency, NFT, or blockchain related businesses to consult the expertise of attorneys who are knowledgeable in the area and the different facets of cryptocurrency businesses. As cryptocurrency and blockchain businesses grow in popularity, demand will also grow for knowledgeable professionals with legal experience to handle the variety of legal questions that spring from the ideas of the next generation of entrepreneurs.
Utility versus Security tokens and the Howey test
If you are contemplating launching a token project, exchanges usually require as a matter of due diligence a memorandum or opinion from an attorney reviewing the legal nature of the potential token before it can be listed on the exchange. This requires a substantial analysis into the nature of the token and the economics of how it will operate. The Howey Test was the name given to the test provided by the Supreme Court case defining what an “investment contract” is under federal law and includes a number of variables that complicate the analysis. Our cryptocurrency law team is already familiar with US securities laws related to digital token launches and what may or may not constitute a security versus a utility token. Contact our team today to discuss how you can have your potential token reviewed under the Howey test to help your project list your token where you intend.
Regulatory Compliance
While many cryptocurrency and blockchain businesses include founders and executives with substantial computer programming experience, most lack the legal knowledge to properly comply with the stringent federal requirements to do business in all 50 states including federal securities law compliance, registration as a money services business (MSB), and compliance with the Bank Secrecy Act (BSA). In this highly regulated environment, it is advantageous to secure counsel who is knowledgeable and can help you navigate the morass of federal and state regulations ahead of time and to help navigate legal uncertainty.
Think Ahead
By securing experienced counsel in the cryptocurrency and blockchain space, your business can proactively address possible issues that will save your company time and money in the future. Our experienced cryptocurrency attorneys can anticipate issues that we have already encountered and help you develop a plan forward or provide options to handle a sensitive legal question. It is always better to choose your attorney ahead of time rather than wait until an attorney has to be hired and you are behind on filing deadlines and requirements.
If you have started or are considering starting a blockchain or cryptocurrency based business and require counsel to help you through the steps, contact our experienced Denver, Colorado cryptocurrency attorney team today for a free consultation.
Cryptocurrency and Blockchain FAQ
We do not provide investment advice. You do have a lot of options though.
We do not provide accounting nor do we provide tax advice. If you are a United States taxpayer, you should probably report your income including cryptocurrency profits.
A blockchain is a network of interconnected computers using software to store and/or host records of transactions in a permanent digital form. A blockchain is a digital ledger stored across multiple nodes. Unlike a single analog ledger, a blockchain makes altering records in the digital ledger difficult to impossible.
That is a very fact-specific question.
An accredited investor, in the context of a natural person, includes anyone who:
- earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonably expects the same for the current year, OR
- has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence), OR
- holds in good standing a Series 7, 65, or 82 license.
There are other categories of accredited investors, including the following, which may be relevant to you:
- any trust, with total assets in excess of $5 million, not formed specifically to purchase the subject securities, whose purchase is directed by a sophisticated person, OR
- certain entity with total investments in excess of $5 million, not formed to specifically purchase the subject securities, OR
- any entity in which all of the equity owners are accredited investors.
Source: Securities and Exchange Commission Investor.gov website.
NFT is short for non-fungible token. A NFT is usually a digital asset including art or a collector’s item and can be traded or exchanged.
Are there registration documents? Is the token offered on a major exchange such as Coinbase or decentralized platform like Sushiswap or Pancakeswap? There is a lot more risk involving decentralized tokens on certain marketplaces than tokens on major exchanges. All purchases come with risk though, so be prepared to lose the value of the asset entirely before you invest in digital assets such as cryptocurrency.
