Blockchain Papers

wonguk lee, Euiseok Kim

No abstract is available for this record.

Husan S. UMAROV

The prospects for the widespread introduction of decentralized finance into global financial markets are analyzed. The aim of the study is to consider the opportunities provided to users and investors by the DeFi ecosystem (decentralized finance), and the potential risks of implementing services, applications, protocols based on decentralized financial instruments in both foreign and Russian financial markets. With the help of the theoretical (analysis, synthesis, abstraction) and empirical (comparison, observation) research methods, opinions of leading domestic and foreign experts on the innovative capabilities of DeFi are presented. Based on up-to-date statistical data from the innovative dApps – DappRadar platform, analytical reviews, conference reports, public speeches and expert interviews, initiatives of the main financial regulator of the United States – The United States Securities and Exchange Commission (The United States Securities and Exchange Commission), the Commodity Futures Trading Commission (CFTC), and the Russian Financial Action Task Force (FATF) group for the development of financial measures to combat money laundering, the author emphasizes the need to implement a regulatory framework to settle the spread of decentralized finance. The resulting conclusions are the inclusion of digital assets in the “anti-money laundering” legislation of Russia, as well as a number of other measures aimed at bringing regulatory clarity to the sphere of DeFi initiatives. The main conclusion of the study highlights the difficulties in the large-scale spread of decentralized finance, which is justified by the direct impact of potential risks of using it, distributed by the author to a number of system groups. As a promising predictive model for the development of DeFi, the author proposes a safe harbor model for tokens developed by Hester Peirce. The relevance and scientific novelty of the research are justified by the possibility of using the achieved results (including in the field of analyzing initiatives recommended by large regulatory institutions in relation to uncontrolled financial markets) to introduce a transparent, open, reliable ecosystem of decentralized finance.

Manish Kumar, Apoorva Thakur

No abstract is available for this record.

R. I. Samsin

The article examines the emergence and transformation of the fundamental concepts in the field of crypto-finance. It is observed that the advent of bitcoin and its rapid proliferation gave rise to analogous crypto-products, whose crypto-tokens exhibited a digital representation of value and turnover, which were designated as “cryptocurrencies.” The evolution of the crypto industry has led to the emergence of novel crypto products with technical and financial characteristics distinct from those of cryptocurrencies (investment tokens, utility tokens, non-fungible tokens, stablecoins, etc.). These products have been positioned by their developers as cryptocurrencies. In 2018, the Financial Action Task Force (FATF) proposed the use of “virtual assets” as an alternative to “cryptocurrency.” Over time, the concept evolved to encompass all crypto-products whose cryptotokens exhibited both a digital expression of value and negotiability. In 2023, the EU adopted Regulation (EU) 2023/1114 of the European Parliament and of the Council on cryptoasset markets and amending Regulations (EU) No. 1093/2010 and (EU) No. 1095/2010 and Directives 2013/36/EC and (EU) 2019/1937 (MiCA Regulation) at supranational level, which was designed to harmonize the regulation of the cryptocurrency asset sector across the EU. This Regulation employs the term “cryptoassets” as a general definition for various crypto products whose crypto tokens possess a digital value and turnover (investment tokens, utility tokens, non-fungible tokens, stablecoins, etc.). It is posited that there has been a transformation of concepts, from cryptocurrencies to virtual assets, and then to cryptoassets. At this point in time, cryptocurrencies may be defined as a type of virtual asset. It could be argued that the concepts of “virtual assets” and “cryptoassets” are in fact identical.

Alexander Mironov

Countering and combating manifestations of terrorism and extremism is an urgent and priority task for law enforcement agencies. These provisions underlie the national security of the state, and the fight against manifestations of this kind of crime rightfully deserves the most serious attention. The article presents the prerequisites for the use of cryptocurrencies for criminal purposes, based on the features of its functioning and use. The role of cryptocurrencies in the financing of terrorist and extremist activities in the current international financial and economic environment is indicated. The main problems that law enforcement agencies have to face in identifying and suppressing criminal activity, the financing of which can be organized with the help of cryptocurrencies, are reflected. Substantiated points of view are presented regarding the danger of the spread of cryptocurrencies in crimes of this direction, not only in relation to the Russian Federation, but also to the world community as a whole. The author presents statistical data of the indicated areas of crime and analyzes it. The results of a study by third-party organizations specializing in research in the field of cryptocurrencies are also presented and summarized. Examples of the use of cryptocurrencies to finance terrorist and extremist activities are noted. The ways of solving the presented problems are proposed, taking into account the mechanisms already proposed by scientists for preventing crimes using cryptocurrencies. In particular, the main emphasis is placed on the need to modernize the existing mechanisms of financial control and the reasonable involvement of representatives of large IT companies in this activity, since the main flow of information capable of exposing criminal activity is accumulated by them.

