Can Sun is a Corporate Associate and Blockchain Industry Co-chair at Fenwick & West, where he provides strategic counseling to all players in the blockchain ecosystem, ranging from early stage cryptocurrency developers to mature businesses, cryptocurrency exchanges, and cryptocurrency investors. Mr. Sun has advised dozens of cryptocurrency projects and associated companies on a variety of public and private token sales, swaps, airdrops, exchange offerings, secondary offerings, multi-token offerings, and other novel structures within and outside the United States. Mr. Sun is a graduate of Yale Law School, where he served as Co-editor-in-chief of the Yale Journal of Law and Technology and Comments and Online Articles Editor for the Yale Journal of International Law.
The views and opinions expressed in this interview are those of Mr. Sun and do not necessarily reflect the official policy or position of Fenwick & West. They are for informational purposes only and should not be taken as legal advice.
The Politic: What’s your background? What path led you to crypto/blockchain?
Can Sun: When I got out of law school, I worked at a firm in D.C., and there was a client who was trying to create a stablecoin. He was an early Bitcoin adopter, and what he couldn’t stomach was the volatility in the price of Bitcoin. He wanted to create a cryptocurrency that had a relatively stable price, so he bought a couple million dollars’ worth of gold bars, moved them to a vault in Iceland, and actually issued a coin that each represented the right to 0.1 ounce of gold.
What have you been doing in the space since 2013?
I moved to Fenwick & West, which has one of the nation’s best blockchain legal practices, and have since helped hundreds of clients in the blockchain industry in transactional, regulatory and compliance activities. Our clients include all major players in the entire ecosystem, from miners, traders, token issuers, to custodians and exchanges, many of them the largest in the industry.
What do you do with your clients? E.g., Do you represent them after they’ve been scammed?
There are scammers in the industry, and I think there were a lot of those in the early days. But all of the clients that work with us are genuinely people who want to work with blockchain technology to revolutionize the world. They have an idea, an innovation, and they want to bring it to market, and would like to comply with regulations not only in the United States but also offshore. It’s not unlike other companies in the Valley who are building a disruptive business in an emerging industry.
The IRS recently put out a letter that crypto traders need to report their crypto earnings. If the blockchain ledger is immutable and irreversible, shouldn’t it be easy to just go scrape the data on your trades and then present that to the IRS?
There is no easy way for regulators to map public keys on a blockchain ledger to individuals or businesses. In addition, while trades made on the public ledger are visible, trades made on hosted exchanges, which represents the majority of where trades occur, are not posted onto the ledger. So those transactions would not be visible to the public or a regulator at all.
It seems like there’s a huge under-supply and correspondingly high demand for lawyers with expertise in the area. What’s your experience?
Yes indeed. There is no uniform “blockchain law” or an overarching set of regulations applicable to blockchain technology right now. And given how new the technology is, it always takes some time for laws and regulators to catch up. As of today, the laws applicable to blockchain technology are extremely multifaceted and varied, from securities, commodities, financial regulation, tax, intellectual property, to esoteric areas such as escheatment and negotiability. Lawyers often come from various backgrounds and no matter where you come from, there’s going to be a lot of learning and digging into the trenches, as well as lots of creative thinking.
What’s the biggest gray area?
Everything. At a high level, laws are generally founded upon the concept that if you have control over something, then you have to take liability and responsibility. The biggest innovation with Bitcoin and other decentralized cryptocurrencies is that it’s hard to identify anyone who has that control. Who controls Bitcoin? You could probably abstractly point to its miners, but you don’t know who they are, where they are, and they’re changing all the time. That’s a huge problem because it goes against how laws are structured. As another example, U.S. securities laws are often drafted with traditional securities in mind, such as common stock, bonds, notes, options and warrants, and are fine-tuned to work for the existing infrastructure underlying our financial markets.
For a cryptocurrency, the question is, first of all, whether it is a security, and if so, how it fits under the existing framework of laws, and how do 20th century laws optimized for one set of infrastructure apply to a decentralized network? There’s often not a lot of laws or guidances that are on point, and even if there are, they are highly fact-specific and will need to be tailored to the needs of the client. Our goal as partners of our clients is to help them extrapolate and find a meaningful path forwards that allows them to achieve their business objectives whilst minimizing the risks.
One worry is that certain individuals or entities who control massive amounts of crypto trading volume would subject people on the bottom to the whims of those on the top– something viewed as unfair to a lot of people. One, how does that compare to the major quant funds in the hedge fund industry, let’s say, and two, will that change?
Yes there are some larger players whose actions can create market movements for certain tokens or the industry as a whole. And it’s true that cryptocurrency markets often shows signs of an immature market. I think it’s going to take some time for the market to develop and mature, not unlike how the Internet boomed and busted in the late 90s and early 2000s. There are manipulators and speculators, but I think the goal for projects is to dig deep and really build something that can revolutionize the way value is created, stored, and transferred in a decentralized manner. We’re already getting there in 2019, with several projects overcoming previous bottlenecks associated with Bitcoin and Ethereum to achieve scalability and throughput that rival Visa and MasterCard. I do believe in the potential of blockchain to effect major changes to the world, especially in developing countries where there’s a dearth of financial services. It’ll take time, but I think it’ll get there.