Marc Piano - Fox Williams - Ethereum London

okay thank you very much I'm actually gonna deviate slightly before I go into the main presentation because as was mentioned just now the Treasury select committee has published their report on virtual currencies so had a quick scan through to look at the key points and I thought I might read out a couple of the initial conclusions so you can get an idea of the direction of travel because if you're working on projects or looking to work in this space it's worth bearing in mind as to how the future landscape could look so they're generally quite critical in some cases using quite strong language so they say the FCA's consumer warnings are a feeble corrective to misleading advertisements they strongly recommend that the FCA which is a financial conduct authority the financial services regulated in the United Kingdom brings icos within their scope of oversight as a matter of urgency there's different definitions of urgency I don't think it's going to happen in the next few weeks and they describe and you'll probably see this in the media when they start to report on this over the next few days they describe the current landscape and respective crypto as a Wild West which is not sustainable partly because of the lack of certainty in the regulatory space so we are probably going to see ICO themselves brought within the framework or oversight of the FCA which is good for lawyers but what I found quite interesting and I don't know the extent to which this will be covered is this one and I'll read it in full if the UK develops an appropriate and proportionate regulatory environment for crypto assets and if future innovations in crypto assets proved themselves as beneficial to society and industry the UK could well be plaits rate could be well placed to become a global center for this activity providing that the crypto asset market adhered to high standards and was not associated with criminality so it is going to be regulated likely and that is a good thing because then you're going to have accountability you're going to have people adhering to standards which are not necessarily voluntary and unenforceable and it's going to add to the UK's reputation as a global finance center of repute and if they do do that and I'm involved in a parliamentary parliamentary group on blockchain and slated to give evidence in jail and crypto and I'm also potentially hopefully going to be involved in the law Commission's scoping study on potentially changing the law to accommodate smart contracts then we could see some interesting developments in this space not just from the UK perspective but with ramifications globally so with that little tangent but reasonably important one let's go on with the presentation so I'm a FinTech lawyer that doesn't actually really mean anything it just means I do commercial work legal regulatory work and finance work with a particular focus on financial technology so peer-to-peer lending platforms boxer and crypto and startups using things like api's for open banking connectivity so it's quite interesting it's still the law at its heart but it has applications in a technology space and if someone is a tech geek is somehow ended up as a lawyer that is a nice blend and it gets me out of bed each morning so I'm quite happy with what I'm doing so I joined the firm in April where a single site firm or not one of these large international ones and we base it 10 FS and I've been there for a few months now starting to see quite a bit of crypto work coming in we're doing stuff such as advising on tokenization projects on the regulatory side of things the contractual elements the wider issues to consider we're doing opinions on certain icos as to whether or not they constitute a specified investment which I'll go into shortly and Jen will work around that so putting together privacy policies to comply with GDP our terminal conditions and all the legal bump that has to go with these projects and if the government does introduce or regulations to bring icos within the SES remit probably going to be very busy so I thought it might be helpful given there's a lot to go through in a short amount of time to focus on three main areas and there's a typo on this slice I'm not going to spend much time on it they don't appear in the documents we produce don't worry about that we'd look at structuring generally which isn't specific to crypto but it's worth considering the difference between security and utility tokens from a UK regulatory perspective and many of you might have read about how he tests and the approach the u.s. takes and then we're going to look at the potential need to comply with local laws and regulations when running an IC o---- skip that slide it's not important for the moment right structuring so the reason I'm covering in particular it's because we actually had a meeting last week with a potential client and they want to use the LTS for a particularly interesting application can't go into too much detail but what became very apparent during the meeting which was initially to discuss preparing a shareholders agreement which I'll go into in a moment was that these guys were very technically astute had a brilliant idea and a great concept but what they didn't have was the commercial or business experience to work out the basics of how to structure the company who should hold the shares and how should they all interact with each other and these are considerations generally which any business starting out needs to take into account because if you don't get it right to start with then you could run into all sorts of problems later down the line not just in terms of protecting your product and the intellectual property but also resolving disputes between shareholders and so the starting point is how are you going to do this I mean are you going to have just one company that does everything you're going to have one company that holds you intellectual property which is in a lot of cases the main value in the business are you gonna have a company that's the operating company and then an IP company and then some other company and it's all held together by a holding company which owns all of the other ones once you have a group of people and you're looking to found a project how are you going to reflect your respective input someone might put