Анастасія Толкачова, Andrian Piskozub

This research article discusses current and promising issues in the field of cybersecurity, in particular, the analysis of potential threats and risks of Web3 development. Web3 is a new generation of the Internet based on blockchain technology, decentralization, cryptography, and smart contracts. This approach aims to improve security, privacy, and user rights in the virtual environment, but without proper understanding, it can carry the opposite risk. The article begins with an analysis of recent research and issues. The authors discuss potential threats and risks, including possible attacks on decentralization protocols, censorship manipulation, attacks on blockchain protocols, attempts to break the consensus system, and unfair smart contract transactions. The article discusses a number of vulnerabilities and attacks that can harm the new Web 3.0 technology. The article describes new threats to the privacy of users and their digital assets, including the use of anonymization technologies and countermeasures by criminal organizations or government agencies. The article also emphasizes the importance of discussing the legal aspects of Web3 integration, finding an optimal balance between the regulation of the digital space and users' rights to privacy and autonomy. Global challenges require international cooperation and standardization of regulatory rules in this area. The results of the study demonstrate that a conscious approach to analyzing Web3 threats is the key to building a secure future for the Internet. This article contributes to the dissemination of information and knowledge about possible risks, opens up new horizons for scientific research, practical implementation of cybersecurity measures, and political dialogue in the Web3 era.

Th. D. Lamappulage Donn

Objective : the automation inherent in smart contracts makes them an attractive tool for global trade applications, especially for the automation of transactions. The prospects foreseeable will significantly impact international economic relations and the transformation of international trade rules. This fact determines the study objective - to identify the possibilities of transforming the said rules and the political and legal strategies adopted by European countries to implement smart contracts in international trade. Methods : the study, devoted to the current international trade regulation in the context of contracts digitalization and spread of smart contracts, uses a combination of formal-legal and comparative-legal methods. They allow researching the international trade rules, analyzing and comparing the UK and the EU political and legal positions on the smart contracts introduction in international trade, as well as predicting the legal consequences of using smart contracts in international trade. Results : the research shows that the proliferation of smart contracts has significant implications for international trade and its regulation. Smart contracts have numerous advantages, such as increased efficiency, reduced costs, and wide availability. However, they may lead to legal challenges when harmonizing traditional legal principles with the digital environment, in particular concerning the authentication of subjects, enforceability under specific circumstances of a case, and jurisdictional issues. Scientific novelty : the current literature on the transformation of international trade regulation in the context of digitalization processes and the spread of smart contracts is complemented by the results of a comparative analysis of the legal positions existing in the European legal space and developed on the basis of problems, lessons and achievements in the smart contracts implementation in international trade. Practical significance : understanding the legal implications of smart contracts is important for businesses involved in international trade. The study provides insights into the UK and the EU legal positions from which guidance can be provided to companies navigating the digital landscape. Policymakers can also benefit from the findings when developing appropriate legal acts to balance the benefits of smart contracts with the need for legal certainty and protection in international trade.

Liana Spytska

Presently, legal circles, both among theorists and practitioners, are particularly concerned about the legalisation of cryptocurrencies and transactions with them according to the current legislation. For this reason, the purpose of this work was to study approaches and methods to legalisation of income derived from cryptocurrency speculation based on the provisions of the tax legislation of Ukraine. A theoretical analysis of the general concepts under study was conducted, which in turn formed the object of this study. The common and distinctive features of the researched concepts were identified, thus establishing the relationship and dependence between them. As for the practical aspects, the study revealed them in the analysis of particular regulations, namely, the specific features of their implementation. Positions and opinions of various scholars on it were compared, which allowed for a qualitative coverage of ways to legalise the income that citizens receive from cryptocurrency speculation. On the basis of the analyzed scientific publications, the most successful and suitable for implementation in Ukraine, the experience of other countries, in particular the USA and Canada, has been determined. It has been proven that the legalization of citizens’ incomes received from cryptocurrency transactions is a necessary process for the economic development of the state.The practical value of the study lies in the fact that it can be used both by scholars, in the context of the primary source for further study of this issue, and by lawyers whose activities are related to cryptocurrencies. The scientific value of this study was covered in the description of effective approaches to transactions with income generated by cryptocurrencies, which have not yet been studied to the required level

Polina O. Gertsen, Aleksey Yu. Churilov

Based on the analysis of legal norms, explanations provided by the Plenum of the Supreme Court of the Russian Federation, and legal practice, it can be concluded that issues related to the judicial protection of cryptocurrencies, including through the use of criminal law and criminal procedure, have not been subject to consistent regulation within the current legislative framework. This poses a threat to the possibility to prosecute individuals involved in cryptocurrency theft and the accessibility of legal remedies for those who became victims of such cases. The authors conclude that at present the legal narrative has been established, which effectively serves as a sole source of the law enforcement practice in the absence of comprehensive regulatory provisions. The authors have formulated some proposals for the improvement of the existing legislation aimed at addressing the identified and researched legislative ambiguities and ensuing the access of cryptocurrency owners to the judicial protection of their rights.

