“Pure decentralized tech will become more regulated.”
Cal Evans has been voted “Crypto Lawyer of the year 2021”, and he is an advisor to the governments of Estonia, Malta and Dubai. Recently, we got the opportunity to ask Cal about the legal side of NFTs.
— Are there any dangers NFT projects should be aware of regarding the law?
Pure functions NFTs have nothing to worry about. Practical applications that the technology is solving. Folks that sell NFTs to raise funds for a project or company should
be prepared to account for that. Along with those who have held out that their NFTs will go up in value (even if the hint is dropped between the lines). Don’t just trust your lawyer or expert because they have worked in Crypto for a while, NFT’s can be seen as a security if they act like one.
— Legality surrounding tokenisation of real-world assets?
This can be a fantastic model. Diversifying ownership and spreading the risk can really benefit markets such as real estate, especially with current market prices. The legality of tokenizing any asset is tricky because it depends on what you want to tokenize and who you are looking to target as owners. Be careful and accept that when assets are tokenized, they lean more toward securities or derivative rights laws. Most countries don’t care how something is owned (tokenized, fractionalized, or direct); they will apply the law equally.
— Thoughts on SEC in cryptocurrency?
Once upon a time, the SEC said, ‘if it walks like a duck and quacks like a duck, it is a duck’. I believe the view of Crypto from the SEC has never changed. They will not look at what you say; they will look at what you do (and by you, I mean the token).
Remember, the SEC will always work with you, don’t look at them as the enemy or don’t think that they are stupid. The SEC will always make periodic statements about Cryptocurrency; however, remember their duck view, and you will usually have a good starting block.
— Can governments regulate decentralised protocols?
Many governments are starting to look at decentralized protocols and applications. Decentralization is not new; peer-to-peer technology has been deployed for years. If we are honest, 98% of companies that call themselves ‘decentralized’ mean ‘peer to peer’.
So many laws already exist concerning doing business directly from one person to another.
Pure decentralized tech will become more regulated, especially if it gives a large amount of interaction. Laws will end up focusing on the users more than the companies; this will be the most significant change we will see in the future and one of the only ways governments can regulate decentralized protocols.
— To what extent is cryptocurrency regulation necessary?
Some regulation is needed; bad actors will appear in every industry, and cryptocurrency is no exception. However, not every aspect of cryptocurrency needs to be regulated. Many people turn to crypto for its direct nature because they do not want governments interfering with their transactions. Not because they are acting illegally or wrongfully but because they believe they should be in charge of their money without any third parties getting involved. I think many of us can understand that.
A true peer-to-peer transfer of value was and is something the world has needed for years. It is healthy for people to work directly together, and 99% of the time, that requires no government intervention or a third party to facilitate that.
— What attracted you to Blockchain and crypto when you first joined the field?
I was one of the first in the space, and I am proud to see how much adoption has been gained over the last few years. There is a risk that some in the space are trying to put crypto into the traditional financial models. I don’t believe that will work. However, as the ecosystem continues to grow, I expect to see more service providers and more companies working within this space, helping to drive innovation.
I think in the future, most tickets and information will be in NFT format. Although, most people won’t know that this technology is being used. NFTs will become a little like a motor vehicle. Most people will own one, but very few will understand how it works.
— As NFTs are stored on the blockchain, does holding the wallet's private keys prove ownership in the eyes of the law?
This is a complex topic that depends on where you are based; you should consult with a local lawyer to protect yourself from this!
And Nothing in this interview should be considered legal advice. While I am a lawyer, I am not your lawyer 😄.