As any founder knows, operating in the blockchain space requires navigating a myriad of regulatory regimes. While every product and token are different, below are 6 key questions that any founder should ask themselves as they launch their product or token: Are you advertising to the public? If a company advertises to the public, anti-fraud and consumer protection laws are relevant. Regulators in the U.S. from the Federal Trade Commission and the Consumer Financial Protection Bureau, along with state attorneys-general, enforce rules to ensure advertisements and public statements do not contain ..read more

A flurry of recent activity has reinforced the SEC’s commitment to regulate crypto assets, including trading systems that trade crypto asset securities. WHAT HAPPENED? The SEC shared additional information in April 2023 on whether and how its proposal to expand the definition of “exchange” would affect trading systems for crypto asset securities. The SEC initially issued the proposal in January 2022. This revised proposal responds to comments the agency received requesting clarity on the application of existing rules and the proposal related to crypto asset security trading platforms that meet ..read more

Venture investments in blockchain companies are often similar to investments in traditional, high-growth technology startups. However, there are a few differences any company or investor should know about: Board Seats: Lead investors in venture backed companies often require a right to designate a member of the company’s board of directors. Having a seat on the board lets investors exercise corporate governance oversight and influence the overall company’s strategic direction. However, given the complex and evolving regulatory and enforcement environment in blockchain, as well as difficulties ..read more

Venture capital investors in blockchain companies often require formal rights to receive tokens or other digital assets created by those companies. Typically, these rights are provided through an instrument called a “token warrant.” While token warrants are most frequently issued in priced rounds, they have become increasingly prevalent in connection with SAFE or other convertible rounds. Here are five things that any blockchain company or investor should know when evaluating token warrants: Token Warrants Can Confer Broad or Narrow Rights. Companies and investors should pay close attention t ..read more

Turbulence in crypto and blockchain has shed light on a question that has received increasing attention: how web3 companies share ownership in digital networks, including through tokens. As the industry wrestles with this question, builders and investors should consider adding cooperatives to their ownership structures. A handful of web3 projects have done so, but the model is not widely understood in the web3 context. Credit unions, rural utilities, insurance companies, and agriculture producers often organize as cooperatives. In web3, projects that add cooperatives to their ownership structu ..read more

Ending doubts regarding its interest in the space, the Consumer Financial Protection Bureau (CFPB) has for the first time publicly acknowledged its investigation of a crypto company — and it’s likely a sign of things to come. The agency hinted at increased enforcement in a summary of consumer crypto complaints in November 2022. The CFPB acknowledged an investigation for the first time that same month, when it published a decision in the case. Crypto companies with direct-to-consumer products should take note — and consider steps to mitigate risk. What Happened? The CFPB sent a Civil Investigat ..read more

What Happened The Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) issued a sample letter on December 8, 2022, highlighting considerations that public companies that are in, or connected to, the crypto industry should keep in mind as they prepare their public disclosures, spanning the description of business, management’s discussion and analysis (“MD&A”) and risk factor disclosures. What Public Companies Need to Consider While the letter highlights additional points for consideration in the business and MD&A sections, the majority of the comments focus ..read more

The EU’s Markets in Crypto-Assets (MiCA) regulations are now all but final and may take effect this year. MiCA will provide new regulatory frameworks, including licensing and disclosure obligations, for participants in the cryptocurrency ecosystem, including token issuers, financial intermediaries (exchanges, brokers, etc.) and custodians. What Happened The Economic and Monetary Affairs Committee of the European Parliament gave its approval to MiCA on October 10, 2022, the latest step in a process that has lasted more than two years. What’s Next This paves the way for the larger European Parli ..read more

Federal Reserve Requires Banks to Provide Notice Regarding Crypto-Asset-Related Activities The Federal Reserve Board (“FRB”) announced a significant shift requiring FRB-supervised banking organizations to disclose any current crypto-asset-related activity and to notify FRB in advance of entering into any such business activities in the future. This notification requirement may add some friction to the bank adoption of crypto-asset activities. This announcement follows the OCC’s previous direction to its supervised entities to “notify its supervisory office, in writing of its intention to engag ..read more

Coming quickly on the heels of the Biden Administration’s Executive Order on Digital Assets, the Congressional Blockchain Caucus has signaled it will be watching new regulation closely in line with their belief in a “light touch regulatory approach.” On March 16, 2022, the Caucus issued a letter to SEC Chair Gary Gensler demanding information on SEC “voluntary” requests for documents and information to blockchain, cryptocurrency, digital assets, or other similar entities. Congressional Blockchain Caucus Co-Chair Representative Tom Emmer (R-MN 6th District) said the letter came in response to c ..read more