The notion of decentralization has acquired a central position in contemporary debates on crypto-asset regulation, yet its legal meaning remains largely unresolved. MiCA is the first EU legislative act to attach explicit regulatory consequences to decentralization, most notably through Recital 22, which excludes from its scope services ‘provided in a fully decentralized manner without any intermediary’. This chapter examines how such decentralization could be interpreted and demonstrated when invoked as a criterion of regulatory scope. Adopting a legal-dogmatic and functional approach, it argues that the ‘proof of decentralization’ should be grounded in verifiable distributions of control, discretion and operational capacity. The chapter develops this argument across three analytically distinct layers of the cryptoasset ecosystem: node operators at the network layer, smart contract deployers at the protocol layer and front-end providers at the interface layer. It shows that each layer hosts actors capable of influencing transactional outcomes in ways that may reproduce, rather than eliminate, forms of financial intermediation and risks targeted by MiCA. The analysis illustrates why decentralization is a matter of degree rather than an absolute condition and why its evidentiary assessment must be structurally informed. The chapter concludes by outlining the implications of this approach for MiCA’s supervisory landscape and for the future treatment of decentralized systems within EU financial regulation. Keywords: decentralization, MiCA, crypto-asset services, regulatory scope, decentralized finance, DeFi, blockchain governance, node operators, protocol deployers, front-end providers, distributed ledger technology, intermediation, EU financial regulation.
Over the last few years, the advent of the DLT technology led to the spread of new business models within the financial market, which gave rise to two different applications. Initially, new distributed registers were used to create (at least apparently) ways of offering assets, such as so-called Initial Coin Offerings, and financial services in an innovative way, that is, more decentralized and without the intermediation of traditional intermediaries. More recently, these technologies, also as a result of the intervention of the regulator oriented towards the principle of technological neutrality, began to be employed to recreate a mere alternative to the traditional financial market both with reference to the supply of tokens – e.g. the supply of Securities Tokens Offering, and of services which continue to maintain centralization characteristics and still require the presence of an intermediary. Keywords: decentralized finance, distributed ledger technologies, smart contracts, disintermediation.
Abstract This chapter describes how the institutional design of finance governance matters for picking winners. In the United States, responsibility for devising and implementing consumer financial protections is fragmented—both within and across levels of government. This decentralized and fluid system of finance governance shapes the degree to which different actors can influence US consumer financial protection by raising the costs of engaging with policymakers, decreasing the visibility of regulatory actors, and allowing industry interests to engage in venue shopping for favorable treatment. The result is that industry actors can exert greater power over regulatory outcomes at the expense of wage earners or consumers. The chapter also explores how the Consumer Financial Protection Bureau reshapes the landscape of finance governance by centralizing a greater degree of policymaking authority, generating the conditions for more robust financial protection even in the absence of underlying legislative changes to the system of financial regulation.
Huei-Wen Teng, Wolfgang Karl Härdle, Joerg Osterrieder, Daniel Traian Pele · 31 authors
Digital assets (DAs) such as cryptocurrencies, tokenized securities, stablecoins, non-fungible tokens (NFTs), and central bank digital currencies, are transforming financial markets with new business models, investment opportunities, and transaction efficiencies. Underpinned by blockchain, distributed ledger technology, and smart contracts, digital innovations are reshaping the financial ecosystem. However, their rapid growth introduces substantial risks, including fraud, market manipulation, cybersecurity threats, and regulatory uncertainty. This position paper offers an interdisciplinary and empirically grounded analysis of the DA landscape. We define and classify major asset types, trace their evolution from speculative instruments to functional tools, and assess current adoption trends. Additional technological developments (e.g., decentralized finance and NFT expansion) are examined for their role in accelerating this transformation. We also analyze the global regulatory landscape, highlighting jurisdictional differences, classification challenges, and emerging governance frameworks. To address key risks, we derive mitigation strategies via quantitative analysis and case-based evidence. The risks include balancing innovation with investor protection through adaptive regulatory design, promoting cross-border regulatory harmonization to prevent arbitrage and fragmentation, and supporting experimentation through regulatory sandboxes and innovation hubs. By adopting a forward-looking, evidence-based, and collaborative regulatory approaches, stakeholders can harness the benefits of DAs while managing systemic risks and maintaining market integrity.