Luong Kien

Introduction. The author draws attention to the emerging practice of recognizing cryptocurrency as property and converting it into the income of the Russian Federation. The purpose of the study was to identify the features of emerging practice and develop recommendations for further development of law enforcement practice. As part of the study, the author solved a number of tasks, namely, establishing which decisions the preliminary investigation body had allowed to foreclose on cryptocurrency as well as which indirect circumstances had influenced the effectiveness of the preliminary investigation. As part of the study, the author used the method of analyzing law enforcement practice. The author came to the conclusion that the effectiveness of the work of the preliminary investigation bodies in terms of the subsequent conversion of cryptocurrency into the income of the Russian Federation largely depended on the efficiency of decision-making, the application of professional knowledge about digital currency, and the competent building of a dialogue with the suspect and witnesses.

K. E. Britton

The Regulatory Response and the Current and Future Legal Status The relative newness of non-fungible tokens combined with their complex nature has led to an unclear response from U.S. regulators. The incomplete regulatory scheme has left the market open to the various forms of bad actors common among financial asset classes. Within this article we evaluate the current regulatory status of the cryptocurrency markets and their applicability to NFT Markets. Regulators who are most active in the crypto space include the SEC, CFTC, CFP, and FTC. Because regulatory power is vested differently among the various regulators there exists an inability of any one regulator to adequately address the complex nature of NFTs. To address this inadequacy this article argues that the dispersed regulatory powers should all be granted to the SEC due to its express interest in regulating digital asset markets.

Yevgeniy A. Ignatenko

The article discusses certain features of the legal regulation of cryptocurrency, taking into account the specifics of building a model for the functioning of blockchain networks, which consists in combining various tools, technologies and principles that form a logical and secure structure for distributed data storage. The problems of criminal law protection of digital currency are highlighted and the most common scientific approaches are identified, on the basis of which the author indicates that the use of the concepts of “digital currency” and “cryptocurrency” as synonyms does not correspond to the legislative definition of digital currency, since the concept of cryptocurrency is wider in content than the concept of digital currency. As a result of a comprehensive analysis of the norms of the Federal Law of July 31, 2020 No. 259-FZ On Digital Financial Assets, Digital Currency and Amendments to Certain Legislative Acts of the Russian Federation, the author comes to the conclusion that digital currency is exclusively a “domestic” currency. Based on the study of judicial practice, it is shown that the broadest possible interpretation of the concept of “other property”, which includes digital currency and cryptocurrency, is allowed. It indicates the presence of judicial acts in criminal cases, in which the subject of a crime are such cryptocurrencies as, for example, bitcoin. Attention is focused on the importance of civil law regulation of cryptocurrencies for their criminal law protection and the range of social relations that develop regarding cryptocurrencies subject to protection by means of criminal law is determined.

Giovanni Maria Nori, Matteo Girolametti

That the legal nature of cryptocurrencies does not fit into a comprehensive definition is already known. On the one hand, EU case law, albeit for tax purposes, has categorised bitcoin as a means of payment (European Court of Justice, judgment of 22 October 2015, C. 264/14). On the other hand, the highest European banking authority, with the opinion of 12 October 2016, reiterated that “virtual currencies do not qualify as currencies”. These latter words stand up in defence of that State’s patent, theorised by Georg Simmel (in Philosophy of money), concerning the monopoly right to coin money. Yet, this antinomic contradiction is only illusory, as with Directive 843/2018/EU, the European legislator restated that virtual currencies are: a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically. On the basis of these considerations, in the first part of this chapter the authors try to outline the current legal framework of cryptocurrencies with regard to their qualification as property. This contribution also focuses on the analysis of the recent proposal of a Regulation of the European Parliament and of the Council, on Markets in Crypto-assets, and amending Directive (EU) 2019/1937. This legislative draft is part of the Digital Finance package (made up of 4 draft laws), with the aim of “ensuring that the EU embraces the digital revolution and drives it with innovative European firms in the lead, making the benefits of digital finance available to European consumers and businesses”. The Commission therefore goes beyond the wait-and-see approach, aiming at uniformisation of the discipline inherent to crypto assets at a supranational level. In this context, the second part of this chapter tackles the issue of the solvency of a debtor with digital assets from a European transnational perspective, especially in light of the discipline laid down by EU Regulation 848/2015. Specifically, it relates how the legal qualification of digital assets, especially concerning cryptocurrencies, will affect the claim of virtual assets owners against the insolvency estate. This analysis then focuses on the debated matters of the insolvency of cryptocurrency exchange platforms and e-wallet service providers (applicable law, jurisdiction, recoverable assets), also relating to insolvency proceedings case-law. The authors thus attempt to relate the issues concerning insolvency, ordinarily connected to the application of national law, with the Blockchain and its decentralisation.

