Interview by David Berger, CEO of the Digital Currency Council, with Stuart Hoegner, an attorney and accountant in Toronto, Canada. He is legal counsel to Tether and General Counsel of the Bitcoin Alliance of Canada.
David: Stuart, your practice is cross-border and cross-disciplinary. Whether law or accounting in the US or Canada, you have unique expertise and are well positioned to serve clients on Bitcoin related matters. Could you tell us a bit about your background and what got you interested in Bitcoin?
Stuart: After I became a lawyer, I spent several years at Ernst & Young in their M&A Tax Group. In 2006, a unique opportunity came along to go in-house as counsel at an Internet gaming company in Toronto. I took the job, transitioned to my own practice when the business was sold, and never looked back.
I started reading about bitcoin in the fall of 2011. I guess I’m quite ordinary in that I was initially skeptical about bitcoin, but fascinated. I started doing some research in the area, and some early conversations with Erik Voorhees were very influential for me. I was fascinated by it from a legal and an economic perspective, but I was also struck at how well it seemed to address some of the problems in the Internet gaming payments space.
Then I began to get calls in 2012 from gaming clients wanting to know more about bitcoin. As I learned more, people in cryptocurrency having nothing to do with gaming began reaching out. So now my practice is a mix of ‘pure’ gaming work, cryptocurrency-gaming hybrid assignments, and bitcoin projects having zero to do with gaming.
David: And today your practice is primarily Bitcoin related? What are the key issues that your clients are facing?
Stuart: Lately it certainly has been. Some of the issues my clients are facing are known to most lawyers: contractual negotiations, rounds of investment and allocating debt and equity, where to incorporate and corporate form, etc., but bitcoin always seems to bring novel issues with it. So the forum question, which is always a kaleidoscope, takes on added dimensions when you have to fold in how the authorities in a place approach and regulate and tax bitcoin’s actors and uses.
They’re also grappling with some key banking and compliance issues with which I help. Then there are some (in my mind) critical private law questions that lawyers are only really beginning to address that are taking up more of my time.
It’s a fantastic sector with some similarities to the early days of Internet gaming, which I enjoy.
David: Recently, we saw a change of leadership at the Bitcoin Foundation and a refocus of that organization’s efforts. What is the purpose of the Bitcoin Alliance of Canada?
Stuart: The Alliance is about raising awareness of bitcoin, promoting bitcoin adoption, and furthering the research and study of bitcoin and other cryptocurrencies. We have had a session with the Senate Banking, Trade and Commerce Committee, which is doing a very interesting study of digital currency. We have also put our views to provincial securities regulators, federal regulators, and the federal Department of Finance. And we have organized a great conference in Toronto and various other meetup events.
David: Many of us watched Andreas Antonopoulos’s articulate presentation of Bitcoin to the Canadian Parliament. In comparison to the US, how is the Canadian government treating Bitcoin today? Would you call Canada a Bitcoin friendly or unfriendly jurisdiction? Is there a partisan split on the digital currency?
Stuart: First, there appears to be no partisan split. Some of the issues raised are being raised irrespective of party affiliation.
Canada seems to be taking a cautious approach to the subject so far. We have laws and rules that already regulate the uses of this technology somewhat – think of taxation and securities rules. On the AML front, we have new legislation that passed as part of the 2014 federal budget, and we’re now waiting for regulations to spell out what kinds of cryptocurrency businesses will be covered by the new rules. There will be a consultation process as part of the development of the regs.
I would still call Canada mostly bitcoin-friendly, but I stress that the banks here are not. Policy makers appear to want to understand this technology before rushing into anything.
David: You’ve also been involved in a very exciting new company called Tether. Could you tell us more about it?
Stuart: Sure. Tether is a smart property project. It seeks to take away the short-term volatility of bitcoin while retaining the benefits of the whole Bitcoin network. Tethers will be fully-backed by their underlying assets, say, US$1,000 for 1,000 issued Tethers. It’s launching with some fantastic partners and will try to be one of the most transparent enterprises in history.
David: Sounds interesting! What are the key legal and regulatory issues facing your Bitcoin ecosystem clients?
Stuart: The uncertainty and dynamism of the regulatory picture. At the same time, even short-term stability is good for certain clients of mine because they realize that things are changing so fast that a viable business model might have to be fundamentally rethought before a short-term horizon anyway. Even near-term stability can give them the window they need to act.
David: What do you see as the biggest challenge to the adoption of the Bitcoin technology?
Stuart: I really wish I knew the answer to that. Look, mass adoption will take applications and integrations that are compelling for people. I don’t think that bitcoin will ever replace the dollar, save for a relatively small number of people. But even if mass adoption of bitcoin as a cryptocurrency doesn’t happen, the potential of decentralized ledger technology I think will go into some very interesting places that we’re only starting to think about now.
David: What can Bitcoin holders and business expect in 2015? Any predictions for the coming year?
Stuart: I don’t think there will be any great theme. I think it will be a patchwork globally. We’ll start to get more clarification on what Canada will look like, and the securities commissions will continue their audit and enforcement activities. (I think that securities scrutiny in Canada is the next big push up here – it already started this past year in several provinces.) We’ll see more enforcement actions in the US. The UK will be neat to watch as it tries to figure out what to do. Some governments will continue to be threatened and will try to suppress cryptocurrency outright.