This manuscript presents a conceptual and ideological-social framework for a cryptocurrency token denoted as $Rupert (or $Rupert), positioned as an innovative fusion of decentralized finance (DeFi) mechanisms and political advocacy aligned with the policy agenda of British politician Rupert Lowe MP and his associated movement, Restore Britain.
Financial technology (FinTech) has emerged as a transformative force in the global financial landscape, integrating advanced digital technologies like Artificial Intelligence and distributed ledger systems into traditional services. Since the early 21st century, it has fundamentally reshaped how payments, credit, investments, and risk management are handled. At the vanguard of this revolution are blockchain and cryptocurrencies, which provide decentralized and borderless alternatives to conventional banking. This research explores the evolution of these technologies, examining how smart contracts and automated systems drive efficiency and foster global financial inclusion. However, alongside these advancements, the study highlights the emergence of significant risks, particularly in the realms of cybersecurity, consumer protection, and the complex challenges of cross-border regulatory compliance. The paper further analyzes the strategic responses of traditional financial institutions and central banks, specifically focusing on the rise of Central Bank Digital Currencies (CBDCs) as a stable counter-narrative to private digital assets. Through various global case studies, the research illustrates the diverse regional adoption patterns influenced by local economic and cultural factors. Looking toward the future, the study predicts a trend of increased interoperability, where decentralized finance (DeFi) and programmable money integrate into mainstream economic structures. Ultimately, the paper argues that while the digital transformation of money offers immense potential for efficiency, its long-term success is contingent upon robust international governance frameworks and collaborative regulatory efforts to ensure trust and stability in the evolving global market.
Kara J. Bruce, Christopher K. Odinet, Andrea Tosato
Abstract The enormous diversity in decentralized autonomous organization (DAO) ownership structures, governance models, and operational processes yields a spectrum of potential outcomes when DAOs meet bankruptcy. US bankruptcy law offers distressed businesses orderly rehabilitation or liquidation options but assumes conventional management and debtor–creditor frameworks. DAOs that are open to more traditional corporate-style operating structures may be able to access the bankruptcy system with some creativity and compromise. Conversely, DAOs that implement highly decentralized and automated governance models may find themselves unable to access or navigate the bankruptcy system voluntarily. This is due to bankruptcy’s heavily centralized and court-supervised process, which stands in tension with core DAO ideals. For such DAOs, bankruptcy might not be avoidable if their stakeholders commence involuntary proceedings. As decentralized models proliferate, understanding bankruptcy law’s application to DAOs is crucial for developing robust legal frameworks and policy responses to govern the rapidly evolving digital asset economy.
Abstract Decentralized autonomous organizations (DAOs) are communities of participants usually in permissionless blockchains or applications hosted on permissionless blockchains. Although they purport to be alegal organizations that do not conform to the legal and regulatory norms for legal organizations such as companies, these communities are experimenting with developing governance frameworks and norms that are innovative and not derived from traditional organizational and legal principles. However, their governance endeavors are often in response to problems and crises. This incremental development is also likely to be contrary to regulatory expectations, as financial regulation is increasingly extended to crypto finance. In the EU for example, where the Markets in Crypto-Assets Regulation has come into force for a range of crypto-asset activities that have financial implications, it remains uncertain if decentralized finance (DeFi) is caught within its scope. This chapter argues that regulatory provisions, whether or not they apply to DeFi for certain, can shed light on the expectations for governance development that DAOs that govern DeFi applications need to meet.
