In the fast-evolving world of cryptocurrency, one name stands out as a trusted legal guide through the maze of regulatory complexities — Sasha Hodder. Founder of Hodder Law, she has been instrumental in providing legal support to countless pioneers and market participants in the crypto arena.
With a career that spans across major investment firms like NEI Investments and Franklin Templeton Investments to offering critical legal advice to leading crypto companies, Sasha’s expansive experience renders her an expert in the field.
As the crypto industry undergoes rigorous scrutiny and faces strict regulation, join us as we uncover the legal intricacies of the ever-changing crypto world.
DOUNYA: As an expert in the field of cryptocurrency law, what initially sparked your interest in crypto, and how has your practice evolved alongside the rapidly changing crypto landscape?
SASHA: I became interested in crypto law after listening to Andreas Antonopoulos on the Joe Rogan Experience podcast in 2014 while driving from Canada to Florida to begin law school. I listened to about 24 hours worth of Bitcoin content on that drive and continued absorbing it as I unpacked and painted my new apartment.
I was able to connect with a Bitcoin ATM company online to start a part-time job as a compliance officer, and I began learning the legal landscape from there. It was around the time that Ross Ulbricht’s Silk Road case was unfolding, Mt. Gox was hacked, and Charlie Shrem was arrested for his role as CEO of BitInstant.
My little compliance officer role felt exciting, dangerous, and important all at once.
DOUNYA: In recent years, there have been increasing debates over the regulation of cryptocurrencies. What are some challenges you’ve faced in navigating the legal complexities of this emerging field, and how do you help your clients stay compliant with existing and new regulations?
SASHA: My role as a crypto attorney involves helping clients navigate these complex and evolving regulations, drawing on my extensive research and practical experience over the past decade.
I focus primarily on state and federal money transmission regulations, and have avoided working on token offerings that can be viewed as a way to circumvent SEC scrutiny. Mostly, companies I’ve helped with token fundraising have been treated as securities tokens, and followed traditional fundraising routes such as SAFE, Regulation A+, or Regulation D.
There are so many agencies regulating crypto when it’s taking place in a centralized fashion, and they each take a different approach. It can be expensive and challenging for start-ups to make sure they follow all the rules. For example:
- FinCEN (the Financial Crimes Enforcement Network) requires anyone exchanging or issuing a token to register as a Money Service Business and comply with the Bank Secrecy Act.
- The SEC (Securities and Exchange Commission) requires anyone issuing or selling a security to follow the same rules as the traditional stock market and uses a very broad catch-all test from 1946 to make this determination on a case-by-case basis.
- The CFTC (Commodity Futures Trading Commission) requires anyone selling future-settled crypto products to comply with its regulations.
- OFAC (the Office of Foreign Asset Control) requires anyone providing any transaction or customer service to follow its regulations.
State regulators add another layer, potentially requiring a money transmitter license depending on the transaction, with rules that frequently change and hefty penalties for non-compliance.
The IRS (Internal Revenue Service) also has several evolving rules on how companies can handle crypto from a tax perspective, and they’re not straightforward.
I’m able to help my clients navigate these complex regulations because I’ve spent most of my free time for the past decade learning about new applications of this technology and how the laws apply. Through my podcast, I’ve had the opportunity to interview many experts, and I’ve done a lot of research and published it in blogs.
I’ve also submitted hundreds of no-action letters on behalf of clients to various agencies, asking them to interpret specific legal questions. This exercise always helps me better understand how the agencies are applying their laws to certain situations.
DOUNYA: From your experience working with cryptocurrency projects, what are some of the most common legal misconceptions that entrepreneurs and startups in this space tend to have? How do you address these misconceptions to protect your clients’ interests?
SASHA: Many companies hear that crypto is the wild west but have no idea how heavily regulated the field has become. If a project is truly decentralized and only offers non-custodial software services, there’s a chance that it won’t require all that much regulation.
Most people I come across that are new to the space are trying to launch a token or provide some money services, and I often feel like a dream crusher when I start to explain all the legalities involved in bringing their concept to life.
Unless a company is already well-funded, it can be a challenging industry to break into.
DOUNYA: As the crypto ecosystem continues to expand and mature, what do you foresee as the most significant legal developments or challenges that the industry will face in the next few years? How can businesses and individuals in the crypto space prepare themselves for these changes?
SASHA: In my view, the biggest threat is the adoption of a draconian framework by the US that doesn’t allow for privacy, self-custody, DeFi protocols, or NFTs.
Another concern is if the US determines that most coins listed on current crypto exchanges are securities and forces those exchanges to block US customers. Most of the world (except China, India, Canada, and Australia) has a more straightforward approach to crypto regulations.
DOUNYA: As decentralized technologies like NFTs, Web3, and DAOs gain traction, what are the emerging legal challenges and considerations that businesses and individuals should be aware of when venturing into these areas? How can they ensure compliance with current regulations while also preparing for potential future regulatory changes?
SASHA: The legal status of DAOs is currently uncertain. Last year, the CFTC launched a significant enforcement action against a small DAO called the Ookie DAO.
The government is trying to say that each DAO member who voted with a governance token is liable for any action of the DAO. The way forward for all this new technology is to ensure it’s decentralized and takes place in a non-custodial fashion where no exchange holds other people’s tokens.
Instead, users hold their tokens locally on their computers and transact with peers rather than through a centralized intermediary.
DOUNYA: With Coinbase reportedly considering expanding to the UAE due to a lack of clear regulatory guidance in the US, what are your thoughts on the implications of this move for crypto companies and advisors in the US seeking exposure to digital assets?
Additionally, do you feel that the current approach to regulation and adoption of digital assets by US leaders is hindering progress and putting the country at a disadvantage in the global race, ultimately impacting US investors negatively?
SASHA: Yes, regulators like the SEC are turning up the heat and are not interested in offering clarity. It would be nice if investment advisors and mutual fund managers had more ways of gaining exposure to this sector.
Yet, despite all the regulatory uncertainty, the US remains the crypto industry’s primary hub. The majority of Bitcoin mining is taking place in Texas, and innovations for increasing reliance on renewable resources, carbon capture, and natural gas flaring are remarkable.
Crypto is the most transformative and powerful technology we’ve ever seen. A handful of enforcement actions pales in comparison to the vast growth of the industry in terms of market participants, product offerings, and jobs.
This technology is disruptive, and when decentralized, it’s non-seizable and mostly exempt from regulation. It’s proven to be an improvement over traditional financial products because crypto is durable, portable, divisible, scarce, and uniform.
The globally distributed network makes it very unlikely to be hacked or controlled by any country’s government. Bitcoin has been the best-performing asset of all time, and we’re still early.
In conclusion, Sasha Hodder’s insights provide a much-needed perspective into the complex and rapidly evolving world of cryptocurrency regulation. Her deep understanding of the field, combined with her extensive experience working directly with crypto startups, makes her an invaluable resource for anyone seeking to navigate this legal landscape.
Whether it’s understanding the current state of regulations, planning for future changes, or debunking common misconceptions, Sasha has proven herself a trusted advisor and expert in the field.
For those interested in further exploring the world of crypto law, we highly recommend reaching out to Sasha and tuning into her enlightening podcast, HODLCast. Her deep-dive conversations with other industry experts offer a wealth of knowledge and practical advice for anyone involved in the cryptocurrency space.
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