What to Be: A Blockchain Lawyer’s First Steps in Web3

In the ‘What to Be’ series, ForkLog editors ask professionals working in Web3 to share personal experiences of building a career in the industry. In this piece, lawyer Eliza-Tatyana Vasileva explains how she arrived in the blockchain industry, what skills will help those who want to repeat her path, and why smart contracts and artificial intelligence will not leave her colleagues without work.

ForkLog: What attracts blockchain industry professionals with a legal background?

Eliza-Tatyana Vasileva: Lawyers tend to go into specialized sub-sectors: tokenisation of real estate, automated compliance and so on. They understand contracts, deal stages, and have something to contribute to the industry. Far fewer lawyers work on the technical side of blockchain projects.

ForkLog: We had a a podcast with a smart-contract enthusiast who urges lawyers to “program reality,” by learning Solidity. In his view, this is a leap forward for the legal science. Do you agree with this?

Eliza-Tatyana Vasileva: These are very useful skills, but lawyers drafting contracts for business should primarily learn scenario modelling, to see a contract not as a collection of phrases but from the perspective of causes, consequences, and various possible developments. A specialist who can break a contract down into possible negative scenarios is already a lawyer who programs reality. A person with this skill could potentially write smart contracts.

ForkLog: How hard is it to move into blockchain from other fields?

Eliza-Tatyana Vasileva: I myself have changed specialties several times. I started as a litigation lawyer. It’s a useful experience that allows you to see processes through the eyes of a judge and to understand how a potential dispute between parties might unfold and what arguments they might have.

Then I advised investors entering foreign markets. The tasks were varied: from tax questions to compliance and bringing a company into line with regulatory requirements. Such knowledge became essential when the blockchain industry arrived at a point where regulators began requiring projects to obtain licenses, scrutinising advertising and financial promises, and how the corporate structure is built.

Many of my colleagues came not from traditional business but from the financial industry—legal support for banks and financial institutions. That is also highly relevant to the blockchain project market. MiCA and, for example, British regulation of financial promises are built essentially on the same principles. Lawyers with a banking background fit well into this environment.

Additionally, I had experience creating a project in the legal tech space that allowed sketching corporate structures and conducting international tax modelling much faster than a human lawyer. For this, I learned IT-systems architecture development. All of this helped me enter blockchain with sufficient skills and a broad view of business.

ForkLog: What challenges and problems has the blockchain industry brought to lawyers, beyond the rapidly changing regulatory framework?

Eliza-Tatyana Vasileva: I see more of the opposite trend. The blockchain industry is now turning to the centuries-old store of legal knowledge. Layers are gradually opening that previously drew little attention. For a time the industry existed in a break with regulatory requirements. Today we see that the entire body of knowledge accumulated by banking and financial lawyers is coming into blockchain and being put to use.

The blockchain industry has long been out of step with intellectual property law — there were relatively few patent stories. Now we are seeing the emergence of patent trolls — people trying to register ownership of something that is a generally accepted standard and to take royalties from other market participants. Other industries have gone through this already.

Among the challenges I would highlight is the complexity of interaction between the community and project founders, which lawyers have to puzzle over. Some conservative solutions here are inadequate and look insane. For example, in America there were proposals to regulate decentralisation. Special institutions would have to determine how decentralised or centralised a project is, and issue certificates that would impose responsibility to regulators if the company is deemed conventional, and in the opposite case would exempt from oversight. Indeed, some legal innovations will need to be developed.

I like the idea of decentralisation and minimal regulation for innovative projects. But I see that a huge number of crypto companies are in essence no different from quasi-banking and traditional financial institutions. The difference is that financial promises are settled in crypto—that is all. Where a project brings something truly new not in technology but in the philosophy of interaction, there is a case for a new legal framework. Where there are no new meanings and crypto is used solely as a settlement instrument, the thesis of needing no regulation seems false to me.

Imagine if we allowed drawing in an audience with financial promises without any regulation, without compliance, without identification, because settlements are made not in fiat but in crypto. The question immediately arises: why should we do this? What valid economic or social reason is there? Why should we leave banks in the regulatory system? Because they deal with fiat?

ForkLog: Perhaps because fiat is a centralised currency, typically issued by a central bank, on which all other credit institutions depend?

Eliza-Tatyana Vasileva: It is important to distinguish where law serves the state as issuer, and where it protects people as investors. Some laws regulate capital and monetary policy. And there is legislation that protects people as investors from fraud, financial pyramids, dirty money. It defends not the monetary interests of the state; it protects society from money earned through crime and potentially harming the interests of society at large.

Where there is discussion of the permissible quantity of some instruments, the state is less inclined to intervene. It does not go after crypto-issuers or require limits on their issuance. The state does not regulate the amount of issuance; it aims to regulate investor protection. If the state does not do this, it will not perform its role toward society.

In a completely decentralised future, this function will have to be taken on directly by society itself, and somehow still through regulation to protect itself from fraudsters.

ForkLog: What competencies do lawyers in the blockchain space need?

Eliza-Tatyana Vasileva: First and foremost—an understanding of the industry, technologies, regulation, anti-money-laundering and tax law. The ideal blockchain lawyer also has expertise in intellectual property, knows how to handle patent claims, trademarks, and so on. Ignorance of this area can lead to higher risks.

If a corporate structure is designed by a lawyer lacking knowledge of intellectual property law, they may not notice in which jurisdictions patent trolls are more prevalent, and choose one for registering the holding company. Unfortunately, one such jurisdiction is the United States.

