How The Blockchain Alliance Helps Law Enforcement With Bitcoin Crime And Developments Like The DAO

Jason Weinstein and Alan Cohn, partner and of counsel, respectively at law firm Steptoe & Johnson, discuss their work with the Blockchain Alliance, a coalition of both blockchain and cryptocurrency companies as well as law enforcement agencies including Interpol, the FBI, the SEC, Europol and others. Find out how crime in Bitcoin is similar to all types of crime, what genuinely new questions are being raised, and how various law enforcement agencies might think about even recent developments like the emergence of the DAO and the subsequent DAO hack.

Show Notes:

Transcript

Female Speaker:

Welcome to Forbes Podcasts.

Laura Shin:

Hi, everyone. Welcome to Unchained, a Forbes podcast produced by Fractal Recording. I’m your host, Laura Shin, a Forbes contributor covering blockchain, digital currencies, and fintech. Thanks for tuning in.

For today’s episode, I’m speaking with Jason Weinstein and Alan Cohn, who are partner and of counsel, respectively, at the law firm Steptoe & Johnson, as well as director and counsel at the Blockchain Alliance. Welcome, Jason and Alan.

Jason Weinstein:

Thanks, Laura. Thanks for having us.

Alan Cohn:

Thanks, Laura.

Laura Shin:

Jason, let’s start with you. Tell us about your background and how you came to be involved in blockchain.

Jason Weinstein:

Well, I was at the Department of Justice for 15 years and was a federal prosecutor and during the last third of my time there, I had the opportunity to supervise both the computer crimes section and the organized crime section, which focused primarily on international organized criminal groups and one of the things that those groups both have in common is that the criminals are after, are very good at moving money and as it became easier and easier to move money digitally, the criminals they were after got better and better at using technology to do that and so in that context I became interested in digital currencies and when I switched sides and I became a defense lawyer and joined Steptoe, I continued to be interested in it and one of the things that I was really fascinated by as Bitcoin became more in the popular consciousness is that Bitcoin is the complete opposite of the currencies that the criminals we were after were using.

When digital currencies first became used by criminals, they were currencies that were designed and maintained by and for criminals. They were actual digital currencies that were tailored to the needs of criminals and when Bitcoin became more popular, what I realized fairly quickly is that Bitcoin was the opposite of that. Bitcoin was a digital currency that was designed for legitimate uses that was being misappropriated by criminals and so one of my interests, since I’ve been on this side, has been educating law enforcement about the differences between Bitcoin and those digital currencies that they used to go after and getting them to understand that just because criminals misuse the technology doesn’t mean there’s anything wrong with the technology itself.

Laura Shin:

And tell me more about those previous digital currencies that criminals used to use. Were they ones…how did they function?

Jason Weinstein:

Well, you know, the two most popular were called e-gold and Liberty Reserve and the e-gold case was investigated and prosecuted while I was still there and the Liberty Reserve case, we started while I was there and it concluded after I left the department and in a nutshell, they were tailored to a clientele that was really just criminals. It was, you know, there was no kind of KYC, or know your customer, involved, in fact, because they knew their customers were criminals. You know, there was no attempt to establish legitimacy of the transactions. In fact, the assumption was all the transactions were illegitimate and just every feature of the software and every feature of the way it worked was designed to meet the needs of the criminals and to allow them to move their proceeds more quickly and before law enforcement could intercept them.

Laura Shin:

Interesting, and before we turn to Alan for his background, can you just explain how Bitcoin is different from those previous versions?

Jason Weinstein:

Well, you know, Bitcoin, like any new technology, you know, that is misappropriated by criminals, Bitcoin was not created with criminals in mind. Bitcoin was created with, you know, kind of changing the world in mind. The people who created, person or people who created Bitcoin, since it’s still kind of a mystery, I think were motivated by the financial crisis in 2008 and by desire to empower people to not be entirely dependent on banks and I think that one of the ironies of the way Bitcoin is developed is that I think a lot of the people who were drawn to it early were drawn to it because it provided the prospect of disintermediating banks and other large institutions when, in fact, banks and other large institutions have recognized the power both in Bitcoin and even more, the blockchain, which is a technology that underlies it.

