Today, we have the pleasure of interviewing lawyer and author Aaron Grinhaus, an experienced business, tax and Fintech consultant, who advises clients on Fintech strategies, including the use of Blockchain technology, smart contracts and cryptocurrency to reduce business costs, hedge institutional friction and expedite capital raises and cross-border wealth transfer transactions. He is a recognized Fintech expert, and is faculty at Osgoode Hall Law School’s “Blockchains, Smart Contracts and the Law” Certificate program. He is also the author of the world’s first Blockchain law textbook “A Practical Guide to Smart Contracts and Blockchain Law” (LexisNexis: 2019), available for purchase now.
The book goes into the topics of securities law, business structuring, offshore foundations, tax issues, anti-money laundering issues with cryptographic assets, the law of smart contracts, intellectual property rights in Blockchain space, and more.
In the book, Mr. Grinhaus also goes through the pitfalls and risks that await lawyers and other professionals in the Blockchain space.
Aaron is one of those individuals who has the perfect blend of academics and industry expertise, so without further ado, let’s get into the questions with Aaron Grinhaus.
Cryptotapas: What got you started you in Cryptocurrency/blockchain space?
Aaron: I started out as an investor in the space. My background is in business law, tax and corporate structuring, so when I started to learn more about the technology I thought it would be a good idea to get ahead of it before smart contracts eliminated my job. I spent a few years after that learning more about Securities laws and was able to specialize from there. All crypto and Blockchain law really is a tax, Securities and commercial law, mixed with intellectual property and a few other things.
Cryptotapas: What kind of projects have you been involved in, tell us a bit more about your experience in the space?
Aaron: I have been involved in and have acted as an advisor on a number of Blockchain related projects, including exchanges, investment funds, mining operations, and structuring high net worth investors who got in very early, among other things.
Cryptotapas: Where did the idea for your book come from? What big questions does your book address?
Aaron: When I got started in the space I was amazed at how little credible or academic literature there was on the legal and business subject around BlockchainBlockchain and Decentralized Ledger Technology. I began to publish articles and blogs on my website, and as I acted for various clients I realized that a practical guide would be very useful for them. The book covers everything that somebody in this space would need to know.
Cryptotapas: What skills or certifications, in addition to a law degree, do you think will benefit other attorneys who want to get into Blockchain space?
Aaron: Blockchain law is really a combination of a number of areas of law, so it is difficult to specify where you should begin. I’d only emphasize that having a multidisciplinary background really helps. I have a masters in tax law though I spent a few years gaining a Proficiency in Securities Law as ICOs became more prevalent in 2016-2017. My earlier career allowed me to have exposure to various other areas of corporate and commercial law, estates structuring and real estate which really helped give perspective as many of these companies are really just Tech startups that need practical business guidance in addition to legal advice.
Cryptotapas: What are the criteria that you/your firm uses when accepting clients?
Aaron: We are open to hearing out anybody who needs assistance and are happy to have consultations to determine if we can help and how. There is no cut off though we are very aware that there are many individuals out there who want to take advantage of the technology for nefarious purposes and so we adhere to strict KYC and scrutinize the projects for fraud before engaging with them.
Cryptotapas: Next, the most obvious question that no one wants to ask – do you think cryptocurrencies (few or many) have any future? If they have a future, what needs to change for them to stay relevant.
Aaron: The trend for Blockchain technology has moved away from the fad of replacing money to Enterprise Solutions for the technology. People tend to forget that Bitcoin never had an ICO, it was created by a group of developers who worked in concert towards the altruistic goal of creating a world currency that would break down established monolithic institutions and give control of your own wealth and power back to the masses.
Coins and tokens quickly became a way to raise money from the public for projects that may or may not have come to fruition, most of those are in the “not” category. After the dust started to settle people began to realize that above all the rhetoric there were actual practical use cases for the technology that could create massive efficiencies for businesses, particularly those at the Enterprise level. That is the future of this technology, the convenience of information in addition to or instead of wealth. One of the most popular applications in production are those related to the supply chain, which creates massive efficiencies for suppliers. That’s not to say that it will not be adopted as a replacement for fiat currency at some point; it is more that the focus has shifted.
Cryptotapas: As a lawyer in the blockchain space, what due diligence flaws do you see with most projects in the space?
Aaron: Many white papers these days are marketing documents instead of actual technical schematics. compare any white paper you find on a website today with the original Bitcoin Whitepaper and you will see a glaring juxtaposition. Creating a business plan, justifying the market demand for the technology, assembling the proper development team, and proving the use case are pretty basic points that most projects at the early stages are also missing.
Cryptotapas: So far all the features of the blockchain, like immutability or ownership, are claimed in the tech community only – but nothing has been recognized by authorities or legal bodies as legally binding. What changes will need to take place to get Blockchain the legal footing it needs to go mainstream?
Aaron: At this stage, it is more important that the private sector adopt the technology. If it does, regulators will follow.
Cryptotaps: What are the legal considerations that companies need to consider before using smart contracts?
Aaron: Smart contracts are not actual contracts, they are a series of programmed permissions. People get confused because of the name. If obligations are created in the relationship between parties contracting with each other commercial law principles in the relevant jurisdiction will apply.
Cryptotapas: These days, some projects are using securities law exemption () or filing through Reg A+, do you think these positions are sustainable, in other words, do you foresee any SEC action in future?
Aaron: The starting point should be whether the coin or token is a security. If it is then all the regular Securities laws and regulations apply, and so following them will have the same results that they normally have.
Cryptotapas: From a tax perspective, how do people treat the tokens lost due to hack or exchanges shutting down?
Aaron: From a tax perspective, this depends on whether the tokens were purchased in the course of business or for personal use. If it was in the course of business it could be construed as a business loss, either capital or current depending on the characterization of the assets. If it was for personal use it is less clear what tax benefit may be available. Likely though there will be a civil claim for damages. We are seeing a lot of that now with fraudulent ICOs and exchanges shutting down.
In other words, it is very fact and local law specific and so if that happens you need to speak with a qualified professional in your jurisdiction to see if and how those losses can be credited or deducted against income tax.
Cryptotapas: Tell us a bit about your personal life, and how do you stay away from digital noise to spend quality time with your family. Any specific tips or methods that work for you to help work-life balance?
Aaron: It’s not easy to go off the grid in this line of work since it is important to stay up to date on developments and stay connected with the community to know what is going on. But it’s amazing how much brighter the world looks when you put your phone away and spend time with your family and that’s what I do in the evenings and on weekends with some check-ins here and there.
Thank you, Aaron, for taking time out of your busy schedule to answer our questions, our viewers will appreciate it and those in need of business advice will know how to reach out to you.
Aaron Grinhaus’ law firm (grinhauslaw.ca) can be contacted at firstname.lastname@example.org. Mr. Grinhaus is on Twitter @A_Grinhaus, and the book, “A Practical Guide to Smart Contracts and Blockchain Law” (LexisNexis: 2019), can be purchased here.
Thank you for reading this article.
Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.
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About the author
RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.
RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says “what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.” Of course, that is just his opinion.