From blockchain to crypto: there and back again

Álvaro Carrau

Bado Kuster Zerbino & Rachetti, Montevideo

acarrau@bkzr.com.uy

Conference report

Biennial IBA Latin American Regional Forum Conference: Technology, social media and artificial intelligence: challenges for the legal industry in the digital age

23 March 2023

Breakout session 3

Session Co-Chairs

Fabiola Augusta Cavalcanti TozziniFreire Advogados, Rio de Janeiro; Diversity and Inclusion Offi cer, IBA Latin American Regional Forum

Luis Enrique Palacios Rodrigo Elias & Medrano, Lima; Young Lawyers’ Initiatives Offi cer, IBA Latin American Regional Forum

Speakers

Mariano Batalla Alta Batalla, San Jose

Nicole Dyskant Hashdex, Rio de Janeiro

Victoria Funes Bomchil, Buenos Aires

Dionisio Machuca Banco Agricola/Bancolombia, San Salvador

Mariana Olman Greenberg Traurig, Miami, FL

Blockchain technology has proved to be more than a tool for crypto currency. This technology is changing how business relationships are shaped and developed, and consequently a significant portion of legal practice. The panel brought together leading practitioners who discussed the latest trends in advising the new blockchain frontier as well as their experiences in doing business in the web 3.0 ecosystem and with native entrepreneurs.

The first speaker was Nicole Dyskant who presented an introduction about the main concepts in blockchain and crypto assets. Ms Dyskant gave a wonderful presentation in which she illustrated to the audience how the crypto and digital assets started and developed as a different kind of currency. She also described the different platforms that were built over blockchain such as Etherum, which had the capability of supporting smart contracts, self-executed set of rules, etc. She highlighted the immutable condition of the clauses written in blockchain.

Ms Dyskant also gave a brief summary of how regulations regarding blockchain are being developed globally – although it is a very new industry there are many countries passing regulations. In her opinion, the regulations should not be local, but global and that regulators have this in mind. Some countries are creating new regulations and new regulators with their own set of powers. Others are giving power to pre-existing authorities. Transparency and market integrity are main aspects to which the regulations should refer.

Victoria Funes focused on the Crypto regulatory environment in Latin America, considering that the region has been at the forefront of Crypto adoption, especially in Argentina, Brazil and Colombia. In the recent years however, there has been no consensus on the need to create a regulatory framework for Crypto assets. The crises in this industry in 2022 made clear the necessity of creating an adequate legal framework together with improved global cooperation. Such regulation in Latin America is diverse, ranging from crypto acceptance to a ban on crypto, from a comprehensive set of rules to isolated rules. Victoria Funes also mentioned the importance of Fintech Associations and how these organisations play a key role in improving communication with regulatory bodies.

After having the Latin American perspective, Maina Olman described regulations in North America. In her opinion, although the crypto industry started approximately 15 years ago, the US Congress has been trying to evaluate how this industry works and how it should be regulated. This has made companies within the industry consider themselves to be largely unregulated, although there is some regulation, and some uncertainty. There is no federal legislation which addresses crypto currency, so the different players in the market will have different regulations where some need to register with the authorities such as the SEC. Most of the digital assets are being treated as securities and therefore regulated by the SEC which has raised alarm in the industry. There are some states that do not require a licence and others that require more than one. In 2022 the Biden Administration issued an Executive Order requiring that federal agencies submit reports to the White House conducting an analysis of the crypto industry, focusing on consumer protection or issues which need to be addressed. With all that information, the White House published a framework which advised federal agencies where they need to focus their efforts on crypto regulations.

Dionisio Machuca as legal vice-president of Banco Agricola from El Salvador kindly shared his country’s experience with bitcoins. El Salvador has been very innovative in the region, introducing crypto currency to its economy as a legal tender. President Bukele passed a law that every economic agent had to implement a solution to accept bitcoin payments. This decision had mainly three purposes: to attract the global bitcoin industry; to facilitate Salvadorans outside the country sending remittances to El Salvador with fewer transfer costs; and to enhance the bancarization of the country. For all the bitcoin system the State created the Chivo wallet, which is the official Salvadoran wallet. It consists of two parts, the bitcoin and the US dollar. Every Salvadoran can have the wallet and can use bitcoins and dollars to make payments or transfers. The wallet also has an automatic transfer process to convert dollars to bitcoins or the other way round.

Finally, Mariano Batalla focused on the challenges and the impact of these technologies on lawyers. He suggested that there are both positive and negative aspects to the new developments. First, he encourage everyone to keep learning and become interested in the topic. The other idea he suggested was to bring rationality and business accuracy to match client ambition, adding value to clients. The attitude he believed lawyers must change was not to avoid becoming familiar with the new technologies, leaving that for junior associates. Lawyers also currently need to try to forget planning and predictability and act with urgency.