So, Bitcoin, just like the internet, was a technology that was created to improve people’s lives and it will and just like the internet did, dramatically improve people’s lives, as will the blockchain. It’s just that sometimes people who don’t know a lot about it, what they know, they know because they’ve read in the paper about Silk Road or other criminal cases where criminals have gravitated to it also.

It’s a fundamental truth that criminals are the earliest adopters of every new technology and they are drawn to technology that works for the same reason the rest of us are, because it works, because it’s convenient, because it’s efficient and allows you to do things more quickly and so part of what companies in the Bitcoin and blockchain space need to do, and are doing through the Blockchain Alliance, is educating law enforcement and lawmakers about the fact that the technology itself is incredibly valuable and will be incredibly impactful on society and on business and on government and that it shouldn’t get painted with the same brush as the number of criminals who are misusing it for their own purposes.

Laura Shin:

Okay. Yeah. It’s so interesting to hear this evolution. All right. So, Alan, tell us about your background and how you got into blockchain.

Alan Cohn:

So, I was at the Department of Homeland Security. I was there for about nine years and I served as an assistant secretary there. For the last part of the time that I was there, among other responsibilities, I helped to coordinate cybercrime policy for the department.

So, like Jason, my first introduction to the space was through the use of virtual currencies for cybercrime, but as I learned more about the technology, both Bitcoin itself and also the underlying blockchain technology, I became more and more interested and also convinced that this was a potentially transformative technology and so when I left government about 16 months ago, it was an area that I wanted to stay involved with after my time in government. I was lucky enough to come to Steptoe & Johnson and become colleagues with Jason where we’ve been able to continue work in that area, as Jason has described, particularly with the Blockchain Alliance, so helping to kind of continue to help our government colleagues understand and better use the technology.

Laura Shin:

Okay. So, let’s dive a little bit more into the Blockchain Alliance. What does the organization do?

Jason Weinstein:

So, the Blockchain Alliance, Laura, is a coalition of about now more than 25 companies and organizations on the industry side and I think it’s, as of today, it’s exactly 25 law enforcement agencies, both in the United States and overseas, and the Blockchain Alliance was created to establish a forum for dialog between the public and private sector about digital technologies and about the blockchain and also to provide a mechanism for industry to work proactively to educate enforcement agencies, both in the US and abroad, about this technology.

Back in the 1990s, when the internet was first gaining commercial use, as I said before, like any new technology, it had actually begun being exploited by criminals, especially child pornographers and other criminals even earlier, and in the mid 90s, law enforcement reached out to industry and asked industry for help in understanding how this new technology worked so that they could improve their ability to go after the criminals who had already figured out how to use it and the alliance is roughly modeled after that same effort that occurred in the 90s. The critical difference here is that the alliance was created by industry, that industry reached out to law enforcement to offer help, not the other way around, and we were fortunate to team up with Coin Center and with the Chamber of Digital Commerce, who are the two leading advocacy groups in Washington for digital currencies in the blockchain and together with those two organizations, we created the alliance to provide this function and so what we…well, our goals are to protect public safety, of course, because we’re improving the ability of law enforcement agencies to investigate and prosecute crime that involves digital currencies and we’re promoting the growth of the industry at the same time because, at the end of the day, if we can make the people who enforce the laws less anxious about the technology and more comfortable with it, we will also make the people who write the laws less anxious and more comfortable with it.

Laura Shin:

And so who are your members and what role do they play in the organization?

Alan Cohn:

So, we have, as Jason said, over two dozen industry members and then we engage with over two dozen government partners and so our industry members really span the range of Bitcoin and blockchain companies. We have Bitcoin infrastructure companies like Bitfury, exchanges like Bitfinex, Bitstamp, Coinbase, CoinX, itBit, Kraken, Noble Markets, wallets, BitGo, and Xapo and blockchain.