equity in or money in other people might bring in their technical expertise other people might bring in contacts and potential investors and so that everyone needs to decide amongst themselves how that's going to be reflected and ultimately rewarded through the company structure so it can be buy shares or it can be by some other means but it's important to think about this stuff at the beginning and if you all decide that at the start then there's less risk of a dispute later on and you can all focus on bringing this project to fruition and less time and legal fees in arguing about it if things go wrong or you will fall out so it's important to consider at the outset what you're going to structure your project as in terms of companies how you're going to agree things between each other so you might have articles of association which are the constitutional documents of a company every single company has them and they're all publicly available for free and they set out the basic rules which you're happy for the public to see and we shall contractually binding on the company and its members but on top of that you can have something called a shareholders agreement which is a private agreement between the shareholders of the company has to have a vote on certain matters certain things that they can do or can't do without consent and various other provisions which are always fact dependent I specific to each particular company but which you wouldn't necessarily be comfortable having our public website such as Companies House where everybody can see what's been commercially agreed between the people involved in this business so this sort of stuff is is basic to any project but it's important to get right and if you do have that all set up then you know that you've got the structure in place you thought about the future you've got something ready and easily accessible so you can produce documentation to people who are later looking to invest in the company and it just makes things a lot smoother later down the line so that basically covers all that stuff up there that these slides get circulated don't they yeah okay great hopefully without the typo okay jurisdictions are interesting we've seen some clients who have actually moved from the UK to other jurisdictions like Malta Bermuda other places in part because of the regulatory environment around I cos in some cases it's for tax efficiency be very careful with the choice of words there and in other cases it's simply because they've got other commercial reasons for relocating elsewhere but as we're going to go into later on just because you're a company offshore which might be ICAO friendly doesn't mean you're completely outside of ICO requirements in other jurisdictions worldwide so it's another factor to consider London in particular is a very good place to have a company especially if you're going to undertake regulated activities especially as ICS are now likely going to be regulated but also because you have the professional expertise here in terms of lawyers accountants business advisers investment advisers recruitment agents that you're probably going to struggle to get in many other places around the world you've got it all in one spot and in a place which is regarded as one of the global financial hubs in the world so in terms of what's happening in this space London really is one of the central hubs for it the other key thing to consider and it feeds into the structuring side of things is governance now setting aside protocol govern which is one of my current areas of interest and issues of weaponized consensus which I'm having to talk about at some point that it's not related to presentation you need to think about what is going to happen in terms of how decisions are made for your business so there are certain things under company's law which can only be passed by shareholders these are called ordinary or special resolutions and they require different percentages of shareholders to approve they relate more to fundamental functions of the company but in terms of making day-to-day decisions you need to think about how are you going to do that is it going to be all of the directors just making the decisions are you going to have committees so that technical decisions can be made by a committee of Directors focused on that purpose you might have a finance committee to make finance or investment or debt decisions and you might have a operational committee you can structure it however you want but it's stuff to think about and it's important to ensure that you have systems in place to ensure that decision making is done effectively by people who are well placed to make those decisions and avoid conflicts and conflicts of interest and also to ensure that the decisions that are made are well documented and can be evidenced in future for potential investors or if there's a dispute or simply good governance and accountability there's also legal duties implied by law under the Companies Act 2006 which all directors have and so it's important when you are starting a company to not assume that everyone who's a founder is going to be a director you might have people who are willing to take on these legal duties and other people who are not they still want to contribute in some other capacity if you're a director you must follow these legal duties they're very important and they're fundamental to how the corporate system works in the UK because if you don't have accountability of Directors then companies theoretically can do whatever they want without any kind of recourse either by shareholders or by customers or by investors or any other stakeholder and there's not a lot that can be done so this is why we have these directors duties and they're they're fairly they look straightforward but depending on the facts they can sometimes be quite complex to ascertain especially if someone is just gruntled by a decision the board has made and claims that a director has breached their duties by doing something they don't like and that's where lawyers get involved if I'm speaking too quickly by the way please let me know and I'll slow down of just trying to get through as much content as possible and leave time for Q&A so structuring and this goes into funding as well so you have to think about how you're actually going to get the money in to get this