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First bankers, now lawyers: cryptocurrency industry’s latest hiring frenzy

The cryptocurrency industry is ramping up efforts to recruit more legal talent as it faces increased regulatory pressure while looking to be accepted by and become part of mainstream finance.

Crypto exchanges and companies are poaching attorneys left and right, from both law firms and other crypto companies, bringing them in-house to help navigate an evolving regulatory landscape while helping to curb outside legal expenses, industry participants said. Law firms, which are sometimes losing their partners to in-house positions, are also building up their crypto practices to maintain that valuable expertise.

The increased demand for lawyers also marks a turning point for crypto, whose early supporters often expressed scepticism of regulation. The industry has been expanding rapidly with hopes of attracting more mainstream investment opportunities and many are embracing the stance that they want regulatory clarity.

“In [the crypto] space, the consensus is you need to have someone in-house early,” said John Wolf Konstant, a senior consultant at technology-focused legal recruiting firm Whistler Partners. “Especially since investors are going to require that, you need to have someone there to help chaperone the process and to make sure everything is buttoned up from the start.”

READ Meet six former bankers who quit for crypto: ‘My phone rings off the hook’

Competition is also driving up salaries in the crypto space at a faster rate than in the larger in-house legal market, particularly for senior-level positions, Konstant said. Total annual packages, including tokens and equity, can run into seven figures at the very top of the market, he added.

Marco Santori, chief legal officer of Kraken, tweeted in February that the San Francisco-based crypto exchange was looking to hire 30 lawyers in the next three months. He added that he would like to hire 60, “but honestly I don’t know how to get it done”.

“Kraken legal is fully on track with its hiring goals since my comments in February,” Santori said last week in an email. “We are attracting the best lawyers from both traditional finance and white-shoe firms. The brain drain is real and we couldn’t be happier with it.”

Lawyer Jorge Pesok recently joined crypto-based nonprofit HBAR Foundation, which gives out grants to projects, as its chief legal officer after about 10 months as general counsel and chief compliance officer at crypto exchange Tacen. Before Tacen, he was at law firm Crowell & Moring.

“The market is hot,” Pesok said, adding that he received four job offers before he chose HBAR, primarily because of its commitment to sustainability, and he wasn’t even looking for a new position. “Everybody is looking for talent,” he said, adding that for HBAR, even the simple grants it makes require help, given the nuances of cryptocurrency and the regulatory scrutiny around the industry.

Recruiter Whistler Partners said about 10% to 15% of all recent placements have been in the crypto or financial technology sectors, with firms hiring for both in-house counsel and law firm positions, according to Konstant, who himself was a lawyer before moving to the recruiting field. He said the firm was working on six to 10 in-house legal jobs in the blockchain or fintech space over the past year at any given time.

Konstant said there is a great deal of competition for all legal talent across sectors, where candidates for in-house roles may receive multiple offers. But “for the crypto space, it’s more pronounced,” he said, adding that there is a huge demand for those with specialised knowledge in crypto and previous experience working at law firms that specialised in crypto or having built in-house crypto-focused teams.

As with most other jobs, firms operating in the crypto sector would prefer to hire someone with some relevant direct experience, but most expect to train new legal staff on the job as they learn about the specific projects each firm does.

Gregory Lisa, who most recently was a partner at law firm Hogan Lovells in Washington DC, joined decentralised financed-focused company Element Finance as its first chief legal officer in December. Lisa, who previously worked as a regulator at the Financial Crimes Enforcement Network, said his new position at the 25-person startup, which builds open-source protocol for fixed- and variable-yield tokens, offers him the chance to focus on the growth of one company, versus a portfolio of clients as an external counsel. His responsibilities now include engaging with regulators and law enforcement and managing internal legal issues.

READ Why crypto firms are hunting for exec talent at Washington’s revolving door

“You really get a chance to write the script and to engage with companies at an early stage,” Lisa said, adding that he has also stayed on as a special adviser for Hogan Lovells to help with the transition.