The United States is among the most progressive countries on intellectual property registration; it is easy to patent what is not possible in Europe. But this allows patent trolls to creep into the industry — yet Europe has many more obstacles for them. If a lawyer does not monitor patent disputes, they may choose between British and American jurisdictions and end up selecting the latter. And then face the risk that all intellectual property and the shares of subsidiary companies of a holding registered in Delaware will be exposed to patent-troll attacks.

So a lawyer in this space needs multi-disciplinary knowledge: not only compliance, regulation and blockchain technologies, but also related industries.

ForkLog: Are there already distinct specialisations among lawyers in this space?

Eliza-Tatyana Vasileva: First, there is a strong demand for specialists in regulatory law. Also a separately formed industry in blockchain can be considered licensing law and taxation: professionals who can swiftly obtain the necessary approvals are in demand. Patent law is one of the new growing areas, as is work with smart contracts.

From our practice I see that questions are appearing to which the blockchain industry had not previously addressed. Not long ago European crypto companies began paying attention to regulation FATCA, which banks serving American clients must comply with, but which crypto companies did not appear to fall under. The position of the IRS on this issue was rather blurred. It used to be believed that crypto companies did not fall under FATCA, and it applied only to classical bank accounts. But it later became clear that it does apply: the conditions are stated broadly enough that custodial and non-custodial wallets and merchant accounts fall under FATCA.

Therefore, we now see in European companies a growing volume of requests to create regulatory policy and establish compliance that aligns with FATCA. Sooner or later all regulatory cases will be applied to crypto.

ForkLog: Could the blockchain industry be an area of interest not only to practitioners but also to researchers of legal science?

Eliza-Tatyana Vasileva: Absolutely. Blockchain is interesting precisely as a lens to see how outdated regulation is and needs change. There are many topics for researchers. I’m personally interested in the topic of decentralised communities and their autonomy from the state — financially and in decision-making. Regulation within the community is also of interest: how to build that system correctly.

ForkLog: Which young law graduates should go into Web3?

Eliza-Tatyana Vasileva: To those who like blockchain. I am in favour of not entering the industry solely because of its popularity. One should enter the industry if it aligns with inner values and there is real interest. If you like the philosophy of community-building, funds, trading, and so on—this is the industry where you can make your mark. If you are interested in artificial intelligence, that is also a promising direction. There is room to grow; the key is to decide for yourself: do you like decentralisation or not.

ForkLog: What career track do you see for a beginner?

Eliza-Tatyana Vasileva: The first job will likely be in compliance. You’ll need to join more mature companies with a niche on the market that needs to bolster their compliance teams. Another option is working at small startups. They also need legal professionals and want to see someone who can bring a non-standard perspective to the industry: listen to founders, gather all information and coordinate with external lawyers to convey what the company wants.

You can also look to blockchain associations and start your career by volunteering with one of them. Take on duties such as marketing and, as you gradually learn what a given project from the association offers to the audience, get to know the regulatory lawyers who are invariably present.

ForkLog: Is it possible to accidentally find yourself serving the interests of yet another fraud scheme aimed at extracting money from people? What are the reputational risks?

Eliza-Tatyana Vasileva: This is dangerous not only reputationally but also in terms of personal freedom and safety. Especially if you take on business functions and take public positions. I would urge avoiding this. It is very dubious if a startup immediately offers the specialist to take on leadership duties, to become a director. That is a red flag.

Unfortunately, even experienced lawyers confront a project that at the outset behaves properly and complies with regulatory requirements but turns out to be a scam. For a lawyer this is dangerous if they are active in the public sphere—using their position in the company for personal PR. Undoubtedly, this will have a negative impact. If a lawyer works with the company, doing their job and not taking part in designing scams, one can get through with minimal harm.

This is a difficult story, but fundamentally it concerns not only the blockchain industry but the economy as a whole. In any venture, if a company fails to comply with regulatory matters and to interact properly with its audience, this will negatively affect all professionals occupying leadership roles.

When working with startups, you must be careful, hold an internal position and insist on regulatory compliance, not agreeing with situations where founders clearly bypass compliance and financial regulation—these are clear signs of fraud.

ForkLog: The idea ‘code is law’ emerged with the advent of smart contracts. Do you think this reduces the need for lawyers as intermediaries? Are you worried about the profession’s future?

Eliza-Tatyana Vasileva: There are a few things that cause concern rather than fear. First: I like a system in which interaction is built around meaning. A classic example is Britain, where society and law are built largely around sense rather than procedures. This is a question of legal interpretation, which in many cases is not formal but seen through a lens of common sense with a lot of philosophical concepts: morality, ethics.

All of this is handled by an advanced legal community—the judges. These are not people who simply wrote down all the chains of legislation; they are professionals who can interpret the law in terms of balancing private and public interests. They are people who can deviate from interpretations set by earlier precedents, see the smallest differences between facts in earlier and current cases. This work is clearly not programmable. Some initial levels can be encoded into regulations and mechanical interaction—where the risk of harm to life is small, for example, denying compensation for a minor amount. In such cases there is no need for significant qualification or the ability to apply complex legal concepts. All things that could be encoded into algorithms can be moved into smart contracts. There is a contract where interpretation is obvious, and it can be directed to self-execution.

But I think you should not allow AI and smart contracts to have complete priority over human judgment. At least until the pliancy of AI consciousness surpasses human pliancy. There is a probability of that. But for now our consciousness is more pliable, and the human brain can extract from the law not a formal interpretation but a complex interpretation with meaning prevailing over form. As long as this remains the case, it is unlikely to entirely exclude living lawyers from the process. I think this is also unnecessary. It could lead to humanity losing control over its own fate.