The following is an interview between our Business Development Manager, Allys Benitez (AB), and Aaron Krowne (AK), Partner and Practice Group Lead for blockchain and crypto at Industria Business Lawyers LLP. Krowne, a trailblazer in both computing and blockchain law, previously excelled as a research data scientist and online startup innovator, establishing key legal precedents and contributing to the Creative Commons IP licenses. Now, he leverages his expertise to navigate the complexities of blockchain, cryptocurrency finance, and decentralized finance (DeFi). In this interview, Allys and Aaron explore his insights on the evolving crypto landscape, landmark legal decisions, and the future of blockchain technology.
AB: Thank you so much for joining us today. We’re excited to hear more about your background, your role at IBL, and your expertise. So let’s dive right in. So to start, can you tell us about your current role at IBL and what your day-to-day responsibilities look like?
AK: Absolutely. So as you said, I lead the blockchain and corporate groups, which are actually two separate groups, but there’s a lot of overlap. So I do direct work on matters. This includes things like advisory, legal reviews, drafting, negotiations on things like business contracts or transactions, and compliance matters, which could be firm AML compliance in many, many other areas. Securities compliance is a big one. I also supervise more junior councils and people like paralegals, and of course, coordinate with other councils who are sort of lateral specialists. They have their own areas of specialty, and I need to defer to them personally because I just know my areas. That’s about being the glue that holds a team together. To have a multidisciplinary team that can serve clients needs. Beyond that, there’s a lot of client relationship management, both talking to new prospective clients as well as managing the relationships with existing clients, and assisting with business development and general management of the firm.
AB: That’ll keep you busy. So what initially drew you to those fields—blockchain, crypto, and IP?
AK: I had this background in what wasn’t even called data science at the time. It was until about the mid-two thousand, but I worked in things like search engines and machine learning information organizations primarily in a university research context, and I was interested even before that in computing and software in IP because of its relationship to open source. A lot of that was about actually making the software free and available rather than just commercial and closed. That really interested me in the whole ethos behind that and sort of what you could create through that and taking on that model. I was into that since really the early nineties, then extended into developing the first, as far as I know, major wiki-like site in the world. It was called PlanetMath. Me and a co-founder started that, and that was inspired by IP rights concerns and an interest in counterbalancing closed IP rights with democratized content. So that was sort of my first entree to that.
And then, you know, with the general background in tech when Bitcoin came out. When the Bitcoin paper came out in 2008, I saw it, and I was just like, this is the best thing ever. I thought it was great because, again, that whole decentralized collaborative ethos, just to me, latched right into that. I was just interested in sort of as a hobbyist for a while. And then my own path took me more into business with other startups, and I encountered more legal issues there, and that got me interested in the law. So I went to law school, and then I didn’t at first think I would necessarily go into law practice, but I just thought it’d be good to have legal credentials in business. When I came out, as many people do, I realized I could counsel people in the law who are sort of like I was before being just on the tech side and not really knowing the legal side and being somewhat intimidated by it. So I saw an opportunity there. When I came out of law school or shortly thereafter, we hit the first ICO boom of 2017, and that was really the first big moment where people were going into crypto in the sense of starting ventures. And then I started to have prospective clients and clients approach me asking for legal guidance around this. And so that’s when I started to tiptoe into it. And within less than a year, it kind of took over my life. That’s sort of the overall course.
AB: It seems like it’s been such a progression, right? You know, one thing led to the other, which led to the other. So touching on that, how did IBL and your partnership with IBL come about from your experience to now?
AK: Our managing partner and founder, Alexander Rodriguez, was looking for collaborators—legal collaborators—to serve clients in the blockchain law space back in 2018. So really, the very, very early days of it, he found me on LinkedIn and just reached out, and we hit it off quickly. We realized we both had entrepreneurial backgrounds before law, and then we both got our law degrees and wanted to somehow combine the entrepreneurial side with law. We had that in common, and we just teamed up to start to serve blockchain clients, and that became IBL, and it has just grown steadily since. I think we’ve really benefited from both of us having that entrepreneurial background first. It’s not like the law is the only thing we’ve ever done. I think we really get it in terms of founders and businesses and not just tech founders and those in innovative areas.
AB: I want to kind of shift the focus to like the current state of the crypto industry because you talked about your experience there. So let’s talk about today and if there are any recent landmark cases or legal decisions that you believe could set significant precedence.