Cathy Yoon joined crypto technology company MPCH at the end of March as its chief legal officer after less than a year as general counsel of crypto exchange INX. She said she had no intention of moving jobs, but was interested in helping build blockchain infrastructure that could more easily support and onboard additional blockchain assets, which isn’t possible currently. So far, her day-to-day work includes managing internal corporate matters, such as the structuring of legal entities and intellectual property issues, and facilitating meetings with potential investors and customers.

The increasingly competitive job market also demands more lawyers who are “very commercial,” Yoon said, since crypto companies want to bring in attorneys early on to brainstorm with tech teams on what problems their products are meant to solve. “There has been a shift from lawyers being seen as ‘keeping us out of trouble,’ to becoming important members of the management team,” she said.

READ Fintech Files: Meet the disrupters, how to make $1m in crypto, and a new arms race

Law firms, some already struggling with a shortage of talent, are beefing up their crypto services as well, sometimes looking to acquire a whole team from other firms.

Orrick Herrington & Sutcliffe is looking to build “a complete offering” of services for blockchain firms, from helping with entity formation to advising on regulatory issues, according to Daniel Forester, a partner at the firm and leader of its fintech practice. The law firm, with roots in the traditional technology sector, currently has about 20 partners leading its crypto-related work and is looking to lure current regulators and candidates or teams from other law firms or in-house positions, he said.

Facing increasing competition for legal talent, Forester said Orrick continues to focus on retaining employees, including those at the associate level. “There are more positions than people,” he said of the legal industry as a whole. “The key to long-term success is retention.

Write to Mengqi Sun at mengqi.sun@wsj.com

This article was published by The Wall Street Journal, part of Dow Jones


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Washington Debates Cryptocurrency Rules, With Sights Set on Stablecoins

WASHINGTON—As Washington attempts to get its arms around the rapidly growing cryptocurrency industry, policy makers in the Biden administration and on Capitol Hill have identified stablecoins as an initial target for tighter regulation.

Often billed as one-to-one representations of a currency like the dollar, stablecoins have recently exploded in popularity as investors use them for trading other cryptocurrencies. There are dozens of stablecoins, though a handful pegged to the dollar account for most of the market value, which grew roughly 500% in the 12 months ending in October, according to a report from the Biden administration.


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Bitcoin Price Surges on Biden’s Crypto Executive Order

WASHINGTON—Bitcoin’s price rose after President Biden announced an executive order to study digital currencies, a move the industry welcomed and skeptics decried as delaying needed regulation.

The order, titled “Ensuring Responsible Development of Digital Assets,” directed agencies across the federal government to produce reports on digital currencies and consider new regulations. It outlined the risks cryptocurrencies pose to the economy, national security and climate, while also noting their possible benefits.

It also asked agencies to review the possibility of issuing a digital version of the dollar, tasking the Justice Department with assessing whether it would require new legislation and possibly preparing such legislation. Some central banks around the world have experimented with the concept to keep pace with private-sector payments innovations, and the Federal Reserve has already started to evaluate the possibility.

As details from the executive order leaked overnight, the price of

bitcoin,

the largest cryptocurrency, rose almost 9%. Bitcoin’s price was $41,910 Wednesday evening, according to CoinDesk.

While financial regulators have long taken a cautious view toward cryptocurrency, the executive order marked the first time the White House had weighed in formally.

Crypto advocates welcomed the absence of any imminent federal action in the order and its acknowledgment of the positive elements of the industry, such as fostering innovation and financial inclusion.

“We applaud the White House for recognizing this as a defining moment for U.S. innovation on the world stage,” said

Faryar Shirzad,

chief policy officer at the largest U.S. crypto exchange,

Coinbase Global Inc.,

in a series of tweets.

“We look forward to continuing our work with regulators and lawmakers,” he said.

The chief executive of Valkyrie Funds,

Leah Wald,

said she expects the order will lead to regulations that will further help the industry grow. “Clarity spurs adoption, and adoption leads to growth,” she said. Her firm sells crypto-focused exchange-traded funds.

