In response to increased regulatory scrutiny in the US, crypto companies have begun placing a greater emphasis on hiring legal professionals. This follows recent developments regarding the SEC’s ongoing lawsuits against Binance and Coinbase.
The SEC targeted Binance for allegedly engaging in the unlawful sale of securities and failing to register under the Exchange Act, among other charges. The US securities regulator then sued Coinbase, claiming it was operating as an unregistered exchange. Agencies from individual US states also went after the company’s trading and staking services in separate legal actions. Both exchanges have denied any wrongdoing.
Ari Redbord, head of legal and government affairs at TRM Labs, noted that the heart of cases alleging unregistered securities hinges on whether certain digital assets are, in fact, securities. He expects this issue to be initially addressed by the courts and eventually by Congress.
Redbord added that crypto businesses can seek legal counsel from those versed in these complex issues, invest in compliance teams, use blockchain intelligence solutions, work with law enforcement to weed out bad actors, and build robust corporate governance structures.
Some companies have acknowledged the need for additional vigilance after the latest allegations against Binance and Coinbase. A representative for the Bitstamp exchange mentioned that although the company has been focusing on compliance since 2011, they are taking new regulatory developments very seriously.
Marc D’Annunzio, general counsel for Bakkt, said that while some of the headlines are new, their approach remains the same. The company continues to work with regulators and legislators in determining clear, actionable guidance alongside enforcement for crypto businesses wanting to comply with laws.
Zachary Plotkin, a managing director at Madison-Davis, said that crypto companies have traditionally prioritized professionals specializing in know-your-customer (KYC), onboarding, and due diligence. However, in 2023, there has been a noticeable increase in demand for legal support in specific areas.
In addition to full-time professionals, the demand for temporary legal consultants has increased in the last six months amid regulatory uncertainty in the segment. These employees are mainly being hired on a contractual basis for periods ranging from three months to two years.
Plotkin added that the SEC’s lawsuits against Binance and Coinbase have caused larger crypto firms to pause hiring, as the space has entered a wait-and-see period.
Overall, the burgeoning legal support in the crypto industry may indicate efforts toward better compliance and positive growth in response to regulatory scrutiny, suggesting that these challenges could pave the way for improved practices and broader adoption of the technology eventually.