SDX Fintech Conversation Series – interview with Nathan Kaiser

Prior to becoming General Counsel for SDX, Nathan Kaiser has had a long and varied career as a lawyer, across a variety of jurisdictions. He took an early interest in distributed ledger technology and digital assets, and his journey has given him an eyewitness position in many of the key developments in this area.

Hi Nathan! Let’s start at the beginning. How did you become interested in digital assets?

I am fortunate to have had a varied and international career, which is substantially useful when it comes to the emerging digital asset sector. I was born in Switzerland and qualified as a lawyer here, and then went to Asia, where I spent nearly 20 years working across the region.

I was always a bit of a geek lawyer – or lawyer geek! In 2011, I read an article about Bitcoin, and it was just such a fascinating topic. And looking at it from a lawyer’s perspective, I was thinking wow, this is something new and different that I haven’t seen before. How does decentralised currency work? What are the legal implications of using it?

After leaving Asia, I ended up in Boston in 2017, just as the ICO boom was getting underway. Many of the interesting initiatives in this space, such as Poloniex and Circle, were happening not in Silicon Valley, but in the Boston area, with projects backed by institutions such as MIT and Harvard. At this time, I decided that I was going to focus my legal practice entirely on digital assets.

In 2020, SDX was looking for someone with experience with Swiss law, and a strong background in digital assets and financial markets, and an international perspective as well. Financial market infrastructure was new to me, but everything can be learned and it’s the final piece of the puzzle when it comes to digital assets.

As a lawyer, what do you find most interesting about digital assets?

The emergence of digital assets poses some really fundamental questions for regulators and governments. What is Bitcoin? Is it a currency or is it an asset? Does it matter? Then ICOs came along, and the next question was, what are all these coins, or tokens, and how do we classify them? That led to this now classic designation, now widely adopted by many regulators, of payment tokens, utility tokens and security / asset tokens. And how do we identify these? It doesn’t help that different jurisdictions have different tests for these, either – like the Howey Test for determining whether or not something is a security, in the US.

It’s often said that digital asset markets are global by nature, and that’s made possible by the technology on which they are built, and the smart contracts that govern them and can enable compliance with multiple jurisdictional requirements. However, in practice, there remain many challenges around cross-border regulation and the ability to issue assets in one jurisdiction that are sold to investors in many others. Is the dream of global markets realistic?

When talking about digital assets, it’s really important to draw a distinction between securities and non-securities. When it comes to non-securities, then yes, it’s true that there are not many obstacles to attaining global markets, although the body of regulation is growing in this area, and it could change. Securities, on the other hand, are highly regulated financial instruments, and in the regulatory environment that we have today, there is no such thing as an international asset. Now, can we harmonise securities regimes in the future, and is there actually a global appetite to do that? That’s a very big question and one which hasn’t been solved today, even with respect to equivalence decisions between friendly jurisdictions such as Switzerland and the UK. A global regime, if it ever becomes possible, would take a very long time to develop. Technology could arguably be helpful in disrupting the current regulatory paradigms, especially when it comes to concepts such as investor protection, but it remains uncertain.

You’ve had an incredibly varied background. How does that help in your current endeavours, in setting up a digital asset market in Switzerland?

What we’re doing at SDX is very much at the bleeding edge of what’s happening in financial markets, and in capital market infrastructure. And we’re also at the cutting edge technologically – we’re not only building infrastructure that has never been built before, but we’re using a new technology stack in a novel way to do that. And finally, from a legal and regulatory perspective, it’s all novel as well.

Being a General Counsel to an organisation that’s operating in such unknown territory, my background – having seen and worked within sometimes drastically different legal systems and jurisdictions – is extremely useful. The same type of asset might be categorised and treated differently under Swiss law, Chinese law and US law. I think my background gives me a useful flexibility, in approaching these legal problems. Having seen the variety of ways in which different jurisdictions treat similar structures, I’m not wedded to any single approach, and I’m also able to look at legal challenges from the perspective of different legal approaches.


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