Burcu Yüksel Ripley, Florian Heindler

Crypto assets can be defined broadly as “cryptographically secured digital representations of value which can be transferred, stored or traded electronically” by the use of distributed ledger technology or a similar technology. They introduce new challenges to Private International Law due to their novel, complex, fast-evolving and cross-border nature. The purpose of this chapter is to critically examine some of the key applicable law questions regarding crypto assets. The chapter first gives an overview of crypto assets, highlighting their key features. It next addresses challenges around characterisation of crypto assets as money or legal tender, and property, and reflects on the legal implications of this characterisation. The chapter then discusses freedom of choice and its operation and limitations; explores considerations around suitable objective connecting factors; and, aims to shed light on the possible ways forward in terms of policy choices in determining the law applicable to crypto assets.

Igor B. Ilovaysky, Tofik Huseynov

Introduction. The emergence of new technologies poses to the Russian legislator a number of complex issues that require rapid and high-quality study, since successful or, conversely, unsuccessful legal regulation of certain processes can promote or hinder their development. These are currently digital technologies and, as their separate element, the metaverse, which exists through the operation of a system of distributed registries, smart contracts, and primary accounting units – tokens. In this regard, the purpose of this publication is to consider the current state and certain aspects of improving the legal regulation of the metaverse and the turnover of a particular type of token, namely the non-fungible token (NFT). Methods. The research is based on the application of logical and dialectical techniques and methods of scientific cognition, comparative legal and legal-technical analysis of texts of normative acts, and materials of law enforcement practice. As a result of the research, the features of the functioning of metaverses as a symbiosis of the real, virtual, and imaginary worlds were considered. The introduction of such technologies into civil circulation, including the sphere of maritime transportation, can significantly improve the quality of legal protection of the rights and interests of subjects involved in these relations. The results of the review became the basis for the following conclusion: the Russian Federation is at the initial stage of the formation of metaverses on its territory, including the issue of legal regulation of such phenomena. In this connection, and taking into account the geopolitical situation, it was proposed by the state forces, with the involvement of the largest Russian transport organizations, on the basis of a public-private partnership, to accelerate the creation of such systems, including regulations in this area, both within Russia and at the regional and international level within the framework of the EAEU and BRICS.

A. N. Kirsanov, Alexander Kuzmin

Introduction. This article discusses the problem of the lack of special legislative regulation of the institution of smart contracts, which is expressed, among other things, in the absence of a definition of the concept of a smart contract and a distributed ledger of transactions (blockchain) in the law. The authors made an attempt to identify the presence of negative effects on legal relations due to the presence of a legislative gap in the regulation of this institution. Materials and methods. As part of the research, the author uses both general and specific scientific research methods. When studying the issue of the origin of the institution of smart contracts, the authors use the historical method, and when considering the issue of the existence of a gap in the legislative regulation of the institution of smart contracts in domestic law, they use the comparative legal method of scientific knowledge. Results of the study. The authors come to the conclusion that one of the main problems currently existing in the field of legal regulation of smart contracts is the lack of special regulation of this institution, as well as the lack of legislative recognition of the concept of a smart contract and a distributed registry of transactions. The identified problems create obstacles to the development and application of the institution of smart contracts in civil law relations. Discussion and conclusions. The study showed that the simplest solution to eliminating the regulatory gap of the smart contract institution is to legislate the concept of a smart contract and a distributed transaction registry in the wording proposed in the draft Law on the Central Federal District, which will make the use of this institution more attractive for participants in civil legal relations and will contribute to the development the specified institute.

Chelsea Medina, Lily Shaw, Dissy Vargas, Sundar Krishnan

This paper discusses the mechanisms of cryptocurrency, the idea of using security in the system, and the popularity of it. To begin, the authors provide a background on cryptocurrency and how it works. The authors understand that while most people may be familiar with the concept, they may not know how it works. Next, the authors discuss the security of cryptocurrency in-depth within the paper. The authors also provide examples of attacks on cryptocurrency systems to show the vulnerabilities within the system. Lastly, the authors discuss the popularity of the system to further express the need for security in cryptocurrency.

В.Ю. Легенько

The article is devoted to the study of the current legal regulation of virtual assets in the Hong Kong Special Administrative Region of the People’s Republic of China. The author analyses the advantages and disadvantages of the relevant legal framework, as well as the possibility and feasibility of implementing the most successful solutions into Ukrainian legislation. Due to the lack of in-depth studies that would combine the main regulatory norms and definitions and provide a general overview of this regulatory system, it became necessary to study in detail the current legal system of the Hong Kong Special Administrative Region of the People’s Republic of China, which is characterised by high autonomy from the rest of the PRC, and to identify the institutions that perform the functions of a regulator of virtual assets. Next, the author provide a legislative definition of virtual assets and their classification. Unlike other jurisdictions, the Hong Kong Special Administrative Region of the PRC focuses on the key features inherent in this particular object of civil rights, and excludes from the definition other objects that have similar features but are already regulated separately. The common law system makes it possible to regulate certain aspects of the circulation of virtual assets through precedents, which helps to quickly adapt to changes in this market, where new concepts and civil law relations emerge every few years. For example, it was through precedent that it was determined that cryptocurrencies are property and can therefore be the subject of a trust. Currently, not all objects created on the basis of blockchain technology are subject to regulation, such as non-fungible tokens or central bank digital currencies, as the possibility of their circulation is still being investigated by the Hong Kong Monetary Authority. The article also examines the new nuances of licensing service providers related to the circulation of virtual assets, which require dual licensing under two regimes regulated by separate legal acts. The author concludes that Hong Kong has managed to regulate the circulation of virtual assets in one way or another, but has not managed to create a clear system for all market participants, so it is possible to introduce some solutions into Ukrainian legislation, but in general, this legal regulation system has many disadvantages and sometimes creates legal uncertainty.

