How to tell if your firm is ready to take on a blockchain or cryptocurrency practice.
Take for example Cogent Law Group for example, a Washington, D.C.-area firm that marketed blockchain more than any other practice area last year. Founding Partner Tom Goldstein believes there’s money to be made, but only if the work is a match.
Just as some firms are poorly suited to take on personal injury or patent filings or other particular areas of law, crypto and blockchain aren’t for everyone either. So how do you know whether opening a new practice is the right move for your firm? From an HR and technical perspective, how can you tell you’re ready?
For starters, Goldstein says, “If you’re going to have a practice, certainly you better know what the difference is between blockchain and cryptocurrency.” Blockchain is a transparent database ledger that tracks the movement of data across a peer-to-peer network. To participate in this network, people often use cryptocurrency — or crypto for short. Like cash money, crypto carries financial value. But unlike the dollar, the euro or other fiat currencies, cryptocurrencies aren’t issued by a government. Instead, blockchain leaders make and sell their own tender specific to that system — or use existing cryptocurrencies or maybe not even require the use of crypto at all. It just depends on the network.
Goldstein compares them to a Venn diagram, explaining, “There’s an overlap between those two concepts. But not everything that’s cryptocurrency-related is blockchain-related. And there are a lot of things that are blockchain-related that have nothing to do with cryptocurrency.” Take banking compliance and securities, for example — two areas that crypto attorneys have to be up on, but blockchain lawyers might not touch.
If your firm doesn’t have that go-to employee with the time and technical skill to research wallets, crypto is not for you.
Of course, staff can always learn new lingo. Goldstein says local tech Meetup groups are great for self-education and meeting prospective clients. But if a core set of employees isn’t tech-savvy enough to already understand the basics, that’s a major red flag.
Fortunately, from a legal perspective, many firms already have the skills the new practice areas would take. The United States doesn’t have blockchain- or crypto-specific laws, Goldstein says; there are just new challenges in “taking the existing regulations and trying to fit them around a new technology.” That means staff working in certain areas should already have some transferable skills. Fintech — or financial technology — attorneys, for example, know the compliance laws required to work in crypto. And hospital and pharmaceutical clients need help with data exchange and trusted intermediaries, so health-care regulatory lawyers already have the knowledge they need for blockchain.
Of course, legal know-how is only half the battle. Administrators have to think high-tech. Goldstein says clients in this field “not surprisingly, tend to be very technically adept. They would get very quickly frustrated with a law firm that didn’t have cutting-edge or at least a pretty sophisticated understanding of the more high-tech solutions.”
Firms don’t have to be virtual law offices (VLO), but they do need to use the same business software that startups embrace. For discovery and other file transfer, this means file-sharing platforms like Google Drive. Consider swapping out email for secure communication apps such as Signal. And if your firm still requires clients physically sign their engagement letters, watch out: In tech, paper is passé. Use an electronic signature tool like DocuSign or Adobe Sign instead. Again, secretaries and staff don’t have to be VLO-level savvy, but they can’t be Luddites either.
Fortunately, from a legal perspective, many firms already have the skills the new practice areas would take.
Firms also need to be prepared to accept payment in Bitcoin, a popular cryptocurrency introduced in 2009. When clients make their money buying and trading a certain currency, they of course want to pay in it and, according to Goldstein, those who can’t will take their business elsewhere. For Cogent’s administrator, he adds, setting this up was actually the hardest part of adding the firm’s new practice. “The setup might seem straightforward,” he says, but is “actually fairly complex.” For starters, the bookkeeper — or someone who works with her — needs to know how to use crypto wallets — the technology required to accept, store and trade cryptocurrencies. Then you have to make sure the vendor you choose is compliant with “know your customer anti-money laundering” (KYCAML) laws.
“There’s a fair amount of complexity and paperwork just to get yourself signed up for service like that,” he notes, noting that Cogent was “fortunate that we had a really very smart, detail-oriented administrator” — one patient enough to “take the time to figure that out.” If your firm doesn’t have that go-to employee with the time and technical skill to research wallets, crypto is not for you.
Unlike other areas of law where top attorneys dominate the field with decades of experience, crypto and blockchain are both still new enough that it’s easy for firms to become competitive very quickly.
Outside of this, though, Goldstein says adding the new practices didn’t really create a lot of work for staff. “If you’re already servicing high-tech clients, you’re probably well positioned,” he advises, noting attorneys who have founded their owns startups, served as in-house counsel, or worked in patent or intellectual property law tend to be a good fit.
Above all, Goldstein says the most important trait staff need is perception. “It’s critical that you understand your clients’ business model, how they make money, what their unique challenges to that business sector are, and it really helps if you have a good grasp of the technology and how the technology works.” When you do, existing clients may come to you, asking for blockchain or crypto work. That’s how Cogent’s new practice started: a high-tech client needed help with setting up a cryptocurrency hedge fund.
“Anytime you’ve got a new emerging technology, there’s a good opportunity,” says Goldstein. Unlike other areas of law where top attorneys dominate the field with decades of experience, crypto and blockchain are both still new enough that it’s easy for firms to become competitive very quickly. “It’s definitely not too late,” Goldstein adds. “We’re still very early in the development of both sectors.”