Mohammed Dawood Dawood, Syed Saif Ullah Hussaini, Mohd Zain ul Abeddin, Bishal Hizli Hizli
Cryptocurrencies have emerged as a disruptive force in global finance, challenging traditional banking systems through decentralization, transparency, and borderless transactions. Initially perceived as speculative assets, cryptocurrencies have increasingly gained institutional recognition, raising important questions regarding their financial role, regulatory governance, and long-term sustainability. This study adopts a qualitative-dominant mixed-method approach based on secondary data analysis. Data were collected from peer-reviewed journals, institutional reports, regulatory documents, and reputable market analyses published over the last decade. Thematic and descriptive analyses were employed to examine trends in cryptocurrency adoption, regulatory responses, technological innovation, and sustainability efforts. The findings indicate that cryptocurrencies have evolved into recognized financial assets, with growing institutional participation and expanding applications in cross-border payments and decentralized finance. However, significant challenges persist, including regulatory fragmentation, cybersecurity risks, market volatility, and environmental concerns related to energy-intensive mining. Regulatory milestones such as the European Union’s MiCA framework demonstrate progress toward legal harmonization, while technological innovations such as Layer 2 solutions, interoperability protocols, and Proof-of-Stake consensus mechanisms support scalability and sustainability. The discussion links these findings to Technology Acceptance and Innovation Diffusion theories, showing that institutional adoption is driven by perceived usefulness, regulatory legitimacy, and technological compatibility. Market Regulation and Institutional theories further explain divergent national regulatory approaches and increasing global coordination efforts. Sustainability considerations emerge as a critical determinant of long-term viability, shaping both technological development and policy intervention. Cryptocurrencies represent a transformative element of the global financial system, offering opportunities for efficiency, inclusion, and innovation.
David López Jiménez, Eduardo Carlos Dittmar, Jenny Patricia Vargas Portillo
Stablecoins have emerged as a transformative yet controversial development in digital finance, promising stability while posing novel regulatory and systemic risks. Their growing role in payments, decentralized finance, and remittances raises questions about monetary sovereignty, consumer protection, and financial integrity. This chapter examines the governance of stablecoins through comparative and interdisciplinary perspectives, focusing on the evolving relationship between self-regulation, soft law, and hard law. Special attention is given to the Commonwealth Model Law on Stablecoins (2025), which provides a harmonised legislative framework designed to balance innovation with financial stability and inclusion. By comparing this model law with international approaches such as the EU's Markets in Crypto-Assets Regulation (MiCA) and voluntary standards from global standard-setting bodies, the chapter highlights how model laws can bridge the gap between flexibility and enforceability in the governance of digital money.
Over the past two years, Hong Kong hasn’t just talked about Web3 transformation — it has executed it. A sequenced rollout of real policies. A clear regulatory masterplan. A vision anchored in innovation and investor protection. Today, Hong Kong is emerging as one of the world’s most credible and forward-looking regulated digital asset hubs. In my latest article, I break down how the SFC’s A-S-P-I-Re Roadmap, new licensing frameworks, custody standards, staking regulations, and tokenisation initiatives are reshaping the entire virtual asset landscape across 2024–2025. This is not just regulatory evolution — it’s regulatory engineering. 🔍 Inside the article: • The real meaning of “same activity, same risk, same regulation” • How reforms are raising the bar for VATPs and market integrity • Why Hong Kong’s digital asset roadmap is now a global reference point • The rise of institutional-grade custody + cybersecurity requirements • The strategic push behind Project Ensemble and tokenised finance • How collaboration between the SFC, HKMA, and industry is driving safe innovation Hong Kong’s approach shows that a digital asset market can be innovative, resilient, and globally aligned — all at once.