Нателла Звиадовна Беридзе

В научной статье затрагиваются проблемы правового регулирования смарт-контрактов в действующем гражданском праве. Актуальность работы заключается в том, на данном этапе глобальной цифровизации происходят изменения и в гражданских отношениях, которые требуют своевременного формирования правовой базы. The scientific article touches upon the problems of legal regulation of smart contracts in the current civil law. The relevance of the work lies in the fact that at this stage of global digitalization, there are changes in civil relations that require the timely formation of a legal framework.

Jamalbek TUSUPOV, Seyit KERIMKUL, Adilzhan IZAT, Bakytgul RYSBEKKYZY

Today, the industry, referred to as «mining», is rapidly gaining momentum. Cryptocurrency mining is the extraction of digital assets by performing computational work on specialized equipment using special software. On the territory of the Republic of Kazakhstan, this industry has a great impact on the energy industry, since the operation of the above-mentioned equipment requires a huge amount of electricity to carry out the necessary calculations. Cryptocurrency mining activity is quite profitable at the moments of the peak value of cryptocurrencies. In Kazakhstan, cryptocurrencies are recognized as digital assets and are divided into secured and unsecured. Cryptocurrencies, as well as digital assets, are not suitable as a means of payment according to the laws of the Republic of Kazakhstan. Consequently, the collection of taxes from entities engaged in activities related to cryptocurrencies is a rather complex process. This work was written in order to solve the problem of converting cryptocurrencies into the state currency, to open up the possibility of building a centralized system for monitoring cryptocurrency mining within the state in the future, the article describes the structure of exchanges and platforms that enable cryptocurrency owners to exchange cryptocurrencies for traditional types of currencies

Mika Selar

Tema ovog rada je analiza tržišta kriptovaluta. Kriptovalute na neki način predstavljaju financijsku revoluciju, te virtualne valute su stekle ogromnu popularnost u zadnjih desetak godina i sve više postaju dio našeg svakodnevnog života. Sve od njihove prve pojave, kriptovalute su kontroverzna tema javnosti. Dok su nekima prilika za ozbiljnu zaradu, drugi misle da su prevara i da im se ne može vjerovati. Nemoguće je zanemariti ogroman utjecaj ovih naizgled nepostojećih valuta koje svakim danom mijenjaju način na koji ljudi gledaju na novac. Cilj ovog rada je prikazati nastanak kriptovaluta, njihov napredak i izrazito nestabilno tržište na kojem čak ni najveći stručnjaci ne mogu predvidjeti što će se sljedeće dogoditi. Osim toga, u radu su prikazane pozitivne i negativne strane kriptovaluta te su opisane neke od najpoznatijih kriptovaluta zajedno s njihovim načinom rada. Također su prikazane kontroverze koje prate digitalne valute tijekom godina. Nakon niza godina spominjanja kriptovaluta kao valute budućnosti, ta budućnost je stigla.

R. LUKIANCHUK

The role and significance of the cryptocurrency phenomenon is defined. The directions of criminal use of cryptocurrencies are outlined. Algorithms for the use of cryptocurrencies and illegal crypto markets by Russian criminals have been revealed. The prerequisites and features of the use of cryptocurrency mixers and tumblers for the purpose of concealing criminal cryptocurrency operations are disclosed. The decentralized service “Tornado Cash” and the directions of its criminal use are characterized. Modern ways of circumventing sanctions and avoiding sanctions pressure during the purchase of cryptocurrencies by Russian war criminals and hackers have been identified. The features of the functioning of centralized and decentralized cryptocurrency exchanges in the context of existing and probable restrictions on cross-border cryptocurrency payments and p2p transfers by Russians are detailed. The basic provisions of the EU law on AML were considered in order to introduce restrictions on the implementation of anonymous cryptocurrency transactions. The positive experience of Israel in combating the financing of terrorism with the help of cryptocurrencies is highlighted. The further directions of improvement of the mechanisms to prevent the use of cryptocurrencies for the purpose of supporting war criminals and financing terrorism have been identified, including within the framework of regulatory settlement.