We have payment processors and financial services infrastructure like Bitnet and BitPay, Circle and Ripple, other participants in the ecosystem like BitPesa, which is a cross-border service provider in Africa. We have Bitwage, Block, Netkey, and then the suite of analytics companies that provide analytic services to law enforcement and to financial institutions like BlockSeer and Chainalysis, CipherTrace, Elliptic, and Scry, as well as the MIT Media Lab and then, on the government side, we have a range of different partners, the US federal government law enforcement level. We have the Department of Justice and several different United States attorneys’ offices. We have the FBI and US Marshal Service, the Secret Service, U.S. Immigration and Customs Enforcement, Homeland Security Investigations, the U.S. Customs and Border Protection, and the criminal investigation groups from both the IRS and the Food and Drug Administration.

From the regulator community, we have FinCEN, Commodity Futures Trading Commission, the Securities and Exchange Commission. At the state level, we have the California Attorney General’s Office, the Texas Attorney General’s Office, the New York County District Attorney’s Office, that’s the DA’s office for Manhattan. We also engage actively with Europol and Interpol and then directly with the Australian Federal Police and the Commonwealth Secretariat.

Laura Shin:

Wow. That’s quite broad and so what do all the different members do?

Alan Cohn:

You know, the key thing that we try to do with our members and our partners is to encourage them to engage with each other and so we begin with and our foundational activities are simply monthly calls that allow these participants to engage with one another.

Ideally, we want to be responsive to the needs of both industry and government and so in addition to the calls, what we try to do there is to draw out issues of current concern or future concern and then we put on informational webinars on different subjects and again, these are on subjects that our government partners might identify as areas of concern or that our industry members might identify as issues that they want to present on and so that includes everything from basic blockchain 101, webinars, to more in-depth information about blockchain analytics or mixers and tumblers and other anonymizing techniques or wallets and exchanges, the different players in the Bitcoin and blockchain ecosystem, and these are presentations done by industry for law enforcement and regulators to help increase the education and knowledge level and to surmount challenges that come up from time to time.

Laura Shin:

And can you dive into the mixers and tumblers a little bit more for people who don’t know what they are?

Alan Cohn:

Sure. So, mixers and tumblers and other types of tools are mechanisms by which people try to more fully anonymize their transactions using Bitcoin and so this would be mechanisms by which you can take Bitcoin that you hold in a wallet of your own and run it through different services, sometimes in the clear web, sometimes in the dark web, that seek to obfuscate where the coins come from and seek to obfuscate where the coins are going.

Laura Shin:

And is that something that law enforcement has been able to handle?

Alan Cohn:

You know, it is one of the categories of ongoing concern that we hear from our law enforcement partners is concerns about whether is the pseudonymity or the perception of anonymity that comes along with Bitcoin transactions generally or the emergence of newer techniques that are meant to help, on the one hand, ensure privacy associated with these types of transactions, but that also can obfuscate origin and an eventual destination of Bitcoin involved in transactions.

Laura Shin:

And Jason, did you want to add something?

Jason Weinstein:

I was going to say that the educational programs that Alan mentioned that we’ve done have been, the curriculum for those has actually been designed by law enforcement. What we have done on behalf of industry is gone to law enforcement and asked them what are the things you are most concerned about, what are the topics you most want to be educated about, and we’ve designed these webinars to meet those needs. We’ve now, you know, we’ve done four of them so far in the eight months or so that we’ve been active and we’ve reached over 400 and 500 law enforcement officers, I think it’s just about 500 actually, law enforcement officers and regulators from over 15 countries around the world and as Alan alluded to, the concern that all of them have, even as they get more educated and they learn more about the technology, continues to be this question of anonymity or really the better way to say it is attribution because one of the misperceptions about Bitcoin is that it’s anonymous. It’s not anonymous, but it does take some understanding and some skill and some technology to be able to do the investigative work necessary to connect a Bitcoin address or a wallet identifier with a human being.

Laura Shin:

And how did the alliance get started?