The crypto industry has waged an intense lobbying campaign over the past year to stave off more-aggressive regulation of digital assets. A report this week by Public Citizen, a progressive advocacy group, said the number of cryptocurrency lobbyists nearly tripled in recent years, from 115 in 2018 to 320 in 2021. The sector’s lobbying expenditures rose to $9 million from $2.2 million.

Crypto skeptics see the executive order as a step back.

Lee Reiners,

executive director of Duke University School of Law’s Global Financial Markets Center, said it appears likely to delay any consequential policy decisions until after the midterm elections in November. In most cases, the White House is giving agencies at least 180 days to produce their reports.

“Leading up to this executive order, the narrative that had been circulating was that the administration was set to crack down on crypto,” Mr. Reiners said.

“This executive order is a complete 180 from that,” he said. “This is as close to an embrace of crypto as you could have hoped for from this Biden administration, if you’re pro-crypto.”

President Biden’s cryptocurrency executive order may have produced more questions than it has answered: What’s a central bank digital currency? How is it different from crypto? And why hasn’t the Fed introduced a digital dollar? WSJ’s Dion Rabouin explains. Photo composite: David Fang

Financial regulators have already been studying cryptocurrencies for years. The Treasury Department’s Financial Crimes Enforcement Network issued guidance in 2014 around cryptocurrency-payment systems. The Securities and Exchange Commission has taken scores of enforcement actions against individuals and entities in the sector, while the Commodity Futures Trading Commission set up an initiative to study cryptocurrency and other technological innovations in 2017.

A senior administration official noted that the White House held a number of “Crypto Sunday” events to gather feedback from stakeholders as it prepared the executive order. A White House spokeswoman didn’t immediately respond to questions about the events, such as how many were held or who participated.

SEC Chair

Gary Gensler

has said that many cryptocurrencies should be regulated as securities such as stocks and bonds, something that would involve strict disclosure requirements from issuers. Crypto firms have pushed for CFTC oversight, believing it would be easier to comply with.

Matt Kluchenek,

a partner at law firm Mayer Brown LLP, said Mr. Biden’s executive order appears unlikely to resolve such questions.

“Rather than provide direction with respect to who regulates what, the order calls for research, assessment and coordination within specified deadlines,” Mr. Kluchenek said. “Many market participants were hoping for more concrete direction.”

Industry lobbyists say that heavy-handed regulation would risk pushing more of the cryptocurrency market overseas. Some law-enforcement and national-security officials are reluctant to discourage use of cryptocurrencies such as bitcoin, saying they allow transactions to be traced more easily than cash.

“Ensuring that the U.S. remains the leader in global financial infrastructure for generations to come has never been more paramount for economic and national security interests,” said

Sigal Mandelker,

a former Treasury official in the Trump administration who is now a general partner at

Ribbit Capital,

a venture-capital firm invested in crypto. “The president’s recognition of that is an essential step in that direction.”

But investor advocates worry that the executive order will give an opportunity to dilute existing regulations.

“Silicon Valley and their army of new lobbyists may have feared the worst, and instead the White House is rolling out the welcome mat,” said

Tyler Gellasch,

executive director of the Healthy Markets Association, an investor trade group. “Politicians and lobbyists are likely to use this as an opening line to try to rewrite the securities, commodities and banking laws under the guise of better regulating crypto.”

Bitcoin, Dogecoin, Tether: Cryptocurrency Markets

Write to Paul Kiernan at paul.kiernan@wsj.com and Andrew Duehren at andrew.duehren@wsj.com

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Can Russia use cryptocurrencies to evade Western sanctions? Likely, to some extent, but it’s ‘very hard to do at scale,’ says one analyst

As the U.S. and its allies aim to cripple Russia through sanctions for invading Ukraine, there has been some speculation around whether Moscow could gain leeway through cryptocurrencies, which are typically based on decentralized networks and don’t rely on any central authorities to maintain.

The sanctions target Russia’s central bank, some state-owned companies and elite families, and include measures that remove some Russian banks from SWIFT, a payments-related messaging service based in Belgium that helps banks world-wide execute financial transactions. 