project off the ground hire some staff get some office space and cover your initial costs lots of different ways of doing it the initial founders might dip into their pockets and put their own equity in you might have friends and family who decide to put some money in to get it going you might have private equity although you might need to get a little bit further along the line before you're in a position to attract that whether it's early stage funding or full-on funding round potentially an ICO although I'm not sure an ICO is necessarily the best way to fund an intial company to get off the ground that might more be to get the project up and running or debt which is simply borrowing money borrow money from a bank might be from a private loan from a shareholder or a director or it could be some other way of structuring debt has anyone heard of the mini bonds like the BrewDog bond and things like that yes so this is something called a mini bond where a company wants to raise money it doesn't necessarily want to go to offer more equity or list on capital markets but it does want to raise money and it thinks it's in a position to return it so issue something called a mini bond which is effectively a bond which pays some form of interest and in BrewDog case or some of these other companies something a bit cool like free beer or you know free food or discounts off the services there's lots of different ways of structuring it and it's important to work out which one is right for you because everyone's going to have different requirements every business has different roadmaps and you also got to think about what happens if things go wrong it's also important to make sure depending on the project you're doing that you're not taking in money from lots of different people and the business itself actually invests in other businesses because then you might potentially be undertaking something called a collective investment scheme which is a regulated activity so let's get into security and utility tokens they're complex it doesn't matter what you call them it's what they do which is what everybody looks at from a regulatory perspective and the key pieces of regulation are the financial services and markets act 2000 which the regulated activity is all is a something derived from that and the FSMA as we call it is the framework for financial services regulation and law in the United Kingdom and it's through that that the FCA was created and the reason this is important is because it is an offense a criminal offence to carry on a regulated activity in the United Kingdom unless you're authorized by the FCA or you're exempt you fall outside of it an activity is a regulated activity of a specified kind which is carried on by way of business ie it's the way you get paid and relates to an investment of a specified kind and this goes to the ongoing question are tokens utilities or securities and my typical lawyer answer is it depends there is a list of specified activities and they go into quite a bit of detail in the our AO are going back to that in a moment and these are the specified investments there's a lot of them and because tokens are programmable with lots of different properties and qualities and can have contracts and agreements wrapped around them which confers certain rights they could fall within one or more of these and so what I've done is I've bolded some of the ones which are more likely to apply to a lot of projects based on what I've seen so far they could be electronic money they could be a form of shares tokenized forms of equity which is an interesting proposition instruments creating reg knology indebtedness or any kind of to token that gives you a right to receive money in return instruments giving entitlements to investments so you could argue an saft and thus sometimes used in the u.s. is one of these or some equivalent as used in the UK certificates representing certain securities I've not seen any of those yet but there's no reason why that might not happen in future and right right - or interest in other specified investments so even something that gives you the right to an investment can itself be a specified investment and if you're looking to work on a project to do an IC o---- this is an important distinction to make because a lot of cryptocurrency exchanges are not authorized by the FCA to undertake buying and selling of specified investments that's often deliberate and it also means that they can't list tokens which are specified investments because otherwise they have to be authorized by the FCA and they'll be in a lot of trouble if they don't of course also as I said in this previous slide with collective investment schemes you also can't undertake something that's a regulated activity in terms of your project unless you have FCA authorization so one of the things we do is regulatory advice and we're dealing with projects at the moment where people are looking to become electronic money institutions or payment services providers and there's all sorts of implications around that as well and you also might potentially be undertaking electronic money services operating a payment service might you might be doing consumer credit we're seeing now forms of crypto collateralization and borrowing against that if individuals you might fall within the Consumer Credit Act gambling or a gaming and there's quite a lot of that going around there might be regulatory implications there you might be operating an insurance business or you might be undertaking what's deemed to be banking services and so depending on what your projects looking to do especially if it's in relation to financial services you really do need to take the right advice at the right time one other point I just wanted to very quickly touch on is in terms of equity so because tokens do not necessarily confer share rights as if you were a shareholder then there's a very important difference because shares give shareholders certain legal protections they're set out under the Companies Act including the right to bring a claim for unfair prejudice against a company and also because you have your rights enshrined in a set of articles which gives you the voting rights to dividend rights and other rights or a shareholders agreement tokens don't necessarily have that now you may have tokens which are offered with certain