Anthony Chidi Nzomiwu, Scholastica Chidkodilri Uzondu
Decentralized Finance (DeFi) signifies not just a technological advancement but a profound transformation in financial governance, shifting power from traditional hierarchical intermediaries to autonomous, self-executing code. This article, grounded in institutional economics and legal theory, posits that DeFi introduces a novel governance framework in which trust is embedded in deterministic protocols rather than vested in individuals or institutions. By examining the four fundamental DeFi primitives—decentralized exchanges, lending platforms, programmable derivatives, and automated financial operations—we illustrate how programmable rules disintermediate conventional fiduciary responsibilities and enforcement mechanisms. A detailed case study of Compound’s governance evolution highlights both the potential for increased efficiency and the rise of new accountability challenges. We identify a critical tension: while automated rule enforcement minimizes transaction costs and mitigates principal-agent issues, it concurrently diminishes contestability, adaptability, and avenues for redress—elements vital for robust financial systems. The article concludes by proposing a hybrid governance framework that retains the efficiency of code while reintroducing deliberative safeguards, providing pathways for regulators, protocol developers, and scholars to navigate the re-integration of finance in a post-intermediary landscape.
Tokenized lending is a major application of decentralized finance (DeFi) that has evolved as an innovative platform for credit intermediation through blockchain-based smart contracts. Early token lending platforms such as MakerDAO (now Sky), Compound, and Aave were permissionless, built for decentralized retail lending. More recently, however, there has been an increase in the interest of tokenized lending by institutional investors and regulated entities looking for compliant, risk-managed solutions. This chapter explores the institutionalization of tokenized lending, including an overview and conceptual analysis of the growth, technology, and potential role in the financial system. Additionally, the chapter highlights the fragmented landscape of regulation on tokenized lending and more nuanced strategies taken by the United States, Canada, the European Union, and Singapore. Although this mixed picture provides the avenue for innovation, it also evinces risks of fragmentation and regulatory arbitrage. The chapter contextualizes the development, potential, and risks of the institutionalization of tokenized lending relative to the global and selected credit markets.
Decentralized Finance (DeFi) has emerged as a transformative force in the financial sector, leveraging blockchain technology to enable permissionless and automated financial services. A key component of DeFi's expansion is the rise of tokenized assets, which represent digital ownership of real-world and virtual assets. This chapter explores the various forms of tokenization, including cryptocurrencies, asset-backed tokens, and Central Bank Digital Currencies (CBDCs), and their integration into the DeFi ecosystem. It examines how tokenized assets enhance liquidity, facilitate financial inclusion, and create new investment opportunities. Additionally, the chapter discusses the interplay between decentralized and centralized financial models, regulatory challenges, and the risks associated with smart contracts, price volatility, and governance. By analyzing case studies and emerging trends, the chapter provides insights into the future of the tokenized economy and its potential to bridge traditional finance with decentralized innovations.
This paper examines how banking compliance frameworks, particularly Italy’s Legislative Decree 231/2001 (MOG 231), are evolving in response to emerging technologies such as artificial intelligence (AI), blockchain, and smart contracts. Originally designed to regulate corporate criminal liability, MOG 231 must now address decentralised financial services, such as crypto wallets and tokenised payments, progressively integrated into traditional banking. This convergence of conventional banking and decentralised finance (DeFi) generates both opportunities and risks, demanding a reassessment of compliance, governance, and value creation models. While cryptocurrencies enable financial inclusion, microfinance, and operational efficiency, they also introduce vulnerabilities related to fraud, anonymity, and misuse by organised crime. These developments challenge legacy compliance systems to manage increasing technological and regulatory complexity. The study employs a conceptual methodology grounded in academic and regulatory literature, drawing on governance, financial regulation, and technology management. To capture the dynamic complexity of compliance adaptation, a system dynamics (SD) approach is used, with causal loop diagrams mapping interactions between compliance structures, technology adoption, performance, and risk exposure. Preliminary findings indicate that integrating AI and blockchain can enhance compliance capacity, regulatory responsiveness, and organisational resilience. However, persistent challenges, such as algorithmic accountability, smart contract enforceability, and integrating decentralised operations into centralised frameworks, suggest MOG 231 requires significant adaptation to effectively govern digitally enabled financial systems.