Such restrictions aim to limit Russia’s access to financial markets, as SWIFT plays a dominant role in financing international trade, covering more than 11,000 institutions in over 200 countries around the world. It will be more difficult for Russian individuals to import, export or invest abroad.

Read more: ‘Selected’ Russian banks to be removed from SWIFT global banking network, as sanctions against Moscow grow

The ability to move cash through crypto would “definitely be some level of buffering,” Rance Mashek, president and founder of trading platform iVest+ told MarketWatch in an interview. 

“Unless the Russian companies are on the sanctions list, we can’t see anything that would keep a US-based company from paying a Russian company through crypto to just transact,” Mashek said.

Ari Redbord, head of legal and government affairs at blockchain intelligence firm TRM Labs, echoed the point, saying that “there is no question in my mind that Russia will attempt to use cryptocurrency to launder funds and evade sanctions.” 

However, “it’s very, very hard to do at scale,” said Redbord, who once worked as a senior adviser to the undersecretary for U.S. terrorism and financial intelligence. “The liquidity is just not there,” Redbord said. The war is likely to “require billions of dollars and it is very hard to off ramp billions of dollars of crypto.”

“They will find ways to do it. It just can’t be in the huge amounts that would come anywhere near replacing or getting close to replacing what they’re essentially losing with the sanctions that have been imposed,” Redbord said.

Russia exported $332.2 billion worth of merchandise in 2020, and imported $240.4 billion worth of goods, according to data by the World Trade Organization. Russia’s central bank holds $630 billion reserves made up by deposits and assets in the world’s major currencies. 

Bitcoin’s total market capitalization stands at $790 billion on Monday, while the whole crypto market capitalization is $1.85 trillion, according to CoinMarketCap.

“What Russia will likely do is to attempt to use cryptocurrency in much smaller amounts to evade sanctions. And they will need on-ramps and off-ramps from traditional currencies to traditional currencies, and they will need exchanges to do that,” Redbord said. 

“The larger cryptocurrency businesses where most of the liquidity exists, have compliance controls in place,” Redbord said. 

Exchange’s role 

The Biden administration is reportedly asking crypto exchanges to ensure that Russian individuals and businesses aren’t using cryptocurrencies to avoid U.S. sanctions, according to Bloomberg, citing people with direct knowledge of the matter.

Binance, the world’s largest crypto exchange, is reportedly blocking the accounts of any Russian clients targeted by sanctions, Reuters reported. 

Sam Bankman-Fried, chief executive at crypto exchange FTX, wrote on Twitter that “we are already complying with international sanctions to prevent evasion, and will do so whether or not it’s mandated.”

Still, Russia may turn to decentralized exchanges and some exchanges without ties to the West, Redbord noted. Russia has over 340 total virtual asset service providers such as crypto exchanges and over-the-counter brokers, according to TRM’s research. 

A wake-up call for regulation? 

The European Union should move quickly to pass crypto regulation that prevents Russia from evading sanctions, European Central Bank President Christine Lagarde said on Friday.

Though new regulation might take time to pass and become effective, the Russia-Ukraine war could be “a wake up call for governments globally, to get a better grip on what’s going on with crypto on the regulatory front,” Mashek said. 

Bitcoin
BTCUSD,
+3.24%

rallied 16% during the past 24 hours to around $43,729. The S&P
SPX,
-0.24%

500 closed down by 0.2% on Monday.


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Justice Department Installs New FBI Crypto Crime Unit

The Federal Bureau of Investigation is launching a unit dedicated to tracking and seizing illicit cryptocurrencies as part of a broader shift in focus toward disruption of international criminal networks rather than just their prosecution.

Deputy Attorney General Lisa Monaco said Thursday that the new team, called the Virtual Asset Exploitation Unit, will centralize the law enforcement agency’s cryptocurrency expertise and provide blockchain analysis, virtual asset seizure and training to the rest of the FBI.

“This FBI unit will combine cryptocurrency experts into one nerve center,” said Ms. Monaco, speaking at the Munich Cyber Security Conference.