Jason Weinstein:

Well, the alliance got started in part because as I studied Bitcoin and as I said, it was focused on how different Bitcoin was than truly criminal currencies, one of the things that occurred to me was that this reputational issue that Bitcoin had, the fact that, you know, the random person on the street or the random person in my house, if you ask them about Bitcoin, the first thing they are going to say if they know anything about it at all is Silk Road, but that reputational issue was not just an annoyance to industry, but it could actually be a real impediment to industry, that it could interfere with adoption by the public, it could interfere with the development of applications for the technology, it could interfere with investment, and it certainly could interfere with the legal and regulatory environment and so I had the opportunity to go to, I know you, Alan, went to the second Necker Island summit this year, I had the opportunity to go to the one the previous year and during conversations with a cross section of investors and entrepreneurs and representatives of various Bitcoin and blockchain companies, one of the things I pitched them on was that they should do a modern version of what I described before as having happened in the 90s with the internet, that it was in all of their interests collectively, even if they were competitors.

It was in all of their interests as an industry to reach out proactively to law enforcement and do the kind of engagement and education and relationship building that Alan and I are describing and the response was enthusiastic, overwhelmingly enthusiastic, and so when I got back from the island, we, Alan and I together with Coin Center and the Chamber of Digital Commerce undertook the process of putting that idea into action and were thrilled by the fact that not only were the companies enthusiastic about participating, but the law enforcement agencies we reached out to were as well.

When we started, we started relatively small. We had about 20 members or participants between government and industry and now, as Alan said, we’ve got over 50 in just a very short period of time and I think that speaks to the, you know, the determination of the industry to make this happen and the power of the idea and I think the shared goal of both law enforcement and industry of having this be a technology that can thrive and to create an atmosphere where innovation can take place without compromising public safety.

Laura Shin:

And what has the attitude of regulators been toward digital currencies and blockchain and how has that evolved over time?

Alan Cohn:

Well, it’s funny. I think that the attitude of regulators towards digital currencies and blockchain initially was huh, but we’ve seen that evolve dramatically over time. I think it’s interesting you had several regulatory agencies really study the technology with an end towards determining how it fits into their existing regulatory regimes and so some of the earlier actions were by FinCEN determining who in the ecosystem is and is not a money services business. You had the IRS coming forward and determining that Bitcoin and other virtual currencies would be treated as property under their regulatory regime, as opposed to currency. More recently, you have the Commodity Futures Trading Commission come forward with decisions as to how their, or its, regulatory regime would apply to not only to virtual currency but to companies participating in the ecosystem. So, that’s been one category of activities.

You’ve also had different states step forward. The most well-known, I think, is New York State with its BitLicense. So, you have states like New York on the one hand that have actively sought to learn about the technology and then, in different ways, sought to apply regulatory regimes to the technology. You have other states who have simply said that this technology is not covered by our current regulatory regime.

You have a third category of regulators who are in a sense leaving aside the questions of the technology itself and looking more closely at how is this technology being used in ways that are harmful to the public or harmful to investors in ways that other technologies are. So, you’ve seen the Securities and Exchange Commission identify Ponzi schemes that are using Bitcoin or other types of virtual currencies.

It’s not to say they are making a clear distinction between a statement on the technology itself, but rather when people use the technology for malicious ends and then you have a number of other regulators who have adopted a wait and see attitude and who are actively looking at technology or, in many cases, just seeking to learn more about the technology so that they can understand either how it best fits within their regulatory regimes or how their regimes will have to evolve to account for the new technology.

Laura Shin:

What are regulators’ concerns now? We’ve seen a range of activity that might catch their attention. There’s criminal activity around paying with Bitcoin, around ransoms being demanded in Bitcoin, and then there’s also instances where it’s not clear whether a law was broken, such as the DAO hack where a decentralized autonomous organization was created that was essentially a venture fund that was written in computer code and then somebody hacked or exploited a loophole in that computer code to steal money from it, so where are the regulators focused now?

