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Insiders know I always make a concerted effort and do my research, so when they bring to my attention that I missed the mark on something, I listen, give it more thought –and recalibrate when necessary.
Taking some of the feedback I got over the past year, this week I’ve decided to do a humbling piece on a few of the things that I got wrong in 2018. Or at least, things that Insiders disagreed with me on.
Below are four of the more contentious issues that came up over the past year.
The Caymans aren’t (yet) a dream
In my article, The Cayman Islands: The Dream Jurisdiction for Crypto Start-ups, I painted the archipelago as an idyllic place to establish a crypto-related business.
The Cayman Islands have long been known as one of the top places in the world to set up offshore companies, due its low taxes and business-friendly atmosphere. And in the light of a number of new government initiatives to establish greater regulatory certainty and attract crypto projects to its shores, I saw the jurisdiction as a great place for crypto businesses to consider basing their operations.
Not so fast.
Several Insiders explained to me that despite the aforementioned incentives, it’s still a deeply complex and frustrating endeavor to set up a crypto business there. Though the government may want to attract businesses in the industry, local banks are still reticent to get on board.
One Insider noted that, “Know Your Customer (KYC) banking was already tough, but when the word ‘crypto’ was uttered it tripled in difficulty.” This made opening a bank account in Cayman a complete nightmare for them.
I looked into it further and it’s true, the Cayman Islands is not the perfect crypto haven that the government paints it out to be.
That said, given that setting up a corporate bank account for a crypto business is a headache in pretty much any jurisdiction these days, I wouldn’t write it off completely yet. You just might want to avoid it until the banks get the memo and start applying reasonable levels of KYC.
Or if you don’t want to wait around, you might want to follow Bitcoin ATM manufacturer, Lamassu, and check out Switzerland, which brings me to my next point…
Zug may not be prohibitively expensive
In September, I detailed in my piece, Zug: The Crypto-friendly Jurisdiction Where You Can Pay Taxes in Bitcoin, about how that little municipality in Switzerland is one of the hottest global destinations for digital technology. In fact, Zug, (AKA, ‘Crypto Valley’), is touted as the Silicon Valley of cryptocurrencies.
Though it’s clear that Zug is one of the most attractive jurisdictions for crypto startups, in my article I included one caveat to entrepreneurs that didn’t sit well with some. I said the cost of living in there was exorbitant, significantly higher than even the notoriously pricey San Francisco.
Soon after my article went to print, an Insider contacted me (one whom I greatly trust) and told me how wrong I was. According to him, lakeside villas anywhere in Switzerland are expensive, but if you’re willing to move to the outskirts of the city center then the prices are actually very reasonable. (Or, at least on par with typical US pricing). He also said the costs of lawyers and accountants are not as high as I claimed, as long as you find the professionals who aren’t in business to rip off foreigners.
While there may be some truth to this point, I’m not convinced. In my many visits to Switzerland, I’ve seen first-hand just how expensive it is. So until I see definitive proof to the contrary, I’m sticking with the belief that Zug is more expensive than any of the other crypto-friendly jurisdictions on our list. If you have on-the-ground experience working in Zug, I’d love to hear your take.
Engineers may not be terrible businessmen
I got quite a bit of flak from my engineering friends when I opined in my article, A Quick (and Easy) Primer on Open Source Software that engineers aren’t known for their business acumen. (Nobody likes to hear the negative stuff!)
Since the advent of the internet, engineers have viewed open-source software as a way to ‘give back’ to the development community. Though the ideological ethos of open-source software is at the heart of cryptocurrency, this can cause issues when a project attempts to operate successfully as for-profit business.
As Peter Thiel once said, “Engineers are bad at business and need some capital. Scientists are catastrophically bad at business and need enormous capital.”
Typically, engineers are introverted, hate the idea of risk and unpredictability, and are terrible at assessing priorities. Those qualities are great for engineering, but not for business.
My problem with engineers who enter the business world is they typically think marketing is worthless and they don’t seem to understand why consumers need user-friendly interfaces.
Ever used a crypto wallet made by engineers for engineers? It’s usually just one step above command line!
So despite the backlash, I’m sticking to what I said. Of course there are exceptions, but generally 9/10 engineers are terrible business people.
When it comes to making key decisions for your project, it’s important to recognize their suggestions will likely be more based on ideology than what would be best financially for your business.
Data Privacy apparently isn’t as important as I think
I also received a surprising response to my article, Why Data Privacy Matters – Even If You Have Nothing To Hide. From the feedback, I was sad to find out that not as many Insiders feel that privacy is as essential as I would have hoped.
What a disappointment! The right to privacy is fundamental to every human right we have. Think about it—how can a right truly be freely exercised without the ability to exercise said right privately?
The prevalent rebuttal seems to be that government checks are essential for the industry’s security. And if you have ‘nothing to hide’ then you shouldn’t care whether the government reads your emails, checks your internet history, or monitors your crypto transactions.
To me, this attitude is unsettling. People more talented and knowledgeable than me have thoroughly refuted and dispelled this argument. There’s no need to paraphrase their arguments here.
I’m sure you’ve deduced by now that I still agree with my core belief that data privacy is a fundamental right which needs to be protected at all costs.
We are naturally private individuals, having all of our data handed over to the government is not something we should comfortably allow to happen.
One thing is certain. Insiders are knowledgeable, critical thinkers who continue to keep me in check. For that, I must thank you.
As I continue to expand my knowledge of the legal intricacies of the cryptocurrency space, I look forward to your valuable, constructive feedback as we navigate through 2019.
Dean Steinbeck is the Managing Director of Crypto Law Insider, the leading legal authority for entrepreneurs and investors in the cryptocurrency and blockchain ecosystem.
Dean is a US corporate lawyer with a focus on data privacy and technology. With over 15 years of experience representing VC-backed software development companies, Dean has found himself at the center of multiple blockchain projects and is currently recognized as one of the top attorneys in the cryptocurrency space.
Dean currently serves as General Counsel for Horizen (formerly ZenCash), a privacy-oriented cryptocurrency and cutting-edge blockchain platform. Prior to Horizen, Dean was General Counsel at TigerConnect, the leading communication platform in the US healthcare market. His experience gives him an in-depth knowledge of the legal intricacies within blockchain technology, data privacy, intellectual property, venture capital funding and regulatory compliance. Click here to learn more about Crypto Law Insider.