Cryptocurrency has emerged in recent years as the primary means by which cybercriminals reap the financial rewards from cyberattacks. A February report issued by blockchain analysis company Chainalysis Inc. estimates that around $11 billion in cryptocurrency holdings at the end of 2021 had illicit sources. Law enforcement agencies have zeroed in on disrupting the economics of cybercrime as a key prevention tool, by recovering funds paid in ransoms or stolen by hackers and identifying hackers through transactions.

The FBI’s Virtual Asset Exploitation Unit will work with the Justice Department’s National Cryptocurrency Enforcement Team, a group of about a dozen prosecutors that Ms. Monaco established in late 2021.

The DOJ announced earlier Thursday that Eun Young Choi, a career federal prosecutor, will serve as the NCET’s first director.

The Justice Department also announced an international virtual currency initiative, through which it will help law enforcement authorities in other countries improve their techniques and abilities in cryptocurrency investigations, Ms. Monaco said.

International law enforcement agencies have helped in previous cybercrime investigations, she added. “We can’t do this alone,” she said.

The DOJ is taking additional measures to step up its cybercrime work with international law enforcement authorities. U.S. prosecutors handling significant cybercrime investigations will now be required to consult with department experts to identify foreign partners that could help, Ms. Monaco said. A new Justice Department cyber operations liaison will be embedded in Europe and work with U.S. prosecutors and European officials to speed up cases against top cybercriminals, she added. “International cooperation will not be an afterthought,” Ms. Monaco said.

Tonya Ugoretz, deputy assistant director of the FBI’s cyber division, said that international cooperation has already borne fruit.

“We’ve had some notable successes, not only in infrastructure takedowns but also arresting and extraditing some of the criminals behind this activity, as well as some notable virtual currency seizures,” she said while speaking at the same conference as Ms. Monaco.

On Feb. 8 the Justice Department said it seized around $3.6 billion worth of cryptocurrency stolen during a 2016 hack of an exchange. The value of the cryptocurrency at the time made it the largest financial seizure in the Justice Department’s history. Ms. Monaco said this and other efforts involving cryptocurrency seizures should encourage companies to report incidents as early as possible.

“If you report to us, we can follow the money and not only help you but hopefully prevent the next victim,” she said.

Federal prosecutors and investigators will also start looking for ways to disrupt cybercrimes before they happen, instead of waiting to charge perpetrators afterward, Ms. Monaco said. Authorities could, for example, seize servers used to carry out attacks or issue decryptors to help victims whose data is encrypted during an attack, she said.

Ms. Monaco said the efforts to disrupt cyberattacks before they occur will require a cultural shift similar to the Justice Department’s counterterrorism work after the Sept. 11, 2001, terrorist attacks in the U.S. The Justice Department will consider “all available tools” to disrupt hacking crimes and reduce risks to victims, she said, including sanctions, export controls and efforts with international partners and the private sector.

“We should be looking for success both inside and outside the courtroom. My message to cybercriminals is equally clear: The long arm of the law can and now will stretch much farther into cyberspace than you think,” she said.

Write to James Rundle at james.rundle@wsj.com and Catherine Stupp at Catherine.Stupp@wsj.com

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What happens to my Twitter account and cryptocurrency when I die?

Social media accounts, cryptocurrencies, blog posts and songs purchased on iTunes
AAPL,
+6.98%

– these are just some examples of common digital assets the average American may have. 

But what they might not have: an estate plan for this property. 

These digital assets, some of which could be valuable, don’t disappear when a person dies. Notifications still pop up on Facebook
FB,
+2.40%
,
copyrighted work still lives on desktops and domain names will stay active until their expiration dates. 