AK: It’s actually an interesting time for that. I’d say it’s because after a number of years, really a large number of years of bringing cases that are mostly about basically fraud or gross mismanagement, they started to bring cases that are more over like the fine grained gray area questions relevant to crypto and for the SEC, especially crypto securities and whether crypto assets should be classified as securities, but also whether a platform should be classified as regulated brokers. So it’s finally gotten to where these lawsuits are over those issues. Now that that’s happening, the SEC is starting to take some losses, which is interesting. So when they were going after more sort of the scams or they’re really just insubstantial projects, they were just winning over and over again. And that was extremely intimidating to the space. I will always tell people to just wait till they get to the cases where they’re actually litigating the material issues and not just people who are scammers or just didn’t have their act together.
So that’s happening now. For example, both in the Ripple case and the Binance case, the courts have ruled against particular distributions of crypto assets being securities, which is what the SEC is claiming, especially when they are indirect or secondary market transactions. Those are huge wins for the industry. The other day, the final judgment came out in that Ripple case, and Ripple was leveled a penalty by the court which was 94% less than what the SEC originally asked for. So that’s also, I would say it’s a pretty big win. That case could still be appealed, but the SEC is clearly having to walk back from the level or the extent that it was asserting enforcement. We’ve also seen self-hosted wallet broker liability claims dismissed. That was in the Coinbase case.
Meanwhile, the cases against Coinbase and Binance still continue on the remaining claims, and there’s now cases against Uniswap and Consensus. Those that are continuing really have basically just started. So we have yet to see the final determination on the merits of broker liability. Which is basically for whether these exchanges and platforms are allowing people or are engaging in activities that should be regulated as securities exchanges or brokers, dealers, or underwriters. There are definitely subtle and fine-grained questions around where the line is drawn. Unless that’s all preempted by comprehensive legislation, and I expect those to just get hashed out by the courts in the coming year or two.
AB: What year would you say was kind of that shift for the SEC in these decisions going differently than they normally would?
AK: I’d say last year. The cases had started before that, and some of them were filed back in 2021. The Ripple decision was really the first where some of their claims got dismissed. It was recognized as a win at the time, but people just weren’t sure if it was a one-off, and it sort of was frowned upon by the judge in the terraform case, but that was kind of ancillary, so it didn’t necessarily matter. The dismissal and the Ripple case have been reinforced in the Binance case. So, and it is a very strong follow of that precedent, and actually adding to secondary market transactions should not by themselves be securities transactions. So, I do think that’s a big win, and it’s big progress for the space.
AB: Speaking of recent news, let’s talk about the major cryptocurrencies, new lows that we saw recently for ‘Black Monday.’ Do you think that those events might be an early indication of a broader crypto winter?
AK: I don’t think so. Of course, no one can say when the market will turn. I think as far as the shocks, there’s always going to be shocks in markets from time to time. I mean, we could also be asking if the stock market is going to go way down and enter a bear market. But, as far as crypto, I think what is notable this time is how well virtually all the crypto world weathered these shocks. Yeah, some coins went down that came back up, but in terms of platforms and the safety and soundness, there are no major platforms that went under.
I think it’s notable how well DeFi generally weathered the shocks. We have one client that runs a DeFi protocol, and I think the protocol lost like $2. It’s kind of what you expect, right? You have protocol and liquidity, which is ensuring the protocol. There’s going to be some losses, but the idea is they should be extremely low level.
The worst shocks in the sector have actually come from hacks and exploits, or what I’d call classical problems like frauds or Ponzi schemes, and not to minimize those, but the sector should work to mitigate them. And I think these aren’t unique to crypto. I think crypto has a real opportunity to build in more organic stability and safety than the traditional finance world, where a lot of it’s based on emergency government backstops. Not necessarily the best architecture to actually have things be organically stable and sustainable. The crypto world is going in that direction and taking that opportunity after a bit more of a wild west starting period of a decade or so.
AB: I want to talk about what your thoughts are on the future of the cryptocurrencies and where you see that going.
