I've put together 50 tips for entrepreneurs, lawyers, and service providers. Some might be obvious and others have some nuance to them. I hope this helps you as you think through your own legal problems in the blockchain space.
1 The person who pushes a boulder down the hill is responsible for what happens under just about every legal system on Earth. It's difficult to escape the reach of "law".
2 Some people want the benefit of "no law" (like anonymous smart contracts with anonymous users) but the benefits of their national laws. It's hard to get both.
3 The world is chock full of laws. A great lawyer is typically only great in one country, maybe two. Be careful with global expansion using only local lawyers. Teams are needed.
4 Marijuana is sold by the state in some places and in others you can be put to death for having it. The law of "where someone is" can be of critical importance.
5 The law of "where you are" and the law of "where they are" both matter for cross-border transactions. A very high percentage of crypto transactions are cross-border.
6 Is a token tracking a transaction of is it the transaction itself? Blockchains are a neutral technology that can be used for many purposes and can do more than just cryptocurrency.
7 Tokens don't inherently reflect the non-digital (i.e. real) world. Systems need to do that. Law can help. Think about how the digital and real world will stay synchronized.
8 Cryptocurrency units are controlled using sets of numbers known only to the person using it. These numbers can be loaded into as many programs as the person wants.
9 One person can have as many cryptocurrency wallets as they would like. Each wallet can have thousands of addresses. The addresses may have no externally visible connections.
10 Most software used to accesss a wallet routes the requests to centralized servers. These centralized servers may have logs about the transactions (including IP addresses).
11 More than one person can access a wallet at the same time. It's a bit like sharing a password to a family email account. The person sitting at the computer knows.
12 Blockchain data is available to everyone online but real world identities are almost never a part of this data. Think about other systems where that data may dwell.
13 The existence of private data is one assumption underlying AML, lending, mortgages, healthcare, etc. Gathering KYC data means taking on responsibilities! It's serious data.
14 Anyone can make wallets for free but the tokens or cryptocurrency that goes into them is usually not free. Like a free chequing account from a bank - they don't put the cash in!
15 Private keys can't be guessed at to steal cryptocurrency (in almost every case). Thefts are almost always done by "stealing" not "cracking passwords".
16 Programs that run on blockchains are called "smart contracts". There are subject to special kinds of attacks that the network itself can't suffer. Very different types of software.
17 It's sometimes possible to evaluate whether a smart contract (code) does what the company promises it does, purely by looking at the code online. Code is on-chain.
18 Income tax laws generally apply no matter how value is received. Being paid in dollars, cows, or bitcoin are likely treated the same way. "No tax" exceptions are rare.
19 Capital gains tax usually apply to profits from selling a thing that was purchased to profit from like a stock or share of a businesses. Is a particular crypto asset like that?
20 Some countries have a lower capital gains tax rate. A sale of cryptocurrency might qualify for that tax treatment and it might be better than "ordinary income".
21 Sales tax is usually applied if a purchase is made. Sales taxes are typically not charged on foreign currency purchases. Is crypto like the purchase or the foreign currency?
22 Sales tax may be really important to a business. Smart "indirect tax" lawyers can sometimes come up with solutions to enable charging or not charging sales tax.
23 The means of payment (e.g. USD or CAD or BTC) is rarely important legally. The substance of the transaction is what matters under most legal regimes, not method used to pay.
24 The business of trading or sending money is often regulated, but the use of money usually isn't. Anti-money laundering law often applies to the former but rarely the latter.
25 Businesses often have regulatory obligations that their customers don't share. Legal obligations are usually not symmetrical. Consumers are rarely the focus of regulators.
26 Value sent by cryptocurrecny can almost never be reversed by the sender. The receiver must sent it back. Think about how this affects legal relationships and processes.
27 Buyers of cryptocurrency should usually only deal with trustworthy local players. Local companies are easier to pay to, easier to sue, and far less likely to be scams.
28 Scams come in two main varieties: using crypto for buying into a scam vs. the crypto itself is a scam. The latter type of scam is less popular today than it used to be.
29 Smart criminals use Tor for obscuring their IP address. They also make use of software and systems to obscure the money trail. Tornado Cash is a notable tool for this.
30 Setting up an "offshore" business the wrong way can accidentally result in bad tax situations. Never do this without professional accounting and legal advice.
31 Downloading templates and changing a few words is a common way to make contracts. Commercial lawyers are often money well spent! Beware the hacked together contract.
32 The best contract template is the one that's used often and without disagreement from the other side. The best versions often also require process changes to the business to match.
33 Make standard, fair deals as contract templates. It's almost always the right call because it saves lawyer time, speeds up deal execution, and makes for happier customers.
34 Blockchain networks don't run in a specific place. They are the consensus of thousands of computers running the same instructions all over the world simultaneously.
35 Deals across borders are almost impossible to enforce in court due to the complexity and high costs. Don't assume courts are coming to your rescue in far away places.
36 Contracts can have clauses that establish how a crypto price is determined in fiat dollars. But remember that contracts can live longer than reference websites!
37 Contracts can have assignment clauses so the business can be more easily sold. Termination rights are also worth thinking through. Code hasn't eliminated contracts!
38 Very few companies get huge due to great paperwork but many have failed along the way due to lack of paperwork. Know what you're doing and spend thoughtfully on legal.
39 It's usually better to have contractors than employees. R&D tax credits can change this calculation. Always be clear which label applies and be sure the contracts are right.
40 A token that represents an investment is transferrable online is probably a security. Tokenization doesn't change the nature of the underlying thing and may aggravate the situation legally
41 Tokens that are akin to ownership stakes in the same way that companies have investors are probably "securities". Even a "maybe" in this regard can be a problem.
42 Debates about what qualifies as a "security" in the world of blockchain assets have raged for years globally. Startups should stay as far away from securities as they can.
43 "Purchasers" generally have far fewer legal remedies that "investors". Securities laws create special protections for investors that the common law doesn't provide for.
44 Buying something in the hope that it can be resold for more later is the basis of modern economies and isn't the definition of a "security". Resold timber is still timber.
46 Regulators hate companies that don't register when they're supposed to. Every business should be careful to obtain all needed registrations or have a great reason why they didn't.
47 Small companies are often treated worse than large ones by the government. The people in small companies may also be personally responsible in more ways. Plan accordingly.
48 "Marketplaces" may be subject to anti-money laundering obligations, securities laws, or special purpose laws. But often they're not subject to any special law. Details matter.
49 Cryptocurrency as money is an obvious (and valuable) use case. But things have evolved. Now there's stablecoins that bring currencies on-chain. Blockchains have dollars.
50 Tokens are not always divisible like cryptocurrencies are. Non-fungible tokens aren't divisible. Some tokens are and some aren't. Know what the properties of units are.