Blockchain technology has taken the world by storm, offering innovations across industries. However, regulatory uncertainty in many countries threatens to dampen continued growth. For entrepreneurs building blockchain startups, understanding the regulatory landscape is essential to finding the most favorable conditions. Andrea Perlak, an accounting firm owner specializing in blockchain, shares her insights on thriving despite murky regulations.
Choose Countries Wisely for Business Structure
Andrea highlighted the benefits of setting up entities in multiple countries, especially when aiming for a global customer base. She stated, “Prior to the most recent election, the standard protocol was to set up dual companies in more than one country. Most organizations had an entity in Delaware, plus an entity in BVI, Dubai, or some other non-hostile location. They search for regulatory certainty.”
Given the SEC’s aggressive targeting in the U.S., many companies have avoided a headquarters in the U.S. until the regulatory environment has been both established and is no longer hostile. As an example, the U.K. offers some advantages thanks to harmonized rules with the E.U. pre-Brexit but high tax rates make it unattractive. Other countries like Singapore and Switzerland offer attractive regulatory frameworks for blockchain entrepreneurs.
Expected Changes Post-Election
After the U.S. elections were held this past week, the regulatory environment is expected to radically change. “A crypto-friendly president and more than 250 crypto-friendly legislators will take office imminently. We expect inappropriate SEC enforcement to cease, hopefully sooner rather than later, and crypto legislation to start to pass over the next 1-4 years.
Perlak believes there will be immediate changes. “While the President does not have the authority to fire the SEC Chairman, an interim chairperson will most like be put forward. This person would likely stop issuing new Wells notices and existing notices may be withdrawn. Also, existing lawsuits may be settled and Operation Choke Point 2.0 should cease.”
“Other changes,” Perlak continues, “might include the repeal of SAB121, the OCC outlawing discrimination against lawful companies trying to open bank accounts being denied and the approval of the staked ETH ETF. The legislative clarity will come, but this will take much longer.”
Remain Flexible and Mobile
When considering your own residence as a founder, dual citizenship can provide an advantage. Andrea shared she is considering dual citizenship herself despite being from the U.S. She also emphasized blockchain conferences like Consensus, Token 2049 in Singapore or Dubai, or Paris Blockchain Week, which offer opportunities to network and monitor regulatory developments. Following major events can identify favorable emerging locations.
Mobility allows entrepreneurs to shift their lives and businesses quickly. Andrea cited examples of founders who fled the U.S. for Dubai or Portugal to escape regulation. Some just wanted to take advantage of the remote working environment. While extreme, being prepared to move yourself or your company on short notice is wise, given regulatory uncertainties.
Work With Governments to Shape Policy
Rather than avoiding government completely, Andrea advocated for collaborating with regulators to shape policy. She shared, “With a change in U.S. regulations, the U.S. could once again become a leader for new and evolving technology. Most U.S. citizens want to stay in the States. We hope our government will allow us to continue to innovate in our home country. “
Build Ethically From the Ground Up
Overzealous regulation often arises from isolated bad actors. “In any new and emerging industry, there will be cases of fraud and corruption. We want these criminals caught, prosecuted, and jailed,” Andrea argued. “If we can isolate the bad guys, it will allow the good guys, the people working to better the world through this new tech, to thrive. Industry working with the government directly can do that.”
Andrea noted that regulators often focus on incidents of corruption instead of also working with ethical companies that are redefining how the world will look in a few years. She said, “We have made specific recommendations on how to curtail consumer fraud which have not been implemented. For industry, that’s painful. We want to stamp out corruption, but we can’t do that alone. We need government participation in creating consumer protection. “
Andrea gave some pointed advise for blockchain organizations just starting out. “Avoid regulatory backlash by making ethics core to your company culture. Vet partners carefully and build transparency into your products to showcase integrity. This distinguishes you from dishonest players, which is important not only if regulations tighten but to your customers, your investors, your employees and your business partners. Ethics should be every company’s highest priority.”
To learn more about Andrea Perlak, you can check out her LinkedIn profile.
