Blockchain & Cryptocurrency

Steptoe advises merchants who accept cryptocurrency as payment for products and services. We advise on the mechanics of accepting and storing those funds, the potential risks and mitigation strategies for holding cryptocurrency, and the tax implications.

We advise individuals and entities in setting up cryptocurrency exchanges, for exchanging between cryptocurrency and fiat or between different cryptocurrencies. We also advise clients on the different business models for exchanges such as a broker, a dealer, or a custodial exchange and assist in setting them up. In addition, we advise exchanges on structuring international arbitrage, taking custody of their customers’ private keys, dealing with cyber-threats, and verifying payment, storage, or technology vendors.

We advise on how to comply with Bank Secrecy Act (BSA), Anti-Money Laundering (AML), and Know Your Customer (KYC) requirements and with sanctions regimes. We assist clients in registering as a Money Services Business with the Financial Crimes Enforcement Network (FinCEN), complying with state money transmitter laws, and developing AML policies and procedures. We advise clients on the use of blockchain analytics software for verifying customers’ funds and other software for automating AML and KYC processes and digital identity management.

We also advise on the tax implications, reporting regimes, and record collection and retention policies for merchants, exchanges, miners, and entities paying wages in cryptocurrency. We advise clients and engage with government regulators regarding fiat to cryptocurrency conversions, cryptocurrency to cryptocurrency conversions, hard-forks, and other taxable events.

Steptoe serves as legal, regulatory, and policy counsel to cryptocurrency entities and provides assistance with government inquiries, requests for information, legislative hearings, as well as investigations and enforcement actions.

We advise established companies and startups looking to implement enterprise blockchain applications that cross a range of industries such as energy, insurance, real estate, transportation, supply chain, and trade. Steptoe takes a holistic approach to implementing enterprise blockchain applications and developing strategic transition plans to blockchain and distributed ledger technology applications. We consider applicable laws and regulations related to compliance and sanctions, cross-border requirements, tax treatment, data security considerations, risk assessment of technology vendors and partners, while also anticipating obstacles to implementation.

We conduct impact assessments of blockchain and distributed ledger technologies, including the benefits of public versus permissioned blockchains and the differences between blockchains such as Bitcoin, Ethereum, Hyperledger, and Corda. We also advise on the legality of smart contracts and transacting digitized assets.

We assess data protection and privacy implications of these enterprise applications. We assist clients in complying with applicable US and international laws and regulations, instituting security systems and procedures to minimize the chances of a cybersecurity incident, and executing an incident response plan after a data breach or cyber-attack.

We advise individuals and entities creating or issuing tokens, commonly referred to as initial coin offerings or token generation events. We advise clients on the implications associated with their token related to currency regulation, commodities and securities law, and the taxation implications. We assess the risk of the token and business model and work with the client to develop risk mitigation strategies. Steptoe engages with federal government agencies such as the CFTC, SEC, IRS, FinCEN, and state regulators on behalf of clients to understand the evolving regulatory landscape and ensure compliance with applicable laws.

Steptoe also advises high-net-worth individuals and entities purchasing and selling cryptocurrency. We conduct due diligence on counterparties such as cryptocurrency exchanges, dealers, and brokers. We guide clients through on-boarding with these entities and assist clients in navigating key decision points when investing in cryptocurrency.

We also create and administer investment funds and algorithmic trading platforms. We advise clients on the different business models for establishing funds. We also serve as regulatory counsel for funds and engage with regulators such as the CFTC, the SEC, and the IRS as applicable. We assess risk and risk mitigation based on the business model. Steptoe provides analysis on the tax implications of investing in different types of cryptocurrency, what constitutes a taxable event, how to determine basis, and the reporting requirements.

Steptoe's team provides strategic compliance advice to help companies stay out of trouble, and aggressive defense and effective government engagement when problems arise. We have represented both individuals and entities conducting crypto-related activities such as exchanges and users who are being investigated by government agencies including FinCEN, the SEC, and the IRS, and state-level agencies. Steptoe also has extensive experience in handling investigation and enforcement proceedings relating to BSA/AML rules and sanctions regimes.

We also assist entities and individuals both before and after cyber-attacks or data breaches. We help clients develop or improve their data privacy practices and incident response plans. We also provide rapid and comprehensive incident response in the event of a breach or cyber-attack.

Steptoe also assists individuals and entities who previously created or issued a token in determining the risk of the previously issued token, responding to investigations by government agencies such as the CFTC and SEC, and developing token remediation plans.