Ilya Kokorin

This article explores the recent collapses of prominent crypto trading and lending firms Voyager and Celsius, investigates the prevailing business models of crypto firms and identifies potential causes of their failure. The insolvencies of Voyager and Celsius reveal complex legal problems, particularly concerning the determination and allocation of customer rights in deposited crypto-assets. The EU Markets in Crypto-assets Regulation (MiCAR) seeks to protect investors by requiring the safekeeping and segregation of crypto-assets held in custody. Yet it does not necessarily protect those investors who ‘lend’ their crypto-assets to crypto-lending platforms with the expectation of earning rewards. MiCAR lacks a dedicated legal framework for crypto-lending, which suffers from many classic financial sector vulnerabilities. To address this gap, we propose the adoption of a new instrument, MiCAR II. Drawing inspiration from existing regulations for financial intermediaries like banks, MiCAR II may incorporate five elements: (i) a large exposures regime, (ii) robust disclosure requirements, (iii) structural and organizational separation of custody and trading/investment activities, (iv) deposit-like guarantees and (v) a dedicated recovery and resolution regime for significant crypto firms. In 2022, the cryptocurrency market experienced a significant downturn (‘crypto winter’), which coincided with the downfall of several major market players. On 5 July 2022, the crypto trading and lending firm Voyager Digital Holdings, Inc. (Voyager) filed a voluntary Chapter 11 petition in the US Bankruptcy Court for the Southern District of New York.1 Shortly thereafter, on 13 July 2022, Celsius Network LLC, a leading crypto-lending platform, and its affiliated entities filed for bankruptcy in the same court.2 Both Voyager and Celsius acted as lenders to one of the world’s largest crypto hedge funds, Three Arrows Capital Ltd. (3AC), which since June 2022 is itself subject to the liquidation proceeding in the British Virgin Islands. In November 2022, the cryptocurrency market turmoil reached a critical point when one of the largest crypto exchanges, FTX, and its affiliated crypto trader, Alameda, collapsed. Given the complexities and ongoing investigations surrounding the cases of FTX and Alameda, we will not address them separately here.3 This article analyses the collapses of Voyager and Celsius, examines the likely causes of their demise and explores some of the typical legal issues accompanying crypto failures. It also questions whether the Markets in Crypto-assets Regulation (MiCAR), a recently introduced law aimed at harmonizing the regulation of crypto-asset service providers (CASPs) and crypto-asset services within the European Union (EU), can prevent or at least reduce the damaging effects of crypto failures and ensure sufficient protection of crypto investors. The article is structured as follows. Section 2 starts with a summary of the key features characterizing crypto failures. It continues with a discussion of a prominent issue observed in most crypto insolvencies, namely the attribution of rights in deposited crypto-assets in insolvency of a CASP. Section 3 introduces MiCAR and its provisions on the safekeeping and segregation of reserve and customer crypto-assets. Section 4 shifts the focus to Voyager and Celsius, examining their business models and addressing the legal challenges associated with crypto-lending more broadly. Section 5 consists of several parts. First, it considers the provisions of MiCAR that directly and indirectly impact the operations of crypto lenders. Second, it draws attention to the differences and similarities between crypto finance and traditional finance. Third, it puts forward several suggestions for future regulation, referred to as MiCAR II. Section 6 concludes. Instances of crypto failures are not unprecedented, with one of the most well-known examples being the infamous collapse of the Japanese crypto exchange Mt.Gox in 2014. Other notable cases include the failures of the Italian crypto exchange Bitgrail in 2019 and the New Zealand crypto exchange Cryptopia in 2020. 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legal or or business is the of one or more crypto-asset services to on a The of crypto-asset services a of activities, custody and of crypto-assets on of of a trading for exchange of crypto-assets for and of for of crypto-assets and crypto-asset of MiCAR and for are by the provisions that address the safekeeping of as as the custody and of crypto-assets on of segregation is a aimed at the rights of are held by on and legal segregation can who and in this protect from the are their on segregation can in EU that a of financial and MiCAR the provisions the segregation and custody of customer and the concerning the segregation and custody of reserve of the of a the of a the of and significant are to and a reserve of reserve are to to the of a and protect who a of at the of as and in US and In one of the largest lending by and the of the to by cryptocurrency It is that as of July the largest and of the market of to the reserve of by a from the and from the reserve that in the of the to the reserve of The reserve of from the and to a firm or on the of crypto-assets deposited with CASP or a and held in the of It is that the of a of in the of the of as as it is to the as to reserve of This is likely to are for to The of and for the custody of reserve is a in the it is to that some may as associated with rights and the is a recent the of the deposited of its in at the of some of its and a by the of and on The On the same its and at To prevent on 13 the that of to their funds, leading to recovery of its This the from the on a of can impact the of a in the of or those In to the provisions with the custody of reserve MiCAR the the safekeeping and custody of customer by It that crypto-asset service providers that crypto-assets to to the rights of in the of the crypto-asset service The is to the of crypto-assets held in custody and to ensure that the to does not to a To this MiCAR several of customer to this that crypto-assets to their ensure that those crypto-assets are not or for their MiCAR that a of in the of to rights to the MiCAR that on the crypto-assets held separately from This can are