3 Questions for Department Advisor Andrew Jacobson

Andrew Jacobson is the Head of Legal (Global) at 21.co and 21Shares and was previously an enforcement attorney at the New York State Department of Financial Services and an attorney at Seward & Kissel. You can find him on X at @AndrewJacobson_.

Matt Homer: One of the most significant developments in digital asset markets this year has been the approval in the United States of spot ETFs for Bitcoin and Ethereum. As the Head of Legal for one of the world’s first crypto-backed ETF issuers, which launched ETP products in Europe in 2018, you’ve had a front seat to this development. How has the regulatory landscape for digital asset-based ETFs evolved since your company first entered the European market? And what impact do you anticipate the introduction of these ETFs will ultimately have on the overall adoption and perception of digital assets in the mainstream financial sector?

Andrew Jacobson: The regulatory environment has completely shifted. When we first entered the market, the idea of putting code into an ETF wrapper was a completely untested concept that required a lot of regulator engagement and education. Regulators had just never dealt with issues such as custody, primary market creations and redemptions, secondary market sales, disclosures, and so on. Today, regulators have a much better understanding of crypto as an underlying for an ETF, mostly because there is a clear track record. That has made the conversation around incorporating crypto into an ETF much different than it was 6 years ago.

In terms of impact, one of the greatest impacts of crypto-backed ETFs is expanded access to crypto as an asset class. The ETF is a very efficient TradFi wrapper. Using ETFs to access various tokens will short and medium term expand the pool of potential investors who are interested in crypto as an asset class.

Matt Homer: The rise of digital assets presents a unique opportunity for new financial sector leaders to emerge among financial jurisdictions. Considering your worldwide viewpoint, how do you envision the global regulatory landscape changing over the next 5 to 10 years for digital assets? Will traditional financial hubs retain their influence, or will emerging contenders significantly alter the landscape? Additionally, what guidance do you offer to regulators navigating this shift?

Andrew Jacobson: There is absolutely a new global competition for innovation. The jurisdictions that will win are those that balance innovation with regulations that are proportionally designed to the risks presented.

If I was a traditional financial hub, I would not take for granted my prior success. Blockchain as a technology and crypto as an asset class are substantial enough to necessitate a refresh of those historical standards.

As for advice to regulators, having been one myself, the most important thing is this: take the time to understand the technology. And come with an open mind.

Matt Homer: You’ve been a regulator, represented clients before regulators, and now serve as Head of Legal for a regulated company. What advice do you have for early stage founders building blockchain related companies today?

Andrew Jacobson: Blockchain-related companies are unique in their needs, which has largely come from the regulatory gray areas that have evolved and the cross-border nature of the technology.

The number one piece of advice I give early stage founders is that they should change their mindset regarding how they work with lawyers. Give Legal the chance to prove themselves as partners to the business, and not adversaries or blockers. In this industry, I view Legal as often fundamental to product execution and success.

To that end, in order to bring Legal in early and often, you need to find the right cultural and capacity mix. The keys I would look for are: someone who understands the tech, is a problem solver, and is able to clearly distill complex issues into simple language. The most frustrating thing (for me) are lawyers who caveat every piece of advice and generate unnecessary cost/time. The business will appreciate candor and that will go a long way towards building trust (and ultimately, successful products).