Regulation, legislation, opportunity – and the role Miami innovators can play in the global blockchain ecosystem
By Riley Kaminer
Few Miami crypto experts have as many insights or as much access into the space as attorney Lilya Tessler. As the leader of Sidley Austin LLP‘s fintech and blockchain group, Tessler regularly interacts with both regulators and entrepreneurs – having been working in the industry since 2016. Refresh Miami sat down with Tessler to get her thoughts on the state of crypto today, the latest in crypto regulation and legislation, and the role Miami innovators can play in the future development of blockchain technologies.
This interview has been condensed and edited for clarity.
Refresh Miami: How has the industry changed since 2016, when you first entered it?
Lilya Tessler: I’m a financial technology lawyer with a background in securities regulation. My experience includes working with pioneering blockchain technology companies in 2016, even before the SEC published official guidance on complex securities issues concerning blockchain.
When I began in this field, I primarily worked with early-stage companies and financial institutions exploring new technologies. Many of these clients have since matured, with some becoming public companies, while others have partnered with major financial institutions. The adoption of the technology has spread to diverse sectors, including healthcare, telecommunications, entertainment, and social media.
As the technology becomes more pervasive, it presents fresh legal and regulatory challenges. The regulatory environment has evolved significantly, with clearer guidelines prompting more companies to enter the space with compliant products both in the US and internationally. Initially, most of my clients were US-based, but now many are expanding their operations globally, spanning continents from Asia to Europe. The growth and expansion of this domain have made it increasingly exciting to be a part of.
How has your work changed given the current ‘crypto winter?’
This is actually my third downturn in the industry – and hopefully we’re on the rise to the next growth phase. Interestingly, downturns often lead to increased investments in companies, enabling them to develop more products. This period sees venture capital and investment firms actively funding our clients to grow and expand.
While upturns result in capital deployments, IPOs, and M&A activity, downturns bring about regulatory enforcement actions and litigations from a legal standpoint. However, many companies view the current downturn as an opportunity to build and prepare for the future, given they have sufficient capital.
In previous downturns, major institutions often dismissed the technology as a fleeting trend. This time around, even amidst a downturn, these institutions recognize the missed opportunities from past cycles and are keen on embracing the technology, anticipating its future growth. Our clients are determined to build and be prepared for the next upswing.
What are the latest developments in cryptocurrency regulation?
In the evolving cryptocurrency regulation landscape, the SEC is revisiting Regulation ATS, potentially bringing decentralized finance (DeFi) technology into its scope. Another pivotal change comes from the proposed expansion of the Advisers Act Custody Rule, which would necessitate all digital assets to be held by a qualified custodian. This shift could directly impact how investment advisors handle certain digital assets.
Legislatively, the debate continues about SEC and CFTC jurisdiction over digital assets, with two notable bills in the fray: the FIT Act and the Lummis-Gillibrand Responsible Financial Innovation Act. Both bills explore how digital assets should be categorized and regulated. As for exact timelines on these SEC rule proposals, further updates from the SEC would be needed.
How can entrepreneurs continue to innovate in such an uncertain regulatory and legislative environment?
Entrepreneurs navigating today’s uncertain regulatory landscape need a nuanced approach. Drawing on industry experience and understanding market trends is essential. Regular communication with regulatory bodies, especially the SEC, is critical. My frequent interactions with the SEC provide insights into compliance needs and areas demanding more clarity. While the pace of regulatory traction might not always match our clients’ expectations, engagement with these bodies can indeed steer the direction.
Additionally, some clients look beyond the US, launching products where regulations might be more accommodating. We aid such initiatives through our global offices, guiding them through non-US launches. Occasionally, the current US regulatory environment simply doesn’t favor certain products.
Would you say that you’re optimistic about the overall crypto space?
Yes, I’m optimistic about blockchain technology and its evolving use cases. While in 2016, many applications were merely hypothetical, we now witness tangible real-world applications. From gaming to digital securities trading, and even in healthcare records, the technology is proving its worth. As the underlying protocols evolve, becoming more efficient and adaptable, they increasingly cater to these diverse applications.
While some may view cryptocurrencies and digital assets primarily as investment tools or subjects of speculation, their real value lies in the technology backing them. The focus should be on the merits of blockchain technology, as that’s where the true long-term potential resides.
What are your thoughts on Miami as a hub for crypto?
I’m very enthusiastic about Miami’s emergence as a crypto hub. Over the years, I’ve observed its growth firsthand, witnessing an influx of blockchain companies, tech firms, traders, and investors, many of whom we call clients. This upward trend in blockchain technology will undoubtedly bolster Miami’s standing, especially given the city’s supportive culture for tech and market participants. Such an environment is bound to attract more businesses to the region.
I think it’s also important for people in Miami to remember that they’re also part of a global environment. Blockchain technology borders, cities, and countries. So thinking about how Miami can be a hub – but also be part of the overall ecosystem that’s developing globally – is going to be important for the growth of the ecosystem. And it’s exciting to be part of that in Sidley’s Miami office and support this growth.
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