to customer and crypto-assets. crypto-assets from the of a The of this segregation is that in of a CASP to crypto-assets held in custody. the of segregation and is the of FTX, the largest to the recent of who as the bankruptcy the of the the FTX customer and funds, and them with The that the customer and and the of as as for and to their and regulation can protection and of deposited in like the provisions on the segregation of reserve in the the on the custody of customer and the protection of rights and MiCAR does not necessarily those of crypto who crypto-assets for custody. This a significant of and The examines the business models of Voyager and Celsius and explores potential that to their Voyager is a crypto-lending and trading business a cryptocurrency that to and crypto-assets with also rewards. To to Voyager to in the of crypto-assets. The from to the to the In 2022, Voyager a with a hedge this Voyager and to This a In June 2022, the collapse of and in of the financial of Voyager of the This not and liquidation in the British Virgin Islands. To the on June 2022, Voyager a with Ltd. also in in the of in and as as customer not leading to a in To a on June 2022 Voyager from to the and on July 2022, Voyager customer and trading business of to the associated with The to a notable of this is the on the one of the key to the of The to a The of being to a This is is to a as the crypto in Mt.Gox to Voyager and the crypto the of crypto with collapses of and insolvencies of crypto firms. This the not impact on traditional financial and not in by financial the with The of Voyager can to the of namely a to a also referred to as the large exposures The of Voyager with being the largest of Voyager subject to significant The of large exposures is not a new of It is also not to the many introduced regulation that to prevent financial as banks, from large as a of a of a or of a of In the the regulation of large exposures introduced in the Capital Regulation of and by the Regulation This regulation to with the as the or This framework by the on which as the for regulation of to the the of of a to a or to a of not of the at a to another this is to The of is with to the in of its that a of a does not the The large exposures regime by and potential from Voyager the Celsius in and one of the largest finance platforms in the the of of crypto-assets transferred to Celsius and by this to more July 2022, Celsius and with of more and 6 in The and of Celsius the business as their crypto-assets to Celsius and from the to or those or on those at more traditional or cryptocurrency platforms that who the Celsius transferred their crypto-assets to Celsius in exchange for rewards. Celsius crypto-assets or on exchanges, to from its deposit-like Celsius from crypto lenders like and FTX, as as lending as and The crypto-assets deposited by as to in and rewards. Celsius also and Celsius to its business a of and when to that of Voyager business of insolvency to a or a business In to Celsius to and it not in it the to a the to a that to the In the for the in July 2022, Celsius the of its by since 2022, a in the market of and as a of crypto-assets by In the a a complex of problems, and to the the to the of to their significant Celsius on some of its crypto-asset in and the of to crypto-assets to to to the between the Celsius to and the from crypto-assets in the The as as to and the a from to June 2022, Celsius to its of the it This in a In the leading to the bankruptcy Celsius a of crypto market of a significant in from and a in from between June and June 2022, Celsius in a on June 2022, Celsius and on its This not the and not the business On 13 July 2022, Celsius filed for MiCAR does not provisions directly and crypto lenders like Voyager and focus is on custody services and of safekeeping and segregation of customer crypto-assets Section 3 In MiCAR that it not address the lending and of and not it may the business of crypto lenders at to crypto-asset service requirements, as and and of of business and of the MiCAR the of to with or services to as and are the concerning and those who issue The regulation of is by to the potential and of by of the that can for crypto-lending is the the of or by the of and to of to the of of to and crypto-asset service providers not when crypto-asset services to In this is as or to the of which a of The of in to the of by several This to by to reduce the that are as a of and to ensure financial by between traditional and particularly in the of to in the and may become a to of deposited with In as one of the key of the for in the in The on the of to of in in as a and to The with the the of to of to its It is which are by this and and of least of the are to the of is a a of from their or a of a in of and for the of This is the of a as the a crypto-asset for this the likely a impact on crypto-lending First, in most of crypto lenders not crypto-assets in the of Voyager and Celsius, to of and the to crypto-assets. Second, as to the of by the of it is that not on the from like and their in as and are to a of services to the of is a or of a not or are transferred to a CASP. This and their crypto-assets to crypto whether or It is that in law a may another The to the business models of crypto lenders and from and a to or this it with the operations of crypto their on deposited in a or it MiCAR does not the or of or The accompanying MiCAR that the is likely to the In the the of the that some entities from for a and them to and In this is most crypto lenders The European that this to to the of the of as not in lending their It can that when a and to a crypto this directly or the crypto-assets. a on as the European to to include crypto-lending within the of the To legal a of this is In the European in June 2022, the of the European that crypto-lending a MiCAR this and which or models it are questions that the of financial regulation and to crypto-assets. In recent of to cryptocurrency trading as The observed that crypto-assets like and that trading to part of the traditional financial services and of the that to the and a in a and This is a may significant and and turmoil in of the as the crypto lenders with the or their insolvencies may for and investors and the of by failures is not to those from at least for the In of one or at least in the to