terms of conditions associated with them as part of the investment agreement but unless you have those in the investment agreement the tokens don't have any other rights associated with them from a legal perspective so it's important to make sure that you think carefully about what you want these tokens to do and if you are trying to persuade people to invest in the tokens rather than invest in the company itself and have shares you need to think about this stuff and work out how you can make it an attractive investment proposition if you're an investor and you're going to invest in tokens which don't give you the same protections or write to receive assets that the company has liquidated that's less attractive than taking shares in the company itself and the shares in the company theoretically will grow in value as the company itself grows where as tokens if Ellis's on exchange a subject to the volatility that we're seeing at the moment so it's another point to consider so i've cos generally got to consider what you're selling to where and to whom selling to retail investors is prohibited in some jurisdictions so you've also got to research a jurisdiction you're looking to incorporate in if it's not the UK and see whether you can even offer the RCO at all from a company in that jurisdiction always take local legal advice in the main markets you're looking to promote in to in theory of the all markets because there's certain concepts known as financial promotions and equivalent concepts which if you're offering a particular product in a particular jurisdiction you have to comply with so it could be making compliance with prospectus rules which means you have to create a document similar to a white paper but has certain requirements around it and there's other activities which depend on each jurisdiction which you have to follow or you can do or you can't do so unfortunately it involved in it hiring more lawyers so it doesn't matter which cup where your company is based or what's behind the project you may still need to take local advice to comply if you say well my company is incorporated in the UK or some other jurisdiction and compliant there that's great locally but it may affect your ability to promote the ICO elsewhere so it's always important to ensure that you get the right advice early from the right advisors so on that just before you think I'm going to do a sales pitch I'm kind of not I was going to give you some general things to think about for getting this sort of thing up and running so as we said you may need advice in multiple jurisdictions obtain different quotes from different law firms and just give you a rough idea of what the market pricing might be also ensure that lawyers and the advisors do actually know what they're talking about and you might want to ask them some questions to test their understanding their past experience some of the clients they've worked for if they're willing to tell you or if they can tell you and some of the issues they've seen come up you're not necessarily gonna get free advice you might get an unlikely gonna get an initial meeting we often meet with clients on a initial basis without a charge and you can work out whether this is an advisor you want to work with involve advisers as early as possible I've seen white papers with wildly unrealistic budgets for professionals and saw one for like a couple of thousand pounds for legal advice over to they're going you're not going to get much for that it's also important because as I said before in terms of structuring the company itself if you get the right advice early then you can make changes your business plan or proceed with your business plan as you originally intended if you go 75 percent of the way there then get some advice and actually you've done it wrong from a tax perspective from legal and regulatory perspective you spent all that time and money putting that project so close to the finish line but actually once you take that advice couldn't do it as the way you thought you did so getting it early can save you a lot of time and money in the long run and also gives you the comfort and confidence to know that you're doing things within the parameters of professional guidance and you might not like the advice we're not paid to tell you what you can do in the way you do it we're paid to tell you what's based on what you've told us can be done within the bounds of the law and regulation we may say what you can't do but we may also say what you can do and it's important to hire professionals who understand what you're looking to do he'll understand the wire market understand especially at the moment legal and regulatory developments and can bring all this to bear on your project so even though you might not be able to do things one way the lawyer might be able to find a different way for you to do things there might need some tweaks here and there and it's up to you if you follow the advice but be prepared sometimes for news you might not particularly be happy with we don't pay you don't pay us to tell you what you want to hear this can be high stakes stuff especially at the moment with this report coming out we've got scams which have been making high profile stories in the press and it's therefore likely that we're going to see regulatory action of some kind and potentially litigation from disgruntled investors again it's projects and icos worldwide in the coming months and years from a regulatory perspective they have the ability to enforce criminal sanctions so it can be fines or even prison time and if you have legal problems in future and you can show that you've taken regulatory advice that is appropriate and early then it can protect you if there are investigations or enforcement action in future so the key takeaway from this is you've got to think about the basics first get the right advice and think very carefully about doing the ico in some cases you might find that actually investors don't want to invest in the ICO they want to invest in the company itself and so you'll find as your journey continues and this landscape rapidly changes their trends and preferences and the law and regulation are going to adapt quite rapidly so it's an interesting time to be in this space if you're on a project it might be a frustrating time but I think there's a huge amount of potential