Regulation of the Crypto-Economy: Managing Risks, Challenges, and Regulatory Uncertainty
Journal of Risk and Financial Management, Forthcoming
33 Pages Posted: 5 Aug 2018 Last revised: 12 Jul 2019
Date Written: January 1, 2019
Distributed ledger technology, also known as Blockchain, is gaining traction globally. Blockchain offers a secure validation mechanism and decentralized mass collaboration. Cryptocurrencies make use of this technology as a new asset class for investors worldwide. Cryptocurrencies are being used by companies to raise capital via Initial Coin Offerings (ICOs). The substantial inflow of unregulated capital into a transactional and transnational industry has aroused interest from not just investors, but also national securities and monetary regulatory agencies. In this paper, we review the Security and Exchange Commission’s initial statements and subsequent pronouncements on ICO’s to illustrate the potential problems with applying a dated legal framework to an ever-evolving ecosystem. Recognizing the inability of enforcement within existing regulatory frameworks, we discuss the importance of regulation of the crypto asset class and internal collaboration between government agencies and developers in the establishment of an ecosystem which integrates investor protection and investment.
Keywords: Fintech, Cryptocurrency, ICO, Legal, Securities Law, Cybersecurity, Taxation, Capital Markets, Economics, Securitization, Regulation, Legal, Frameworks, Crowdfunding, Virtual Currency, Bitcoin, Ether, Secondary Markets, Capital Markets, Initial Coin Offerings, Initial Public Offerings, Blockchain
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