Jason Weinstein:

Well, I think from a law enforcement point of view, the primary concern is, I mean, ransomware is obviously a very big concern right now, although ransomware, I would point out, is not a Bitcoin problem. Ransomware is a cybercrime problem. The hackers who are using ransomware to, you know, inflict harm on their victims happen to be using digital currencies and in this case Bitcoin as the method of payment, but ransomware was a problem long before anybody knew what Bitcoin was and the solution to ransomware is also not about Bitcoin.

The solution to ransomware is this same, taking the same steps that protect people from other types of hacking activity, which is to practice good cyber hygiene and to take all the steps that providers and the government encourage people to take in protecting their personal or their corporate systems to keep them safe from malware.

I think that the pervasive concerns of enforcement agencies, and it’s been true since Bitcoin first gained public consciousness and it will be true even with the work that we’re doing in the alliance, is this question of attribution that I think through the work that the alliance is doing and our companies are doing to provide education, I think the law enforcement agencies are getting a better and better sense that Bitcoin is not, you know, as I often say, reports of Bitcoin’s anonymity are greatly exaggerated and then, in fact, you can pierce that anonymity.

One of the things that I try to do when I talk to law enforcement audiences is get them to put this problem in historical context. The reality is from pagers to burner cell phones to email to online chat to mobile devices, law enforcement consistently has had to evolve as new technology that’s designed for legitimate purposes is used to facilitate crime and in any type of electronic crime, and really, this applies to every type of crime facilitated using the internet, the problem law enforcement faces above all is attribution and what cops and prosecutors call putting fingers at the keyboard.

You have to take a series of letters and numbers and characters, whether it’s an internet chat name or an IP address or a MAC address or even an email address, and tie that to a particular human being and when, on the internet, that person uses Tor or proxy servers or other anonymizing techniques or in the Bitcoin blockchain space when they use mixers and tumblers, that makes that work harder for law enforcement, but it doesn’t, the problem is not insurmountable and law enforcement works tirelessly to overcome those challenges in traditional internet crime and they are getting better and better at doing it when comes to Bitcoin and blockchain based crime.

The solution often lies in taking data from multiple sources and trying to combine that data to figure out who the particular bad actor is and so Bitcoin, to the extent it presents an attribution or anonymity problem, it’s really just the newest twist on a problem law enforcement has been solving in the internet space for two decades now.

Part of what we try to, through industry, teach law enforcement is that there are particular advantages that the blockchain and Bitcoin have for law enforcement that the internet and other technologies do not. The ledger, the blockchain ledger that records all of the Bitcoin transactions is a permanent ledger. It’s not going anywhere so you’re not dependent on the data retention practices of a provider because the data is always going to be there. It’s also traceable. So, once you learn how to read it and how to use it, it’s kind of like the Matrix when you just see a bunch of numbers and when you learn what you’re looking at, you can see the shapes and colors. When they learn how to use, how to read the shapes and colors, that data is traceable and so once you identify who your bad actor is, you can trace back all of that person’s transactions through all of their accounts through the beginning of time and that data is also publicly accessible.

So, in an era where law enforcement is facing increasing challenges to their legal authority to get data that’s stored overseas, they don’t have that problem here because the data is publicly available through, to anyone with an internet connection and so there are technological advantages and there are legal advantages to law enforcement from this technology and part of our challenge is to teach them that so that they are less anxious about it.

You know, I think that with respect to the DAO,  and Alan can speak to this as well because he’s done a lot of thinking and studying of this topic, I think one of concerns that regulators have in particular is that the innovation gets out ahead of anybody else and that before you could, at the blink of an eye, you know, there’s a new innovation that creates some sort of consumer protection risk or other kind of risk to the public that no one’s thought about or that regulators haven’t had a chance to take a breath and think about before it’s already broadly adopted and I think that the pace of innovation in the space is such that, and will continue to be such that, that’s going to be just an ongoing problem.

Laura Shin:

So, the DAO is a very recent phenomenon and it’s really at the cutting edge of this technology. You know, Ethereum was only launched about a year ago and it has this really powerful, smart contract capability and the DAO really showed just how powerful that could be and yet, you know, obviously, there was a loophole in the code that was exploited. There was, you know, more than about 50 million dollars that was stolen, you know, through that loophole. Where are regulators focused now when they look at things like this and how might they handle these kinds of situations?