there and the fact that that Treasury Committee select sorry the Treasury select committee report is quite rightly in some cases critical but also sees the potential if things are done properly should hopefully hearten you that there's a lot of future and potential not just in crypto but also in London but it's important to invite involve the right advisers at the right stage get them involved early get them involved along with you as the journey progresses and I think you'll be in a good position to realize that vision you had in your head with your founders whenever you're the project idea came into your head so that's pretty much it any questions sorry because your disclaimer sorry right go be done high-level presentation only covering topics from a general perspective obviously every business use case is different and will have its own specific requirements always take the right specialist legal advice at the outset and this is a crucial one nothing in this presentation or any questions and answers constitutive reports to constitute specific legal device in respect of English law or otherwise on which you may rely now the Fox Williams LLP or not I accept any duty of care or liability to anyone in respect of anything covered in this presentation or any Q&A bottom line you can't sue me for anything I've said cool so I've kind of freestyled that but happy to answer any questions I can't give any specific legal advice if that slide didn't make it clear but happy to answer any general questions if you have any questions for lawyers hello of them thanks very much on just on the Treasury select committee wondered what you think from that obviously just briefly ready hmm but it doesn't sound like that's anything new nothing what do you think regulation might come in I think it's gonna come in sooner rather than later one of the other interesting points in their executive summary is they've noted that crypto is highly embedded in some sectors Society and they think it's highly likely it's here to stay and one of the disadvantages of a regulated market is all of the tricks and tactics that people used to be able to do in previous markets before they were regulated they can now do in this market so in some respects regulation will help with preventing market abuse help holding people to account the obvious issue here though is it's a global market and therefore unless there's coordination on a regulatory scale worldwide and there might potentially be that because the SCA is recently announced they're going to cooperate or collaborate with I think it's 11 regulators worldwide to create a global sandbox where potentially going to see some very interesting worldwide cooperation into space and the impression I get is that regulators are quite rightly concerned about what's going on at the moment they do see the need for something that has to be put in place I think actually it's to everybody's benefit not just because you're gonna have to hire more lawyers but generally because it gives you more comfort uncertainty I think some of the people who might have been uncertain about investing in this base whether on a significant level or even whatever level you care to imagine might be more confident of getting involved if they know they have some protections and if something goes wrong or someone does something blatantly fraudulent then there's going to be some ramification from that the other point I'd add that is that advertising could potentially be affected by this as well we've all seen the ads on Facebook before they banned it and then reload it with for some SEO which has some frankly ridiculous claims so I think that's also a good thing and anything that's going to help remove the negative optics around this is a good thing it gets taken seriously it's going to attract more talent it's going to attract serious infrastructure around it and it's going to be taken far more seriously than it is now as a form of capital raising as a form of innovation and finding solutions to problems that blockchain can actually solve and not just doing an IC o---- and using the word blockchain and clever sounding words so I think there's a lot of potential and I think the Treasury select committee seem to have taken a balanced approach they're quite rightly scathing where they need to be but I think this taking a step in the right direction so yeah I think it's nothing out of the ordinary but encouragement is going to be regulated hopefully by the way so let me declare my interest in this I hold read tokens it's interesting because one of the interesting things I've seen on blockchain recently and this is not legal points more general observation everyone's talked about decentralization and disintermediation but actually what we've seen with a lot of projects is they're simply swapping out old-school intermediaries for new intermediaries so I'm trying to work out in that respect what's really changed then you've seen property centralization where once it's up and running there's not much anyone can do about it because it kind of just goes on and on and on so I think we're going to see lots of different things in this space from on the day to day basis I see a lot of people using private blockchains because in many cases why would you put confidential sensitive information or business critical operations on a blockchain protocol which you have no control over the governments of we might start seeing blockchain private and public once they've become more interoperable being used as the engines to power certain projects rather than the whole thing itself being focused on blockchain and it becomes a component in terms of the crypto libertarian argument I think we've seen the manipulation in the market and the scams and the frauds which unfortunately show that if this space is ever going to have mainstream adoption that we'd all like it to have it's going to have to have some sort of involvement because human nature being human nature if people can find a way to exploit other people they will and so the crypto libertarian argument was the impetus behind the creation of Bitcoin itself and the OVA tokens but the practicality we're seeing on a day-to-day basis is is not as decentralized as we'd like to believe it to be and when you've seen the huge amounts of money that are involved at the moment and if you saw the