Estate plans go far beyond wills, real estate and life insurance policies. “If you think about all the different things that might be online – in particular, all of those videos or photos or recipes that you’ve put online on a blog – there’s just a whole host of things people need to think about when we realize so much of our world happens completely online,” Abby Schneiderman, co-founder of Everplans, a software that organizes important documents and last wishes, said during a recent Barron’s Live event

See: How to plan your estate during a pandemic 

Individuals should be asking themselves what they want to happen to these accounts, as well as who should have access to them, Schneiderman said. She is also the co-author of “In Case You Get Hit by a Bus: How to Organize Your Life Now for When You’re Not Around Later.” 

The consequences of not having a plan for these assets could be “a mess,” she said. Families may lose out on valuable assets because they don’t have access to online accounts (think cryptocurrencies or investments through robo advisers). They may also just find it hard to manage the necessities in the physical world, such as figuring out how to access the account for utilities or cable. There may also be sentimental items loved ones might not know about, such as written stories or old photos. 

The first step should be rounding up a list of the most important assets – the ones that “hold the keys to your kingdom,” she said – and considering a password manager to keep everything secure. 

Also see: More millennials are writing their wills, thanks to Covid-19

After organizing these properties, users can start figuring out what to do with them, such as keeping social accounts up in the deceased’s honor (Betty White’s assistant has been sharing photos of the late actress since she passed away at the end of last year) or shutting them down after death. 

The pandemic has been eye-opening for many Americans, who might not have yet experienced how an unexpected turn of events could affect their lives. Lack of organization or communication of these assets and last wishes could make a tumultuous time for a family just a little easier to manage. “It has become need-to-have planning,” Schneiderman said. “We just never know when things are going to happen and it’s really important to start thinking about things now.”


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Elon Musk Gives Dogecoin a Boost As Tesla Starts Accepting the Cryptocurrency for Payment

Elon Musk

said

Tesla Inc.


TSLA 1.69%

is accepting payment for some merchandise with dogecoin, a return for the electric-vehicle maker to acceptance of digital currencies for some payments.

The Tesla chief executive said in an early Friday tweet, “Tesla merch buyable with Dogecoin.” The company’s website showed some items, including one labeled a “Giga Texas Belt Buckle,” priced in the cryptocurrency. Tesla vehicles can’t be paid for with dogecoin.

Dogecoin surged more than 10% early Friday after Mr. Musk’s tweet, before giving back those gains.

Mr. Musk has a record of commenting on cryptocurrencies. Dogecoin’s value jumped late last year when Mr. Musk indicated Tesla would make some merchandise available for purchase using the payment form.

This year, billionaire CEO Elon Musk reached several milestones across Tesla, SpaceX and Starlink. WSJ reporters Rebecca Elliott and Micah Maidenberg break down some of his biggest moments in 2021 and what’s to come in 2022. Illustration: Tom Grillo

Tesla last year bought $1.5 billion of bitcoin. Mr. Musk also said at the time that the company would begin accepting payments in the cryptocurrency. It later suspended those purchases after Mr. Musk expressed concerns about high levels of fossil-fuel use for bitcoin mining.

Mr. Musk last year said that he and his rocket company, Space Exploration Technologies Corp., or SpaceX, hold bitcoin. The billionaire chief executive said he also owns ethereum and dogecoin, other cryptocurrencies, though those holdings are worth less than his bitcoin stake.

Dogecoin has been one of the most volatile cryptocurrencies. It was started in 2013 as a joke and is centered around a Shiba Inu internet meme. The value of the cryptocurrency surged last year and remains around 2,000% higher than a year ago.

Mr. Musk—the world’s richest person, according to the Bloomberg Billionaires Index—is closely associated with dogecoin. Almost a year ago, he tweeted a faux “Dogue” magazine cover to his millions of followers. He mentioned the currency again on Twitter a few days later, sending its value up 80% intraday, before paring gains.

Dogecoin made a cameo appearance last year in Mr. Musk’s “Saturday Night Live” hosting debut. In a satirical segment, Mr. Musk appeared as “The Dogefather.” After he expounded on the merits of the cryptocurrency using jargon, other cast members asked him to explain, “What is dogecoin?” Pressed, Mr. Musk eventually said, “Yeah, it’s a hustle.”

Write to Robert Wall at robert.wall@wsj.com

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