Gabriel J. Shapiro, a US attorney focused on mergers and acquisitions (M&A), venture, governance, Infosec, and digital assets, has noted that if you really care about cryptocurrency-related laws and proper governance, then you should know that the most “important” or relevant content out there right now was released this week.
According to Shapiro, Nic Carter’s recent interview with Jeff Dorman, CIO at Arca (an investment management firm offering “institutional-caliber” products to “confidently” gain exposure to digital assets), on token investor activism is worth watching because it highlights key issues related to issuing “decentralized” cryptocurrency tokens.
Shapiro argues that the creators (the crypto token issuers and blockchain platform developers) are “the most important thing in this ecosystem–always.” He claims that, “eventually, token holders will have more rights against creators–it is Thanos-level inevitable.”
He further notes:
“Creators can either admit this and start agreeing to some real accountability mechanisms now, thus maintaining a strong voice in the conversation, or they can run from it, in which case semi-clueless judges and regulators will do it for them.”
“We also need to realize that every time creators agree to be accountable, it makes their token look more like a security–thus, the most responsible devs who drive value to their investors are taking risks in doing so, but they still do it because it’s the right thing.”
Shapiro believes that there’s no “cherry-picking” of issues. He argues that they are all “interrelated…securities law is related to governance [which] is related to tech mission etc.” He recommends adopting a “holistic approach that gives all relevant parties a voice and takes their concerns seriously.”
He also mentions that his modest proposal states that crypto tokens are “shares of network equity.” He suggests that lawmakers and relevant stakeholders need to consider or look into “lightweight interim securities law compliance” and maybe introduce “better governance contracts.” This can help with “minimizing trust in the places where tech currently can’t,” Shapiro states. He adds that the result could be an “optimized innovation environment.”
In August 2020, Shapiro had argued that it’s pretty much “pointless” to be a lawyer in the crypto and blockchain or distributed ledger technology (DLT) space.
He had pointed out that professionals with computer programming or trading skills are able to make a lot of money or get a chance to explore their creative side. However, he claims that law is “irrelevant” to these people and had argued that it’s also not relevant to crypto-related tech.
Stephen D. Palley, Partner, Anderson Kill, Technology, Media & Distributed Systems, recently noted (after Uniswap, a “decentralized” on non-custodial Ethereum token exchange introduced its own UNI governance token which is now also listed on Coinbase):
“Anecdotally, from a practitioner, this one (the UNI governance token), it makes it increasingly challenging to advise people in the ‘DeFi’ space not to sell a governance token which is almost certainly a security when the US Securities and Exchange Commission (SEC) appears to be doing little to police this. It doesn’t impact our advice, but given the announcement from a US based issuer (he’s most likely referring to Uniswap) … that they are issuing a massive number of tokens that appear almost certainly to be investment contracts under Howey, Telegram, and the SEC’s own framework document…”
“We will surely be hearing more of the same. I appreciate that we don’t have telepathy into the SEC’s workings, that much goes on behind the scenes, over a long time horizon, but as practitioners you’d make our lives easier if you appeared to be paying attention. If DeFI governance tokens are a thing you have concluded as a matter of policy aren’t going to be shut down and are fine (which they don’t seem to be under the current rubric), please say so.”
“the law’s the law and Clayton and others have said we have an obligation as lawyers to steer our clients in the right direction. We’ll continue to do that but if anyone from the SEC is listening … We could use a little help.”