story about the potential mount GOx dormant Bitcoin whale that woke up and started dumping coins yesterday or day before if you don't have some kind of oversight in this space then there's a real risk that you're going to have a lot of people potentially coordinating together to really move this market in ways it's going to short a lot of people out they're going to lose a lot of things one of the points made in the Select Committee report was there's a real risk here for retail investors you don't understand this I've had friends who send me their their coinbase screenshot and not knowing what they're doing they bought a Bitcoin on margin my immediate response is what on earth you doing sell that right now so you're trying to balance lots of different factors here I think a pure libertarian argument is not going to work in practice when you've got a whole bunch of retail investors coming in you're getting professional investors from all sorts of areas looking to come in but want some sort of certainty but also the practicality of what we're seeing at the moment with all this exploitation and manipulation and general skullduggery so I have sympathy with the crips a libertarian argument I just don't when you when it comes to reality however it doesn't seem to hold up and I think if it was to remain completely unregulated I think a lot of people would start to move away from this space okay I apologize in advance for the question but could you explain again the difference between a utility and security token in from a legal standpoint sure so a security token it's basically anything that does anything of this it's it comes within the concept of a specified investment so if the token does something which meets these criteria then it's a specified investment and is therefore regulated utility token is anything that's not so if it's something that purely gets you access rights onto a platform for example or it doesn't guarantee a return of capital of some sort or a coupon payment or something like that it may not be a utility I can't say that for sure it depends on each case and you've always got to take legal advice but in general it's important to look at what properties you want the token to have and then get some legal advice on it because if you don't and you go ahead with what you think it is this laws changing on a fairly regular basis anyway and law generally changes on a regular basis and especially in this base with it being so fast-moving it's important to make sure that you don't have to spend sleepless nights worrying about whether you've should have got a lawyer involved on off and you've done what you think was the right thing to do but actually if you're taking advice it might have been a different output so security tokens might meet these criteria or you might think it's a security token but a lawyer looks at and goes actually I don't think it is in terms of tokens themselves it's always fact-specific so we always look at the white paper we ask a bunch of questions we then sit in a cold dark room and then really look at the white paper and the regulation and try and do some analysis in terms of the framework as a whole at the moment it's not black and white and that's one of the criticisms from the Treasury select committee and I think generally from our perspective the Security utility token that argument is actually fairly easy to sort out it then comes down to the other aspects of the project in some cases especially if there's a financial services element to it so you've got for example the payment services regulation which sets out the regulatory framework for operating payment services interestingly crypto I don't think really fits within that because it's not scriptural money bank notes or whatever the other definition is but that could change and then we've got the fourth money ordinary directive as amended but some people call it the fifth which will require all crypto exchanges to undertake kyc AML on their customers most do anyway to varying degrees of acceptability and that's again another point that was raised in the report so in some respect for law as it stands kind of works you have loopholes as we're seeing and as might be tightened up based on this if these recommendations are accepted and implemented but at the moment depending on what you want to do you can always find the right advice to help you understand what ways stand and that's one of the things we do with opinions is we do a legal opinion backed by the name of the firm and our insurance and we in some cases give that to our client who's doing an ICO so they can then show it to a crypto exchange and say hey look I've got lawyers in the UK who are pretty sure it's not a sorry I'm pretty sure they are sure it's not a security and therefore you're ok to list it and what we're generally finding is the UK is very well regarded in the space as being a well regard well regulated jurisdiction and it is and therefore the opinion of a UK law firm can carry weight for exchanges based in other countries although of course we only comment on English law yeah some of the smaller jurisdictions like Gibraltar Liechtenstein Malta have been working quite hard to produce a fully fledged regulatory framework Germany views on those and whether the UK will look to leverage them and whether you advise clients to go somewhere where they can rely on earth they know it's something that's been marked offers as being complete so I'm going to give you a half answer to that so I actually spent 80 nearly two years in Guernsey so I've got a bit of experience in offshore jurisdictions and that they're often in competition with each other so they're always trying to find ways to innovate and offer something new and different and unique so some are going down that path some are going down other paths whether that's going to be a song from the UK emulate I don't know also bearing in mind that these jurisdictions are self-standing jurisdictions they've got their own laws around legal systems so what works in one jurisdiction might not work in another or in the UK some things they might take and implement in the UK but with the nature of this jurisdiction and the fact that it is by defile our majority the preferred jurisdiction of choice for business that's got to be borne into mind as well so you haven't got the flexibility and the