Alan Cohn:

Well, I the DAO itself, as well as the DAO hack, the speed at which the DAO emerged from the Ethereum ecosystem and then the speed at which the what we’ll call the hack occurred, I think presents both a challenge to the regulatory agencies, but also a demonstration of the speed at which that regulators and others are going to need to work in order to try to keep up with developments in this ecosystem because, of course, the DAO’s creation itself raises all sorts of questions about is this a corporation, is this a general or a limited partnership, is it a crowd-funding exercise, is it a venture capital exercise or venture capital firm, as you mentioned, and the DAO tokens, which people could buy with ether, you know, did that represent a security, was that a commodity, a derivative, does it’s characterization change depending on whether you’re exercising voting rights or not, whether it’s sold through the primary offering or through secondary offerings through exchanges and so each of questions is a novel legal issue in and of itself for different regulatory agencies to try to untangle.

The additional question of when someone goes in and exploits and element of the code in order to remove money that wasn’t theirs, you know, this raises the question of whether, as I think the DOA creators represented, the code is the law or is this a question that necessarily falls under either the criminal or civil laws of a range of different jurisdictions and I think that regulators are still trying to parse through those questions and piece together what’s the most appropriate response, but again, it’s not an issues in isolation. These types of issues and these types of challenges are going to continue to present themselves and they’re going to present a challenge both in understanding what is the law today and how might it apply to those types of situations, but also what should government policy be towards these types of innovations tomorrow and down the road and how should government policy or policy-making regulation and even the law itself need to change or adjust to account for this kind of technology?

Laura Shin:

And so can you help them build these solutions or answer these questions and if so, how are you doing that?

Alan Cohn:

Well, I think this one of those things that, you know, a range of participants in the ecosystem needs to look at. For our part, with respect to the Alliance, we are starting with some educational programming, webinars on other types of both digital currencies and blockchains to introduce law enforcement or regulators to Ethereum and to the particular type of ecosystem that’s set up there, a public blockchain, but as you mentioned, optimized towards smart contracts to, again, as the first thing that we try to do within the alliance is just to raise the levels of awareness and help to spread knowledge and education within law enforcement or regulatory agencies. There are extremely smart people within each of these agencies working on these questions, but they are complicated questions and there’s always a need to bring the general knowledge level up and so that’s one of the key things that we try to do within the alliance is to help our government partners kind of raise that awareness across their organizations about these issues.

Laura Shin:

And what next steps do you have planned for the alliance in general?

Jason Weinstein:

Well, you know, a lot of it will depend on the needs of the law enforcement agencies and the regulators that we have on board and that we bring on board. As I said before, we very much want the programming that we do and the education we provide to be responsive to what their needs are based on what they’re seeing in the cases they’re investigating and the challenges they’re having in those investigations, but first and foremost, our goal is to continue to grow.

As I said before, we’ve grown from about 20 to over 50 participants in a very short period of time. We have a number of pending requests from national prosecutor and police agencies in a number of countries in Europe who are looking to join and we certainly welcome their participation and look forward to having them join because this is really a global phenomenon and it’s one with global implications and to the extent that we can educate law enforcement and regulators all over the world about it at the same time. That certainly not only serves the public’s needs, but very much serves the needs of industry. So, we’re going to continue to do that.

One of the things that we have found as one of the most gratifying things about the work we’ve been doing is that in addition to building relationships between regulators and enforcement agencies and industry, we’re building trust that through the work that our companies are doing and our organizations are doing with law enforcement, we think it is much less likely that the companies participating in the alliance will get painted with the same brush as criminals and may be misusing the technology and I think one of the things that for the enforcement agencies and the regulatory agencies that are participating in the alliance, one of the things I think has been a real eye-opener for them is just how seriously the companies in this space take compliance and take security and safety and consumer protection and that these are companies that are run by grownups who have a sense of social responsibility and they’re not just good corporations, they’re good corporate citizens as well so we want to continue to spread that message.

