Source: Bernard Hermant/Unsplash

Despite the crypto winter in the market, lawyers are still busy with crypto, blockchain-related requests as the industry is growing, more investors are entering the space and governments are trying to figure out how to regulate all of this.

Source: stockholmblockchainforum.com

“We currently work with some five or six governments,” Dr Guenther Dobrauz, Partner and Leader of PwC Legal Switzerland, said in an interview with Cryptonews.com. The Big Four firm advises governments on implementing blockchain regulations - “rules that are attractive to build on.”

However, he admits that the number of token sale-related requests decreased, but has not disappeared.

“We’re still supporting ICOs [Initial Coin Offerings] and STOs [Security Token Offerings] - only last year, we had like 50 requests a week. That died down, but we still have like 10 requests per week, which is quite significant,” Dobrauz said.

PwC is also busy with institutional players, or “those wishing to be institutionals.”

“We’ve been handling the vast majority of banking licenses for those who want to become crypto banks, or for existing banks who want to expand their offering. We’re also offering wallet services, trading opportunities and so forth. Then we work on the product level, on structuring funds, notes, all kinds of products based around the new crypto and blockchain universe. We currently have something like 30 jurisdictions where we actively work with this that I coordinate,” he said.

The importance of institutionalization

“We’re expecting to see some really big wins in the course of this year, the sort of propositions that have stayed put during the crypto winter. We will also see institutionalization across the entire spectrum, from wallets, over brokers to custody. We are now seeing more and more Tier 2 and even Tier 1 players entering the arena, which I think is a very strong sign for the industry,” Dobrauz believes.

He stressed that “if you want mass adoption, you need trust.”

“Kind of like cars - the first cars were crazy, but in order to sell them to the masses, they had to be standardized, people had to trust it. Essentially, you need rules that people believe in. In that sense, compliance and regulation are good things”, the partner at PwC said.

However, it might be bad for “the early adopters, the freaks and geeks who don’t need trust to do the smart stuff, but for the more average people, you need to water it down.”

“When institutional players come in, you get adoption. It’s a normal trajectory,” he said, adding that stock exchanges entering the market are a great sign as it will lead smaller funds into the space.

According to him, every innovation starts with freaks and geeks, but they’re not the ones who make it:

“You need a different profile - you need institutional quality grade type of solutions - because 99% of people won’t go on YouTube to figure out how to set up wallets and start trading.”

Regulatory challenges

Although some countries are obviously optimistic in the face of cryptocurrency and blockchain and others want nothing to do with it, Dobrauz believes that’s not quite as black and white as it might seem.

“Sure, there are small countries like Gibraltar, Malta, Estonia and others that are positive towards it, but in the end, it mostly matters what the US does,” he says, adding that the US has a pretty clear-cut stance which is not very friendly towards ICOs and STOs.

Dobrauz believes that Europe could fix that.

“If we can get a resolution on regulation in this space within Europe, that will change everything. Obviously if China changes their stance too, that’s a big roadblock removed,” he said.

“So you structure a fund in the Cayman Islands as an asset manager in Malta, with a bank in Belarus. There’s nothing wrong with it - but no Swiss Family Office or European billionaire family will send their money there, much as they may like the asset class, because the Deutsche Bank in Frankfurt simply won’t accept it. But the more different institutions get in, the more adoption you get,” Dobrauz added.

Protect yourself from shady exchanges

Following both the Cryptopia hack and the QuadrigaCX ongoing debacle, cryptocurrency users are looking to protect themselves as much as possible. Dobrauz believes that clients should definitely do more research before deciding to trade on a certain exchange.

“You can get your car fixed in a cheap, out-of-town garage where people don’t affix some screws and you lose a tire and have an accident. But if you go to the official service, you end up paying much more. You can’t expect the same level of protection, scrutiny, cyber resilience and setup as if you’re trading on a stock exchange - but you can look for something in between.”

According to him, the real question is, “has somebody else been negligent?”

“If so, you should be able to get something - the question is how. You need to do the appropriate steps to find them and prove that they did something wrong - and you hire a lawyer for that. But if you leave your money sitting at an exchange and not move it into a cold wallet just because it’s convenient, you’re in a risky position. That doesn’t mean that the exchanges did not fail - that’s a different story. But if the exchange is hacked, it’s a question of the law enforcement that goes after the perpetrator. It’s only in the case that the operator of the infrastructure hadn’t done their duty that they become liable - but that’s up to the regulator to check up on. Once things become institutional quality, a lot of these worries will go away,” Dobrauz remained optimistic.

”Nobody will talk about crypto in 10 years”

In the debate “Blockchain, not Bitcoin”, Dobrauz is firmly on the blockchain side.

“Crypto is just an application of blockchain,” he told us, adding, “Nobody will talk about crypto 10 years from now. Blockchain is so important - I mean, it’s the second totally transformative technology that had been rolled out in our lifetime.”

He believes that the impact on structure and technology will be as big as the Internet, if not bigger, both in terms of applications and in terms of cultural change.

“I think the real focus is on blockchain and not crypto, as crypto is really just the first application of blockchain. It’s great, but otherwise it’s the Yahoo of the internet, not the Google - and we have to see the Google yet,” he said. “The entire volume of cryptocurrencies is still smaller than the biggest fund in the world. It has no relevance, despite all the noise. Just us being in the industry, loving it, means nothing. If you ask anyone on the street what cryptocurrency is, they’ll tell you it’s the stuff that drug dealers use. That’s the perception.”