Digital Assets Law
Experienced Digital Asset Law Firm
Do you need advice regarding a project involving digital assets? Do you need digital asset IP assistance? Is your business considering expanding its operations to utilize blockchain technology to store its assets? If so, then you need the advice of an experienced team of digital asset attorneys.
Digital assets can present many opportunities to both individuals and companies. At the same time, failure to properly protect them can lead to infringements or other kinds of misuse.
At Oberheiden, P.C., our team of digital asset attorneys are experienced in the laws and regulations surrounding digital assets as well as best options for IP protection.
Do not wait to get the advice you need regarding digital asset laws, compliance obligations, and IP protection. Put Oberheiden, P.C. on your side today.
Overview of Digital Assets
What are digital assets? Digital assets are defined as anything that you own that has value and that can be stored in digital format.
It also includes property that can be created and that has value. In other words, digital assets involve anything that can be created from using computers, audio systems, phones, cameras, and voice recorders, as some examples.
While many digital assets can be stored on the blockchain—such as NFTs—other digital assets can also be stored on USB drives, internet servers, tapes, computers, and network servers.
Protecting Digital Assets
Digital assets can be protected by patents, copyright, trademark, and trade secrets. It is important for digital assets to be protected to safeguard your property—even if they are stored on blockchain technology.
Many individuals and businesses do not realize that there are protections available for their digital IP. Below is a brief list of digital assets:
- Website graphics;
- Social media accounts;
- Client lists;
- Audio files;
- Computer software; and
- Customer details
The above list is by no means exhaustive of examples of digital assets. If you need assistance regarding protecting your digital assets under the law, you need to speak to a digital asset attorney.
Digital Assets and Regulatory Agencies
There is currently no uniform or comprehensive piece of legislation regulating digital assets. While many policymakers are calling for a new regulator or comprehensive regulation, others feel that such regulation would cripple the potential growth in the area.
Currently, the approach taken by federal agencies is to use already-exiting statutes to regulate the digital asset industry in addition to issuing statements, releases, and guidances on the topic.
Federal agencies have already started issuing such guidances, including the following federal agencies and departments:
- Securities and Exchange Commission (“SEC”);
- Commodity Futures Trading Commission (“CFTC”);
- Office of the Comptroller of the Currency (“OCC”);
- Financial Crimes Enforcement Network (“FinCEN”);
- Consumer Financial Protection Bureau (“CFPB”);
- Internal Revenue Service (“IRS”);
- Federal Deposit Insurance Corporation (“FDIC”);
- Department of Justice (“DOJ”); and
- Federal Bureau of Investigation (“FBI”).
The most prominent and aggressive regulatory efforts have come from the SEC—who has time and time again made clear its intention to pursue entities and individuals who are using digital assets and allegedly engaging in fraud and misrepresentation.
In addition, the SEC is both eager and prepared to bring charges against those who involved in the offer or sale of unregistered securities—which includes “digital asset” securities.
Is the Digital Asset A “Security?”
Out of all the federal agencies who regulate and issue guidances on digital assets, the most notable is the SEC.
The most important question when it comes to assessing compliance obligations with the SEC is whether the digital asset or digital asset project meets the SEC´s definition of a “security.”
In order to answer this question, courts and the SEC use the “Howey Test.” To better explain how the Howey Test is applied to digital assets, the SEC released in 2019 its “Framework for ´Investment Contract´ Analysis of Digital Assets.”
The Howey Test basically asks whether a digital asset, coin, or token meets the definition of an “investment contract” under the federal securities laws. If it does, then it can be regulated as a “security.”
Below are the four prongs of the test followed by an explanation:
- An investment of money;
- In a common enterprise;
- With an expectation of profits;
- Derived solely from the efforts of others.
The digital asset at issue must satisfy ALL of the above prongs in order to be regulated as a “security.” If it fails even just one prong of the Howey Test, then the digital asset is not a security, and it does not need to be registered with the SEC.
The first factor—investment of money—is typically easy to satisfy. As long as the project involves purchasers or investors giving money—whether in the form of fiat currency, cryptocurrencies, or even goods and services—the first prong of the Howey Test is satisfied.
The second factor—in a common enterprise—depends on the approach taken by the court and SEC but is generally satisfied where there is a pooling of funds for the same purpose or where the profits among the investors or the profits between the investors and the promoters are correlated in some way. If so, then the second prong is satisfied.
The third factor—expectation of profits—asks what the investor or purchaser intends to receive from the token. If the purchasers/investors are purchasing the token to use it or consume it within the issuer´s platform—such as to buy goods and services or participate in some closed ecosystem of events—the project is less likely a security. If the purchasers/investors are buying the token with the expectation to hold on to it and make a profit like a traditional security, it is more likely that this prong would be satisfied.
The fourth factor—derived solely from the efforts of others—looks to who has the control or the ability to affect the profits of the project. If the third party associated with the project merely engages in ministerial or administrative tasks, it is less likely that the purchasers/investors are relying on these individuals in any way. If there is a promoter or management that exerts significant managerial efforts to develop a platform, market the project, or engage in general advertising and fundraising, the digital asset is more likely a security because the purchasers/investors are relying a lot on the efforts of these “others”—the promoter or management.
That said, the application of the Howey Test is very fact sensitive and depends on the facts and circumstances of the digital asset project, the circumstances surrounding its offering and sale, and the marketing strategies used.
An attorney experienced in applying the Howey Test to digital assets would be able to analyze the specific facts of your case. Give us a call today to discuss your digital asset project.
Need Advice Regarding Digital Asset Regulation?
Whether you are determining whether any applicable regulations apply to your digital asset project or assessing whether the actual digital asset meets the SEC´s definition of a “security,” you would benefit from the services of a digital asset attorney.
At Oberheiden, P.C., we have a dedicated team of digital asset attorneys who are experienced in how, when, and to what extent federal regulation impacts projects involving digital assets.
Do not launch a project or take a significant step with respect to your digital asset development without first securing the advice of an experienced attorney.
Call or contact us today for a free and 100% confidential consultation.