Central banks face rising cross-border supervision costs as banking groups operate across fragmented regulatory regimes, making traditional oversight mechanisms ineffective and increasing crisis risk. While a distributed ledger technology (DLT) settlement hub offers unified visibility, it introduces a novel Security Paradox: complex regulatory detection methods increase monitoring costs and collateral requirements, thereby risking the exit of compliant banks and systemic instability. This working paper presents a formal architecture for a multi-currency, permissioned regional DLT settlement hub-designed to address the complexities and inefficiencies of cross-border supervision and settlement-that maintains monetary sovereignty across jurisdictions. By adopting a "slashing reserve" model, in which coordinating central banks jointly set monitoring, penalties, transparency, and collateral, regional hub security is decoupled from collateral through efficient detection and a Byzantine-fault-tolerant quorum structure. This design enables capital-efficient, Basel-consistent settlement, ensuring stability and sovereignty, even during crises, and provides a blueprint for modern cross-border financial infrastructure.
Financial markets have undergone a profound technological transformation over the past two decades. Advances in algorithmic trading, high-frequency data processing, electronic trading platforms, and quantitative investment strategies have converted trading venues into complex digital infrastructures where automated agents interact at millisecond speeds. Rather than treating financial markets solely as a setting for efficiency-enhancing technolo- gical change, this paper frames algorithmic markets as a leading case of a broader governance challenge: how public institutions adapt regulatory frameworks to oversee highly automated digital infrastructures operating in real time. The paper synthesizes research on liquidity, volatility, algorithmic and high-frequency trading, passive investing, retail participation, non-bank financial intermediation, market fragmentation, dark pools, and systematic intern- alisers, with particular attention to European and UK markets. Building on this literature, it develops a conceptual framework linking market infrastructure innovation, institutional lag, and regulatory innovation. We argue that the increasing speed, automation, and fragment- ation of financial markets require a shift from ex-post volatility-based interventions toward liquidity-aware and data-intensive supervision centered on market reliability. Finally, the paper examines how decentralized finance (DeFi), private markets, and AI-enabled regulat- ory technology (RegTech) are reshaping liquidity provision, market oversight, and financial stability, while identifying broader challenges for governance under rapidly evolving digital market infrastructures.
This written testimony was submitted to the Financial Services Regulation Committee of the United Kingdom House of Lords, in response to that Committee’s “Call for evidence” on the “Growth and proposed regulation of stablecoins in the UK,” https://committees.parliament.uk/call-for-evidence/3845/. This testimony provides an overview of the global stablecoin market and the current leading uses of stablecoins. The testimony also describes the unacceptable dangers that uninsured nonbank stablecoins pose to financial stability, economic welfare, consumer protection, monetary policy, regulatory compliance, and law enforcement. The testimony presents the following policy recommendations: (1) Stablecoins should be regulated in the same way as bank deposits. Only regulated banks should be allowed to issue or distribute stablecoins. Stablecoins should be required to satisfy the same prudential standards and provide the same consumer safeguards – including deposit insurance – as bank deposits. 2) Stablecoins should be issued and recorded exclusively on permissioned distributed ledgers that are controlled and administered by one or more designated banks. The designated banks should have full responsibility and accountability for ensuring that their stablecoins and their distributed ledgers fulfill all legal and contractual obligations. 3) To ensure compliance with AML/BSA/KYC requirements, stablecoin holders should be prohibited from holding their stablecoins in “unhosted” private digital wallets. (4) Stablecoin reserves should be invested solely in central bank reserves or in government securities with a weighted average maturity of 20 days or less. (5) If – contrary to the foregoing recommendations – nonbanks are allowed to issue stablecoins, those issuers, crypto exchanges, other crypto trading platforms, and their affiliates and business partners should be prohibited from paying interest, rewards, or any other financial inducements to stablecoin holders for owning stablecoins or keeping their stablecoins at designated locations. The author also presented oral testimony (via Zoom) to the Committee, available at https://committees.parliament.uk/event/26299/formal-meeting-oral-evidence-session/.