Laura Shin:

Let’s also talk about your work with blockchain at Steptoe. Today, your firm has an announcement about how your practice is changing. What are your plans?

Jason Weinstein:

Well, Laura, over the past two and a half years, Alan and I and our colleagues at Steptoe advise just about every type of participant in the blockchain ecosystem, investors, entrepreneurs, early-stage companies, exchanges, trading firms, transaction processors, even retailers who are studying acceptance of digital currencies and of course, through the alliance, we are proud of the fact that we’ve been part of the foundation of the industry and we’ve been helping, through the alliance, lead the effort to spread the word about the almost limitless potential applications for blockchain technology and now that message is taking hold, I don’t think you can pick up a publication or log on to The Wall Street Journal or Forbes and not see articles about the blockchain and so as we move into the next phase of the public’s understanding of the applications for the blockchain, Steptoe is actually reorganizing itself to better prepare our clients, present and future, in a variety of industries for the application of blockchain to their businesses and operations.

The way I like to think of it is that we have been counsel to blockchain companies and now we are going to be counsel to companies impacted by the blockchain. So, we have put together a sprawling, full-fledged, multidisciplinary blockchain team that encompasses expertise from a wide variety of practice areas in industries that we know are now being impacted by the blockchain and certainly will in the years to come so we have representation from our energy, transportation, insurance, financial services, international regulation and compliance, intellectual property, corporate international trade, government contracts, government affairs, tax, cyber, and government enforcement practices, among others, and we’ve got, because this is global, we’ve got people not just in the United States, but from our London and Brussels and Beijing offices as well and so we think that having this multidisciplinary team will be of tremendous value to our clients in all of those industries I mentioned and others as they study how the blockchain will impact their business and how the blockchain can be adapted by them to achieve their business and economic goals.

Laura Shin:

And why did you decide to build a blockchain practice?

Jason Weinstein:

Well, it has become clear to us, as I said, you know, our focus for the last two and half years or so has been on being part of the foundation of the blockchain industry so a lot of the entities and individuals we’ve advised have been startups and as I said, entrepreneurs and investors and companies that are developing applications for the blockchain as, you know, that work has taken hold and it’s become clear to us that the blockchain is going to be the second internet. It’s going to be the internet of value and will have the same transformative effect on a wide variety of industries that the internet did and so in order to best position our clients to be prepared for the coming second internet and to be able to get out in front of the technology and understand at very early stage how it will impact their business and how best to adapt it, the best way to do that would be to bring all that expertise together. So, we’re really gratified that the leadership at Steptoe saw that, shared that vision, and supported us in putting this team together.

So, what we’ve got is just a tremendous range of expertise in a wide variety of industries that we think were well-positioned to help our clients, as I said, our current clients and our future clients, as they think more and more about how the blockchain will impact their business and you know, it’s a combination, at this stage, of both legal and strategic advice. You know, some of the advice is legal, understanding how laws and regulations apply to their business and how the blockchain would change that. Some of the work is trying to policy work to try to improve the legal and regulatory environment and some of it is simply strategic and educational, making sure that companies in a variety of industries understand the different ways in which this technology could impact them and helping them as they begin to think about how to respond to that.

Laura Shin:

And overall, how do you see the whole ecosystem developing and what role do you think lawyers need to play in that development?

Alan Cohn:

So, I think it’s interesting. You know, we see a number of different tracks along with which kind of the ecosystem is going to continue to evolve. Obviously, as we’ve been discussing along for a lot of today, we do see a continued evolution of the kind of the public Bitcoin blockchain ecosystem with the network of companies transacting currency transactions, but also an emerging number of different applications along those lines. Some of the key issues that we see in that area are helping that ecosystem of companies establish relationships with traditional banking organizations and continuing to develop out along those lines and of course, not to bury a lead, but as part of that ecosystem and as part of our creation of this practice, we will begin accepting legal fees in Bitcoin for companies that wish to pay in that way.