traditional financial services and to crypto-assets and crypto firms. is the of financial the The is whether the concerning and and its or to the of in the of for The differences in the and when this in it can observed that the business models of crypto lenders some similarities with those of traditional on financial and Voyager and Celsius customer in and them for their lending to In to to who in many cases transferred deposited crypto-assets to crypto firms Section 4 This Voyager and Celsius on a of and ongoing in the of them lending It also crypto lenders to to reserve a as a a of the deposited as and the to This and financial like banks, and in crypto and are not of large This is when crypto lenders in one crypto-asset in another The can insolvency to a between and as The of and the of a to their as as as the may those who and with This is from a custody which the of and their to legal in the of the The crypto-lending some similarities with the traditional to the that from the in one or another and to for banks, crypto lenders in and which them and to as by the cases of Voyager and to the of financial The the of in traditional by the of and and leading to a of of major financial The in the crypto the of their and on as and for The similarities not of the existing models to crypto lenders. Yet in the of to the of financial regulation, as market financial and This is the regulation of financial intermediaries can as a of inspiration for the regulation of crypto lenders in the MiCAR II. are five that regulation may are from the in the on the issues that in the cases of Voyager and are not to a framework for crypto-lending and in and large the of the large exposures regime is to prevent a financial from large to the of or a of This regime to ensure financial in financial and MiCAR does not for large to those to financial in the In of the of crypto-lending services and the potential to large may to prevent the and failures. disclosure insolvencies the of and disclosure to of crypto firms. To address this disclosure and the of deposited crypto-assets and whether the to a crypto the disclosure the rights of in the of the of a and financial of a crypto of deposited crypto-assets by a crypto and with the of disclosure it is that disclosure is to ensure protection and market robust disclosure requirements, can investors with the to and in the crypto-lending of custody and trading/investment The cases of Celsius and the associated with custody and or trading activities, as as the that a in one of them can to the of of financial by some the the sector structural of 2019 that services and to and and from and a and by legal is in the with the of the which some on and of which include from in of financial and of crypto-lending and trading from services by crypto-asset service providers the of this will on the of the and the to and The collapses of Voyager and Celsius by which their This is in the referred to as can also subject to of from investors on the the to and leading to the to in a are not by or to traditional lending and guarantees and the to protect and prevent In the guarantees are to to a to investors the services of The of for the crypto-lending sector may The concerning the of and the by them separately to ensure their resolution regime and resolution regime with for can a in addressing the of financial that significant In the for resolution is by the and and the a and a and and MiCAR introduces for significant crypto-asset service significant crypto a to financial or causes significant a legal framework by the recovery and resolution regime, with of This article examines the regime for crypto-assets and crypto-asset service providers in the in of the recent of crypto failures. is the the of regulation and the of and from of and financial insolvency is not a new of the and most well-known cases is the collapse in of which the world’s largest trading we a wave of crypto failures which in the some legal in many crypto insolvencies, are to a business or a of business the is the determination and allocation of rights deposited crypto-assets. This article that the to the of in and a of may on the organizational and for crypto as as property law and the of a between a crypto firm and its To protect crypto MiCAR and segregation of crypto-assets held in custody and that from the of This is a in the Yet it does not necessarily protect those investors who ‘lend’ their crypto-assets to with the expectation of earning rewards. The collapses of Voyager and Celsius the of their business models and the of crypto-lending and MiCAR does not to a legal framework for and of business for service In this we that a new instrument, MiCAR is to a of for crypto-asset lending platforms at the EU the of crypto protect investors in the of crypto in crypto-lending, their and and in crypto This the of this new regulation the and of Celsius, to a are not the business models of Celsius and Voyager those of traditional financial the differences between traditional finance and crypto finance the or of financial like to crypto we that inspiration from the existing regulation of financial on the of crypto we five of future (i) a large exposures regime, (ii) robust disclosure requirements, (iii) structural and organizational separation of custody and trading/investment activities, (iv) deposit-like guarantees and (v) a recovery and resolution regime for significant crypto firms. is in of at The to and for and also for by The of this article at the Bankruptcy the in of the the of the of and the and by the for The

Erik R. Valdes-Martines

A non-fungible token is a digital unit of accounting, with the help of which a digital impression is created for any unique physical item or object, including a digital one, for subsequent performance of various types of transactions, including transactions within a closed blockchain system. The development of digital technologies, including NFT, poses many questions to the researchers. The author of this article conducts a comparative analysis of digital objects and NFT, considers the problems regarding NFT and copyright to the works of fine art, the transition of the right to NFT and the transfer of copyright, possible violations of copyrights using NFT, etc. The need and feasibility of changing the current legislation is assessed.