Michael Mix Shares Tips for Drafting Settlement Agreements When Payment Is in Cryptocurrency with LegalTech News

Partner Michael Mix published an article in LegalTech News entitled “Settlers of Token: How to Draft Settlement Agreements When the Payment Is in Cryptocurrency,” in which he provides a general roadmap for lawyers to follow when entering into a settlement agreement where one party makes a settlement payment denominated in cryptocurrency. Factors to evaluate before finalizing a settlement agreement include:

Make Sure the Wallet Address Is Correct – Providing the wrong wallet address for blockchain transactions is irreversible and has limited recourse. Lawyers representing the payor may include a provision that the payor has no further payment obligation should the payee’s wallet address contain an error. The settlement agreement may also provide for a “test” transaction before the payor makes the full payment.

Account for Changes in Price – The settlement agreement must account for the volatile nature of the price of cryptocurrency assets and the prolonged nature of settlement negotiations.

Be Aware That the Settlement May Not Be Confidential – Transactions on public blockchains are, naturally, public. If the settlement payment is being made from or to a known wallet address (for example, a wallet belonging to a project where numerous stakeholders know the wallet address), the parties will not have confidentiality.

Be Aware That Enforcing the Settlement Agreement May Be More Difficult Procedurally – If the paying party breaches a settlement agreement and declines to pay, there are certain procedural avenues that, given the uncertainty in the law, may be foreclosed to the payee if the settlement amount is denominated in cryptocurrency.

Read the full article in the PDF linked below.