This paper proposes the Sovereign Asset Tokenization and Federated Cross-Border Securities Settlement Model, a regulated financial architecture designed to modernize global equity ownership, cross-border settlement, corporate-action administration, tax withholding, and sanctions compliance through tokenized securities infrastructure. Unlike stateless cryptocurrencies or synthetic tokenized stock products, this model preserves monetary sovereignty by anchoring digital equity tokens to legally recognized corporate shares, domestic securities law, sovereign currency rails, regulated custody structures, and verified investor identity credentials. The model replaces the concept of a single centralized global clearing authority with a Federated Sovereign Securities Interoperability Network. Each nation retains legal control over its own securities markets, currency systems, tax rules, sanctions policy, and investor-protection standards, while interoperable technical protocols allow verified investors to access foreign securities under treaty-compliant conditions. The architecture integrates tokenized equities, central securities depositories, central bank digital currencies or regulated settlement tokens, decentralized identifiers, zero-knowledge compliance proofs, smart-contract-based corporate actions, dynamic tax treaty oracles, circuit breakers, dispute-resolution logic, and sovereign override controls. The paper argues that the future of tokenized capital markets is not the elimination of stateregulated finance, but the programmable modernization of it. The proposed framework seeks to combine the speed, transparency, divisibility, and automation of distributed ledger technology with the legal enforceability, investor protections, monetary authority, and national-security controls of traditional financial markets.
Stablecoins digital assets designed to maintain a stable value by referencing a fiat currency or other reserve asset have moved from a niche instrument for crypto-exchange settlement to a systemically relevant layer of global financial infrastructure. As of mid-2026, the total stablecoin market capitalization stands at roughly $310–320 billion, concentrated overwhelmingly in two U.S. dollar-referenced tokens, Tether's USDT and Circle's USDC, which together account for approximately 80–83% of supply. This thesis examines the stablecoin sector across five interlocking dimensions: (1) the market structure and competitive dynamics among major issuers, including USDT, USDC, PayPal's PYUSD, First Digital's FDUSD, Ripple's RLUSD, and a fast-growing cohort of emerging entrants such as USD1, Ethena's USDe, and Sky's USDS; (2) the regulatory architecture now taking shape in the United States (the GENIUS Act and the pending CLARITY Act), the European Union (MiCA), Singapore (the MAS stablecoin framework), and other jurisdictions; (3) the parallel and often competing rise of central bank digital currencies (CBDCs); (4) the tokenization of real-world assets (RWAs), which is extending stablecoin-adjacent infrastructure into Treasuries, credit, and money-market funds; and (5) the practical adoption of stablecoins in cross-border payments, decentralized finance (DeFi), and institutional treasury and settlement operations. The analysis draws on issuer attestations, on-chain analytics platforms (DefiLlama, rwa.xyz, Artemis), central bank and BIS publications, and law-firm and industry research to provide a fact-based, source-grounded account of where the stablecoin sector stands and where the principal points of tension—reserve transparency, monetary sovereignty, and interoperability are likely to shape its next phase of growth.
The choice-of-law solutions governing the proprietary aspects of bearer financial securities were long marked by great simplicity. When securities were embodied in a paper instrument, applying the law of the place where that paper instrument was located gave the conflict of laws a foreseeable and internationally uniform solution. The dematerialisation of these securities and the advent of distributed ledger technology have rendered that solution obsolete, while the new connecting factors based on the location of the account-keeping intermediary afford no real satisfaction. This article takes stock of these connecting factors and proposes another : that of the securities delivery system operated by the central securities depository.