AK: I don’t have a crypto ball, but I’ll speak on it a bit. I would add blockchains to the question because blockchains are the underlying technology, and I see them as indispensable to provide any sort of information based on networked trust, and blockchain is the first true distributed and decentralized database technology. I think that’s huge. It might be something, and it probably will be something where it’ll just be omnipresent and people won’t talk about things being on the blockchain. Just like we don’t talk about things being in a relational database, even though those are just standard off-the-shelf technology now that we depend on every day as far as coins and tokens, those are also hugely important with things like DeFi. They’ve created a prospectively more efficient, middleman-free world of finance. I think it ultimately will displace a lot of traditional finance. The ability to have coins and tokens has opened up a whole new sector of the ability to basically incentivize and monetize information collaboration. So it’s essentially open source collaboration with built-in economics. This is, in my view, a whole new mode of economics. I don’t think it’s been fully appreciated yet.
I liken it to how open source and open content projects were a new form of production and really economic production at one time coming about from the early nineties to the early two thousands. For a number of years, the world didn’t understand those and actually fought against them before finally embracing them. Open source is the basis of things like Mac OS and Android, and we can’t imagine a world without open content like Wikipedia. I think crypto is going through a similar kind of social dynamic where it’s introduced and then there’s skepticism and pushback, and then finally everyone sees the merits and it becomes adopted, sometimes almost overnight. It does seem very similar to me.
AB: What about the legal framework? Do you see any other things involved evolving over the next few years? I know you said, obviously, we don’t have a crystal ball; we don’t know what might happen, but from your experience and from what you’re seeing, is there anything else that may happen in the next few years or that you think will happen?
AK: I think the law will get more formalized and clarified. We’ve had initial legislation introduced in the US, which is sort of to get some serious momentum and be more serious legislation like the FIT21 Act.
There is the distinct prospect of more bespoke crypto legislation in the US because there’s actually now growing bipartisan support for it—I should say significant and growing. Before that, the US has lagged relative to many jurisdictions around the world, probably the biggest being the EU with its MiCA, or markets and crypto assets law, which is now going into force.
I think what’s changed in the last year is that Democrats have finally realized that we just basically lost almost four years on this issue in the US, and this has harmed the US’s standing in regards to innovation, and now I see real momentum behind efforts to make up for lost time.
That’s very encouraging to me, and as far as the laws and specific ones, one can dislike or like aspects of them, but at least they provide a huge general benefit in bringing clarity to the space and eliminating uncertainty. The uncertainty really keeps people from proceeding with their adventures, either in the US or at all. You can’t really underestimate or understate the damage that causes. Reducing that is going to be immensely helpful.
AB: How often do you feel like you see that big change in this space?
AK: I mean, it’s probably at least every year. This space just moves so quickly. It’s fairly different every six months to the next six months, and it probably goes back and forth between being the market that’s driving the change versus laws and regulations and legal cases, big legal cases, even bad ones like what happened with FTX. That is something that everybody processes and reacts to, and then sort of the next phase, takes that into account. So that’s about the pulse of it.
AB: Are there any opportunities that you foresee for stakeholders and risk as well?
AK: Legally speaking, there’s always going to be risks in proportion to the legal uncertainties that remain. I think what everyone would hope for is a situation where the legal risks are significantly lower than the business risks, which is something that start-ups are more geared to deal with. So I think that’s what the focus should be on now: reducing the legal risk by reducing the legal uncertainty by having more broad coverage of a bespoke crypto regulatory regime. In anywhere that’s happened around the world, that’s been a huge boon. I do see opportunity in that those risks are reducing. But of course, it is a space of intensive start-up activity and intensive research. That’s going to continue to always remain a risk. Certainly, while things are at the developmental stage, those who go into it should have a healthy risk tolerance.
AB: There’s always so much going on in this industry, like you were just saying. What are you most excited about and what do you feel people should be most excited about right now?
AK: Well, in addition to the applications I mentioned, I’d say just the progress against the SEC in the litigation arenas. I’m very excited about that. It was a long time coming now; we have seen really concrete and good progress. Maybe more so about this prospect of finally getting bespoke crypto legislation in the US because now I’m really seeing bipartisan support. So that means things can really start to happen productively. That’s definitely one of the things that excites me the most.
AB: Thank you so much for your insights. Today. We were so excited to learn more. Before you go, we’d love to know you a little bit better. So, do you have any hobbies or interests outside of the legal field that you’re passionate about?
AK: I do manage maybe one or two. When COVID hit, my wife and I got into sailing as a fun outdoors activity that you could still do at that time. I’d say my favorite type of vacation is a destination sail, and I basically can’t wait to get back out on the water. So it’s definitely something that enriches my life.
AB: That’s awesome. Not so common, but I mean, hey, if that’s what you enjoy, we love it. Well, thank you so much, Erin. We really appreciate it.
