Cryptocurrency and blockchain technology are currently hot topics in the financial business world. Headlines regularly note trends and updates on virtual currency, its value, its regulation, and its future potential. As the digital currency market continues to mature, opportunities for related technologies emerge, the complexity of financial software increases, and new legal issues and applications of long-standing legal concepts surface. Frequent changes in FinTech industry law (such as Illinois’s new “Blockchain Technology Act”, as discussed below) help to demonstrate the importance of employing financial industry lawyers and FinTech-experienced law firms.
FinTech Companies Try to Keep Up with Changes in Blockchain Regulation
Because blockchain represents a fundamental shift in the way digital data is processed, stored, and shared across many industries, litigation and regulatory questions abound. The majority of recent changes have focused on digital currency trading, but that is just one of many developing financial technology categories receiving regulatory scrutiny.
In just a few years, regulatory boards have changed the legal status of ICO’s (initial coin offerings) as a method of raising money, the rules for ICO qualifications, and other underlying legal definitions and understandings of cryptocurrency throughout the world. Last December, the US Commodity Futures Trading Commission (CFTC) agreed to allow trading of bitcoin derivatives on the Chicago Mercantile Exchange, Cantor Exchange, and CBOE Futures Exchange.
The CFTC and the U.S. Securities and Exchange Commission (SEC) warned that they would be increasing enforcement actions regarding digital currency over the next year, too. A few months after that warning, the CFTC sued three companies and “issued dozens of subpoenas and information requests to technology companies and advisers” involved in the cryptocurrency market. In March of this year, a U.S. District Court judge ruled that cryptocurrencies could be regulated as commodities. New regulations could change the industry overnight, so FinTech companies must be able to adapt immediately.
Illinois’s New “Blockchain Technology Act”
The fact that legislators are frequently talking about blockchain regulations and the future of the industry is exciting for FinTech companies and cities like Chicago that host many of those companies. Illinois is positioning itself to be a leader in FinTech industry law with a bipartisan bill that would recognize blockchain-driven “smart contracts” as enforceable contracts. If passed, the Illinois state House Bill 5553, the “Blockchain Technology Act”, could change the way business is done.
House Bill 5553 would remove potential roadblocks to future blockchain use and clear up the grey areas involved when using smart contracts in Illinois. The bill would also limit the power of local government to tax or regulate blockchain smart contracts. Exclusions include contracts that deal with the transportation or handling of hazardous materials, pesticides or other toxic or dangerous materials, which would still require traditional paper documentation. By allowing smart contracts produced via blockchain technology to be treated like paper contracts, Illinois would jump to the forefront of encouraging the application of this technology as one of only a handful of states that have adopted similar legislation.
Frequent Changes Require FinTech Law Firms with Experience
Keeping up with these types of regulatory updates becomes much easier with the guidance of experienced FinTech law firms. Even companies that are relatively familiar with regulations and changes in FinTech industry law could benefit from lawyers who have actually done work in the industry themselves (as in developers, financial analysts, and bankers).
Law firms that have such hands-on experience will be more prepared to handle an array of potential issues facing FinTech companies in this multidisciplinary space. For some FinTech companies, the need may be as little as a confirmation that they are not directly impacted by regulation. But for most, seeking counsel can significantly reduce the risk falling foul of regulations, and provide legal support when questions or litigations arise. And on top of that, attorneys for FinTech companies that have relevant background experience will be more likely to genuinely understand these FinTech issues.
At Ziliak Law, we’ve assembled a team of attorneys who stay up-to-date on the latest developments in the blockchain world so that we can guide clients through every aspect of the creation and evolution of blockchain-centered businesses. Working with clients on matters ranging from cryptocurrency fund creation to trading platforms to ICOs, We’re positioned to help make business plans into reality with a focus on speed and cost effectiveness. To learn more about how Ziliak Law can help your FinTech company, contact us here. Pursuant to applicable rules of professional conduct, this communication may constitute Attorney Advertising.
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