Moving Beyond Bitcoin to an Endogenous Theory of Decentralized Ledger Technology Regulation: An Initial Proposal

47 Pages Posted: 20 Apr 2016

See all articles by Carla Reyes

Carla Reyes

Michigan State University College of Law; Berkman Klein Center for Internet & Society at Harvard University

Date Written: April 18, 2016

Abstract

Current regulation of decentralized ledger technology leaves industry actors in confusion, facing high risk, and confronting significant disincentives to innovate. This Article argues that an endogenous regulatory approach offers an avenue for alleviating these obstacles while still providing sufficient tools for government oversight. In particular, this Article proposes regulation that is endogenous at two levels: first, in that it is created through an iterative, cooperative process involving both regulators and industry actors, and second, that it is implemented as regulation-through-code, that is, regulation written into the code itself. In so doing, this Article also investigates whether successful implementation of such an approach could disrupt the dichotomous choice between ex ante and ex post regulation in the financial and other spheres.

This Article first examines the current regulatory landscape facing decentralized ledger technologies, including payments applications such as bitcoin. This Article then discusses ways in which these regulatory approaches have failed to keep pace with the technology and, as a result, are impeding innovation in a variety of sectors. This Article next outlines criteria for improving the regulatory landscape applicable to decentralized ledger technologies, evaluating alternative models of regulation in light of the criteria, and concluding that most such proposals continue to leave a regulatory lacunae. Drawing on theories of endogenous economic regulation, endogenous development, comparative law’s functional method and financial regulation, this Article attempts to fill the gap by proposing that decentralized technologies, including decentralized payment systems such as bitcoin, are robust enough to support a theory of endogenous, technology-assisted regulation.

Keywords: Bitcoin, Blockchain, Law and Technology, Regulation, Endogenous, Crypto-Ledger, Cryptocurrency

Suggested Citation

Reyes, Carla, Moving Beyond Bitcoin to an Endogenous Theory of Decentralized Ledger Technology Regulation: An Initial Proposal (April 18, 2016). Villanova Law Review, Vol. 61, No. 1, 2016; Stetson University College of Law Research Paper no. 2016-8. Available at SSRN: https://ssrn.com/abstract=2766705

Carla Reyes (Contact Author)

Michigan State University College of Law ( email )

318 Law College Building
East Lansing, MI 48824-1300
United States

Berkman Klein Center for Internet & Society at Harvard University ( email )

Harvard Law School
23 Everett, 2nd Floor
Cambridge, MA 02138
United States

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