agility that you have in offshore jurisdictions to make new law but when new law is made here you see the consultation process has gone through you've got working groups you've got law commission looking at changes in the law you've got all these different parties of different focuses and specialisms looking at what needs to be done and focusing on their particular area and then that's all going to feed in and then government makes a decision so I don't know I have a question before lunch too so first question is do you think I SEOs should be regulated on their websites and social media pages same as you have cigarettes and there is a law that says on every pack of cigarette you know it is to you know be written with big letters this is risky like this is a highly volatile market don't invest if if you don't know what you're doing so do you think that will help that's the first question and the second question is the reason why I SEOs are appealing is because it's very easy for regular people to get in whereas for years it was very hard for for regular people to invest in companies because you know paperwork and stuff like that question is do you think the government need to make it easier for regular people like me to invest in companies and therefore they will not look at i ciose because it's easy for them to invest in companies do you think that's the solution so answering your first question in terms of will regulation of advertisements for icos help yes I think they will because if it is brought within the auspices of the FCA then making financial promotions in respect to specify the vestments is something which falls within law and regulation and therefore there's certain things you can do certain things you can't do and certain things documents have to contain and I think that's a good thing because we've seen a lot of I SEOs where in some cases what they were offering didn't match up with reality and if you didn't know and didn't do your own due diligence then you might have been burnt you've also got a bear in mind that even buying and holding crypto itself is not an easy process you've got a register go to do kyc you got to buy the token you've got to work out which ones you going to buy go to get a wallet you've got to send the funds to the wallet to the right address and then work out what to do afterwards and then you have all sorts of issues with the wallets themselves potentially being vulnerable so I think actually the bar to entry to get into this space at all is reasonably high at the moment to make it easier over time but it's not something you can just walk off the street and do not not with any degree of confidence anyway in terms of the second question it's an interesting one don't trouble ok how to formulate the answer I'm not sure is he honest answer we're getting to a point now where this is starting to be taken seriously we're seeing a large investment houses start to go in and yes there is an extent to which retail investors can't access certain investments but that's mainly for their own protection because what we have seen in the past is people who have put pension funds or retirement savings into a project and they might have been misled or they might have done sufficient research and in some cases the business model just wasn't sound but if you didn't have experience in this space as someone who makes investments on a regular basis you may not be able to make that distinction you can already invest in startups through cedars and other websites but you have to be able to show that you know what the risks are that you could stand to lose all your money same with IPOs and I think everyone needs to understand that an ICO like any other investment carries risk some cases return on capital some cases of return of capital it's it's a risky space as a volatile space I think people need to know that before they make these decisions and that's why I think regulation and the safeguards that come with it yes from a crypto libertarian perspective that goes against the grain but I think if you look at the reality of what's going on in the last 12 to 18 months I think it's necessary okay since you see also advice on peer-to-peer lenders I was wondering what is the regulatory framework for decentralized debt of decentralized loans because there are some very early applications of it but let's say someone wants to set up a an application in the UK that people can lend a theorem to each other with interest what what is the regulatory framework around that so peel peel framework p2p of platforms are governed by something called article 36 age of the REO and it was something which actually industry leo's of the FCA to create so when peer-to-peer platforms first came about they weren't regulated and they said can you please regulators and that's how we got 36 gauge as to crypto we've not actually come across any peer-to-peer platforms yet that doesn't mean that people aren't looking to do them I've not come across anything using make a dial CDP's or anything like that yet but I do think we'll get to a point where people want the quiddity and people want to do something with their crypto rather than just hold it or in some cases actively manager depending on what they hold so I do think we'll see that again huge amounts of risk involved especially if there's defaults working out how you going to collateralize it if you're going to collateralize it who's going to collateralize it how it's going to be held all sorts of things to bear in mind there and whilst it's not technically currency we might get to the point where you treat it as if it was I don't know I've not come across that yet do you think there is a business potential for a legal tech that form to fold every all of this into a smart contract and approach approach the the legal authorities with the smartphone right I mean at the end of the day all all these articles that you talk about a code aren't they it's interesting because I've actually spent quite a bit of time thinking about this and I'm on a slack for open law which the consensus spoke I think this is where they use which is looking to take regular legal documents and have them interact with each other it's not necessarily going to automate the process it's just going to make drive efficiencies and have document interoperability what I think is going to