It’s an important part of the firm kind of demonstrating its commitment to the ecosystem, but that’s obviously not the only place where we see this ecosystem evolving and as Jason said, you know, as more and more companies look at the adoption of blockchain technology, this whole range of legal and policy and strategic issues that emerge and I think over the last few months, there’s really been an explosion of interest not just in public or Bitcoin blockchain applications, but also in private or permission blockchains, whether that’s in looking to complement or replace backend systems for financial services or other types of applications.

So, whether a company is looking at the Bitcoin blockchain, whether they’re looking at another type of public blockchain like Ethereum or at private or permissioned blockchains, there are a range of questions that companies need to ask themselves about how to adopt or adapt to this type of technology. Again, what legal regimes apply to that type of applications, what questions are still unanswered, what steps need to be taken, how to think about transitioning to a different type of technology or intersecting with different types of companies and in all of these instances, it’s again, not only a question of understanding current law, but also about the need to shape policy, to shape new guidance and interpretations of existing law and existing regulations to go through and even initiate new rulemakings or other regulatory processes to help adapt regulatory regimes to this type of new technology and in some instances, actually going ahead and making efforts to work with government, work with lawmakers to change laws to make the overall legal regime fit into a world in which this technology becomes more ubiquitous.

Laura Shin:

And what do you think of some, I guess, ideas I’ve heard in the era that lawyers role have a really important role to play around smart contracts and that they may need to even understand code to some extent in order to help prevent situations like the DAO hack?

Alan Cohn:

I mean, in a sense, lawyers have to evolve along with the technology. Lawyers absolutely need to understand the technology, but there are many technologists who understand the technology. What lawyers…the role that lawyers have traditionally played and the place in which lawyers can offer, I think, the most value in the ecosystem is not just, again, understanding the law, but understanding how the technology and how the different applications of technologies fit together under not only the legal regime but the policy regime as well.

So, whether we’re looking at smart contracts as they apply to digital rights management and intellectual property or as they apply to insurance contracts or leases, there’s a lot of work to be done in understanding the technology itself, understanding how the technology is being applied in a particular situation, understanding how the current law would apply to that and how it’s meant to apply to those types of situations, and then being able to walk the what areas are unknown, how would interpretations need to change, how would policy need to adjust, or how may it be that a company or a group of companies or an entire industry needs to go to government and initiate the processes that would be necessary in order to evolve legal interpretation, evolve regulatory regimes, evolve laws to adapt to the new technology.

Jason Weinstein:

You know, Laura, my first day of contracts class in law school, my first semester of law school, the book might as well been written in code for all that I understood, but I think that you know, Alan’s right. At the end of the day, a lawyer doesn’t necessarily need to become a coder, but a lawyer need to become conversant in, have a basic ability to converse in the technology and really have an understanding of how the code plays out in the real world and so I think you’ll have lawyers in really any area in which contracts are relevant, which is pretty much any area, have to become a little more literate in what the impact of various types of code are and I think, you know, just as you have litigation and disputes over contract language, you may see litigation and disputes over what code means.

Laura Shin:

Well, this has been a fascinating discussion. Jason, where can our listeners find more of your work or contact you in the future?

Jason Weinstein:

Well, anyone who is interested in learning more about the alliance can go to www.BlockchainAlliance.org and anyone who is interested in learning about Steptoe and our blockchain team, as Alan and I have said, Steptoe is all in with blockchain and so you’ll be able to find more about our blockchain team and our blockchain work at www.Steptoe.com.

Laura Shin:

Okay. Great. Well, thank you both so much for coming on the show.

Jason Weinstein:

Thanks for having us.

Alan Cohn:

Thanks so much, Laura.

Laura Shin:

Thanks for joining us today. If you’re interested in learning more about Jason and Alan, check out the show notes, which are available on my Forbes page, Forbes.com/sites/LauraShin, and if you like what you’ve been hearing, please review, rate, and subscribe to the show in iTunes. Rating and reviews boost the podcast ranking so if you could take that moment, I’d really appreciate it. Thanks again for listening.

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