Cryptocurrency and the Law – Here to Stay?

Did you ever think that there would be considerable value in something that you could never touch, hold, or store under your mattress or in a vault?  Well, in this article we are going to discuss how “ownership” of digital items like trading cards and cryptocurrencies may become more and more relevant to the practice of law, and how you might capitalize on this trend for your own professional development.

Digital Sports Cards Make Digital Ownership Real for Millions of Sports Fans

Not long ago it would have been hard for anyone to pay $1 for a digital image that could be copied for free, and now sports fans are “virtually” lining up to pay $10, $20, and even $150,000 for digital images of their basketball heroes.

About five months ago, Canadian startup Dapper Labs connected with the NBA to create digital trading cards, called “Top Shots.”  These digital cards appear on your screen as floating, spinning digital cubes that each feature a video highlight of a particular NBA player, and these digital sports cards have taken off like a rocket.

Fans are now enjoying the thrill of getting a new pack of digital cards in the same way sports fans of old would feel that rush upon buying a new pack of cards (including the bubble gum) back in the old days.  Even the kinds of prices you would see for highly valuable tangible sports cards are matched by their digital counterparts.  For example, a Luka Doncic rookie basketball card recently sold at auction for a record $4.6 million.

Blockchain – Allowing Digital Ownership of Trading Cards and, More Importantly, Cryptocurrencies

How does digital ownership work?  Digital ownership of Top Shots cards has to do with the use of the technology called blockchain.  Blockchain allows the creation of a permanent certificate of ownership that cannot be copied or deleted. Thus, the technology allows you to “own” the digital card of a particular player.  This “digital ownership” of Top Shots makes a larger point about the growing influence of cryptocurrencies in the marketplace.

In 2009, the first blockchain was created to serve as the public ledger for transactions made using Bitcoin, currently the most well-known cryptocurrency.  While Bitcoin was not the first online currency to be proposed, it has become the most successful cryptocurrency to date.  The original and largest blockchain is the one that still administers Bitcoin transactions today.  There is, however, a second generation of blockchains emerging that handles other cryptocurrencies like Ethereum and Ripple.

Cryptocurrencies are Beginning to Come Under Increased Government Scrutiny

In late March 2021, the newly confirmed Treasury Secretary Janet Yellen described Bitcoin as “inefficient” and “extremely volatile,” and described cryptocurrencies as a “particular concern.”  Her recent comments were a clear indication that she may begin taking a closer look at blockchain-based financial networks in the near future.  In that same vein, 25 states, including New Jersey and New York, are beginning to move legislation through their respective legislatures designed to ensure that cryptocurrency markets are fair and transparent.

For example, New Jersey’s Assembly and Senate are both currently working on a new bill called the Digital Asset and Blockchain Technology Act.  The purpose of the proposed law is to regulate the growing cryptocurrency industry in New Jersey, and to spur innovation.  Significantly, the bill also seeks to provide transparency, consumer protections, and a licensing apparatus for both operators and consumers of cryptocurrencies in New Jersey.

The law would require digital-asset companies to be licensed in the State, or with a State that has reciprocity with New Jersey.  It also would require a cryptocurrency business to disclose the terms of a consumer’s account and provide other information to protect consumers against fraud.

How Does All of This Help Your Legal Career?

Now that laws are starting to be drafted related to cryptocurrencies, companies are going to need lawyers to understand and enforce them.  Indeed, the intersection of cryptocurrency and the law is in its nascent stages.  As noted, 25 states have pending legislation on cryptocurrencies, and all of those laws are being considered in the 2021 legislative session.  Simply stated, governments are just starting to catch up with the world of cryptocurrency.  Thus, becoming an expert in cryptocurrencies, and the laws that are beginning to emerge because of them, would be a valuable asset in your professional portfolio.

Similar to investors who want to get a piece of a particular cryptocurrency investment before it takes off, you may want to consider getting familiar with cryptocurrency issues and proposed legislation now, so that you can prove to be a cut-above-the-rest asset to any company looking for in-house talent.

There is no question that companies are looking at, or even already building some of their market on, the use of cryptocurrencies.  Accordingly, those companies will need to have legal advice from counsel who know what cryptocurrency laws are all about.  Moreover, in a world where Bitcoin can have a value as high as $20,000 and as low as $16 (in her recent comments, Janet Yellen noted that the price of a Bitcoin dropped 10 percent in a 24-hour period), it is highly likely that Bitcoin and other cryptocurrencies will generate legal issues for corporations in the future.

Just like digital ownership of a sports card, you may not be able to touch or store your legal talent, but there is no question that your legal skills have considerable value.  Consider adding to that value, and possibly opening in-house counsel opportunities, by getting to know about cryptocurrencies because they appear to be here to stay.