happen is and I would say this so take this as you will you're always going to need lawyers you're not going to be able to automate the process every deal is different whether it's setting up a company whether it's getting the articles in place and getting investments and debt involved and each struck deal has its own terms and they usually heavily negotiated on a commercial side but then you have to negotiate with legal terms as well and there's ways you can make that process automated to some extent you're still going to need human inputs to consider the commercial aspects to negotiate the legal aspects to look at what's been suggested and thinking about the legal implications which again might be different for each project so I think automation and AI certainly has a place in some cases it's going to be very very useful because it'll save you going through a document and make sure the definitions match up and putting a semicolons and clauses in the right place but in other respects it's not going to replace the fundamental analysis that goes on for most of the more complex work in terms of deal negotiation or contract negotiation there isn't there are quite a few legal tech firms out there already so there's open law there's a grello quite a few others legal things and a few other bits and pieces so it is evolving in this space and Lord generally traditionally has been slow to catch on to tech were actually seen quite a few firms use AI and play around with all these sorts of technologies try and drive efficiencies which ultimately means that lawyers are freed up to focus on what they're trained for which is the law and negotiation and also make sure that there's less time turning standard form documents around which means hopefully the cost savings can be passed on to the client competition in your own sphere obviously the legal the legal area you know Bach chain is growing you know did you know sort of about your own competition in terms of like our project for instance if we're looking first at a legal case or our yeah would we be looking where we have to pick up a hundred firms or would it be fifty firms ten you know you're a smaller shop yourself well I say small you don't you're not a multinational but what's the sort of legal landscape in terms of sort of blockchain counsel well hopefully we'll get to the point where next couple years you can pick up the phone to any firm and they'll be able to help you in terms of a lot of the work it's it's fundamentally the same workers for any other project the interesting aspects come in when you consider the regulatory side of things or some of the more specialist elements there are some very good firms and some very good lawyers in this city it's probably why I moved here because I wanted to be in this place full-time and surrounded by people far smarter than I am on the legal and non-legal side which is not hard to do and what I found interesting is that different lawyers have different approaches to this so some lawyers focus on crypto funds and funds as a whole other kettle of fish to what I do and then you have lawyers to focus on the regulatory side lawyers who focus on the employment aspect and getting immigration visas so if you want to bring someone in who's an absolute technical genius then you can do that and so there's different lawyers doing different aspects in this space in terms of firms themselves there's a few very good ones of course I'd count our firm in that but if you come to us and say I want to set up crypto funds we probably refer the actual fund formation out to another firm because that's just not what we do so it's important to look at the credentials of the firm itself look at the credentials of the lawyers involved and then see what they were variances what sort of work and eventually done what issues have they come up I think I touched on that before we are seeing more firms getting into this space which is always a good thing because I think it's important to have as much choice as possible also Drive competition also drives innovation one of the fundamental issues with lawyers have very very busy so I did 14 hours on Monday for example so who didn't have much time to read up on current developments in crypto so because of the fact that as you pointed out before you have to do a lot of reading on your own time as a dev especially in this space you have to do a lot of reading in your own time as a lawyer because it's no there's no regular or easily accessible source in some case you have to kind of pull different pieces together and then sit down and think about it and look at the issues so I had a very interesting chat a few weeks ago with a QC about some of the issues associated with sale and purchase of cryptocurrency and how you document that and how you treat it and all that sort of stuff so there are some very good people in the space and I think if you do a bit of digging most of the firm sites are well SEO optimized and most of them will have a some form of digital assets service or cryptocurrency blockchain service and then look at what they do and what sort of advice they offer and whether you need specialist advice from one particular aspect or whether you want to firm that can handle everything so there are quite a few firms who do it there's some very good lawyers who do it I do actually wish it was a lot more lawyers in the space because then I have plenty of people to meet up with and shoot the breeze with yeah I'm absolutely all in favor of competition what I will say though is when in terms of advising on the ico some terms are more particular than others partly because it might be that the startup simply doesn't have enough money to pay the fees depending on the advice they need it might be something like for example a gambling or gaming we don't do that because we don't do any regulatory work in the gambling area so if someone came to us an ICO and said all here's 20 grand up front can do our SEO for us if there's a regulatory or element inspector gambling or gaming we have to say I'm sorry this just we don't do regulatory work in that area so you've got to work out whether the firm is right for you and for your project and then make sure that they've got the experience and expertise to be able to give you the right advice incredible we get a big hand over the course mr.

mark [Applause]