Crowell’s Crypto Digest sat down with Jorge Pesok, Chief Legal Officer at The HBAR Foundation and former Crowell & Moring attorney.
What is your role at HBAR?
I am the Chief Legal Officer.
How did you come into your current role? How did you get interested in the digital assets space to begin with?
I first got into the industry almost six years ago as an investor. A friend pushed me into it; and I tripled my money within the first month. I was instantly hooked. Prior to me going down the “crypto rabbit hole,” I practiced white collar securities litigation and enforcement defense. It did not take long for me to spot the similarities between the issues that I was already focusing on and those I anticipated would become relevant in the burgeoning crypto industry. As a way to move my practice into the industry, I started writing and publishing articles related to legal issues that I thought the industry should focus on. I got lucky. When regulators started becoming active in the space, my articles became relevant. That is when I started generating clients.
I continued to practice in this space at Crowell and later went in-house at a development shop working on a hybrid-decentralized exchange, Tacen, Inc. However, when the HBAR Foundation was created, they reached out to me because they had a Chief Legal Officer role that they wanted me to fill. Because I had previously worked with Hedera Hashgraph as outside counsel, I had a substantial understanding of their technology and structure which made it an easy decision. So yes, I’ve been in this role from the beginning. As Chief Legal Officer I manage all of the legal work for the Foundation.
Tell us about the HBAR foundation, what is their mission and what is their overall contribution to the crypto ecosystem?
Hedera Hashgraph is layer one platform. It’s carbon negative, extremely fast, Asynchronous Byzantine Fault Tolerant—it’s the future.[1] Our role at the Foundation is to incentivize development and adoption of the Hedera Network.
What current projects are you excited about or have been the main focus of your time and energy?
It’s tough to pinpoint one or two projects that I’m excited about. Since I’ve been at the Foundation, I’ve worked on over 150 grants, meaning that I am aware of at least 150 projects being developed on the platform. One area that I am particularly passionate about—and I’m happy to be a part of an organization that is also passionate about this—is sustainability. We’ve allocated a significant amount of money to promote development in the sustainability space. What we are essentially creating is a marketplace for carbon credits and carbon offsets that are trackable, traceable and auditable. One of the current issues with carbon credits and claiming you’re “carbon negative” or that you’re offsetting your emissions by purchasing these carbon credits, is that the carbon credits themselves are not very auditable. There are a lot of issues with the industry and we’re trying to correct it from the ground up using the Hedera Hashgraph. If successful, we will have created an entire marketplace for the trading, buying, and selling, of carbon credits which I think will lead to a much greener future.
It’s a daunting undertaking, and we’re working with a lot of entities because this exchange is being built from the ground up. We work with grantees that develop the technology, marketplace, and trading platform, on how these tokens are created, and how they’re audited. And at the same time, we’re also working with potential users, participants of the exchange, to understand what they need, what they want to see, and where the pain points are. These discussions are happening on a global scale. We’ll be participating at COP27, if you’re not familiar with that, I believe it was COP22 or COP23 that led to Paris climate accord. This conference continues to push the “green” agenda and how to combat climate change; and, we now have a seat at the table, along with an international body thinking through these issues and how to push forward.
Based upon what you’ve done thus far, the challenges that you’ve faced, and considering your company’s objectives, were there any lessons learned?
I think there’s always room for improvement, especially in this fast-moving industry. When I started at the Foundation, there was a giant backlog of legal work to get through; and, I was a team of one at the time. I had to triage the work and address the most pressing ones first even if it meant that other tasks had to wait.
Are there interesting projects or grantees that stick out in your mind? Something that might be a game changer?
Yes, I just mentioned sustainability, but we have different funds focused on different verticals. I don’t know if you’ve seen recently, but LG has announced that now certain LG TVs are going to come with an integrated NFT marketplace where you can purchase an NFT and display it on your TV. And that’s all built on Hedera. That’s really exciting. There’re tons to be excited about. I’m very bullish for 2023 and on because right now everybody’s building. In 2023 we’ll see a lot of the development that is happening now come to market, and I’m very excited about it.
What specific legal issues have you been grappling with?
There are many, the crypto industry is filled with legal uncertainty. And there are a lot of potential regulations/regulators to think about on a daily basis. You can take your pick from the cornucopia of acronyms, SEC, CFTC, DOJ, FinCEN, IRS, and so on. However, I think it is all interesting. That’s why I love the space. It keeps me on my toes and makes me stay on top of the recent developments.
Is there any specific area that piques your interest whether NFTs, DeFi, or other platforms? Or is there some other particular trend that you are interest in?
So, I’ve been in the industry for a while. What I get excited about are use-cases coming to market. When blockchain technology or crypto came about, there were some basic use cases like remittance—for example, it takes a lot of money to send funds internationally because you have to go through an intermediary. It’s a complex process but I believe Distributed Ledger Technology can fix that. It’s one of those core use-cases that maybe does not get as much attention as it should. I’m excited about seeing some of these core issues being tackled. I also think that there’s a lot of excitement with regard to the metaverse, a digital world. I think there’s going to be a lot done with that. However, I think a lot of good can happen right now just by tackling the basics. For example, why do I still have to pay a thousand dollars for a title search when I purchase or sell a property? If it is verified on the blockchain, super easy.
How do you or would you use outside legal counsel? How can outside legal counsel help you grow and achieve your specific goals?
I rely heavily on outside counsel. We have tons of legal issues for a legal team of now two. There is no way we could cover it all without relying on excellent outside counsel to support in the drafting of grants, to support in the structuring of a tax perspective, to keeping us apprised of all the latest and greatest in the regulatory space, and so on. I view outside counsel as part of my team. It expands my team from beyond two to however big the law firm is, or law firms because I use multiple.
Do you have any predictions for the digital assets space?
My prediction, at least in the short term, is that the industry will continue to face a bear market but will come out of it much more mature and garner more retail and institutional adoption. I also predict turbulence. But any time you’re creating disruptive technology or disruptive products, you’re going to have some turbulence.
[1] Asynchronous Byzantine Fault Tolerance (ABFT) is a property of Byzantine fault tolerant consensus algorithms, which allow for honest nodes of a network to guarantee to agree on the timing and order of a set of transactions fairly and securely.