Invented in 2008 with Bitcoin, cryptocurrencies represent a radical technological innovation in finance and banking; one which threatened to disrupt the existing regulatory regimes governing those sectors. This article examines, from a reputation management perspective, how regulatory agencies framed their response. Through a content analysis, we compare communications from financial conduct regulators in the UK, US, and Australia. Despite the risks, challenges, and uncertainties involved in cryptocurrency supervision, we find regulators treat the technology as an opportunity to bolster their reputation in the immediate wake of the Global Financial Crisis. Regulators frame their response to cryptocurrencies in ways which reinforce the agency’s ingenuity and societal importance. We discuss differences in framing between agencies, illustrating how historical, political, and legal differences between regulators can shape their responses to radical innovations.
The financial and legal aspects of alternative payment systems from the anti-money laundering prespective Abstract The aim of this thesis is to provide a general overview of the current state of alternative payment systems with regard to their inclusion in the financial market, their properties and potentials for wider use, and to evaluate their possibilities to more effectively combat money laundering, terrorist financing and the proliferation of weapons of mass destruction. In the first chapter, the thesis explains the broader context with regard to financial systems, especially within the money market systems focusing on retail, while providing a deeper explanation of the context of European law and Czech law. The second chapter is focused on closer analysis of alternative payment systems with regard to their use. Alternative payment systems are divided into two basic categories for centralized alternative payment systems and decentralized alternative payment systems. The category of centralized alternative payment systems corresponds to the current conventional financial market, taking into account the innovations that have emerged in recent years. Decentralized alternative payment systems are based on the DLT Blockchain technology and the Islamic Hawala payment system is analyzed as a purely informal,...
Victor von Wachter, Johannes Rude Jensen, Ferdinand Regner, Omri Ross
The smart contract-based markets for non-fungible tokens (NFTs) on the Ethereum blockchain have seen tremendous growth in 2021, with trading volumes peaking at 3.5b in September 2021. This dramatic surge has led to industry observers questioning the authenticity of on-chain volumes, given the absence of identity requirements and the ease with which agents can control multiple addresses. We examine potentially illicit trading patterns in the NFT markets from January 2018 to mid-November 2021, gathering data from the 52 largest collections by volume. Our findings indicate that within our sample 3.93% of addresses, processing a total of 2.04% of sale transactions, trigger suspicions of market abuse. Flagged transactions contaminate nearly all collections and may have inflated the authentic trading volumes by as much as 149,5m for the period. Most flagged transaction patterns alternate between a few addresses, indicating a predisposition for manual trading. We submit that the results presented here may serve as a viable lower bound estimate for NFT wash trading on Ethereum. Even so, we argue that wash trading may be less common than what industry observers have previously estimated. We contribute to the emerging discourse on the identification and deterrence of market abuse in the cryptocurrency markets.
The purpose of this Note is to determine which cryptocurrency initial distribution methods involve the offering of securities as regulated by the 1933 Securities Act. The primary legal issue is the Howey test. This test identifies whether an offering is an investment contract, and thus subject to regulation by the 1933 Securities Act, based on whether it involves an investment of money in a common enterprise, in which investors are led to expect profits from the efforts of a promoter or third party. The distribution methods discussed are mining, airdropping, forking, and initial coin offerings (“ICOs”). Mining, airdropping and forking are likely not investment contracts, but initial coin offerings likely are. However, regulators should make it clear that mining, airdropping and forking are acceptable practices. Furthermore, they should proceed with a light touch when regulating initial coin offerings, except in the case of fraud. In particular, the ICO community in partnership with government should instigate a system where ‘crypto-underwriters’ vet ICOs and the crypto-underwriters are regulated by the SEC.
Blockchain technology is most likely to change the next decade of business.It enables transfer of digital property from one Internet user to another in a secure way without any intermediaries.The consequences of this breakthrough technology have a vast potential in all areas of business.Information Technology (IT) provides ready to use, end-to-end solutions and allow small businesses to focus on their core business.Recent innovations in IT have positively impacted businesses.With the emergence of blockchain technology, the convergence of telecom and computing is finally reaching maturity in a unified platform for doing business in the 21 st century.In this paper, we study the various ways in which blockchain technology can help small businesses and propose a framework that helps in choosing the appropriate blockchain application in the context of business process reengineering.
This bachelor thesis pursues blockchain technology, smart contracts and use possibilities of these technologies particularly in e-business field. In theoretical part, there will be introduced blockchain technology, its functionality and features, furthermore, there will be introduced smart contracts technology, its importance for Ethereum cryptocurrency, and use of all these technologies in e-business field. The practical part of this thesis will be concerned about creating our own blockchain, based on Ethereum platform, and afterwards implementation of our very own smart contract will happen. In the final phase of this thesis, there will be interpretation of overall results.
Over the last few years, debates regarding the application of federal securities laws to primary cryptocurrency offerings and secondary market trading have taken a sharp turn. At the heart of this discussion, regulators, developers, and market participants began to recognize the diversity of protocols supporting the distribution of digital assets and resales on secondary market trading platforms.
This Essay proposes modifying an exemption from registration for exchanges under the regulations governing alternative trading systems (“ATS”). Promulgated in 1998, Regulation ATS offers a set of rules governing emerging alternative trading platforms. The exemption enables the Commission to monitor and supervise newly developing trading venues. In recent years, for example, the Commission has amended Regulation ATS to permit private exchange operators to service secondary trading markets; this approach enables private exchange operators to avoid the onerous registration requirements under Section 5 of the Exchange Act yet facilitates the Commission’s oversight of a critical and increasingly sizeable volume of secondary market trading activity. Anticipating the need to register with the Commission, a number of cryptocurrency trading platforms have already submitted or announced their intention to submit applications to register as alternative trading venues under Regulation ATS.
In Part I, this Essay briefly explores the existing legal framework applied to exchanges and examines the settlement agreement between the SEC and Coburn in the Commission’s first prosecution of a platform accused of violating Section 5 of the Exchange Act. Part II offers a brief analysis of the unique attributes of decentralized exchanges and concludes with questions regarding the existing regulatory framework for secondary market trading. Part III of this Essay proposes that the Commission adopt an exemption from registration under Section 5 of the Exchange Act for secondary market trading platforms facilitating cryptocurrency transactions under Regulation ATS. By taking affirmative action and engaging in formal rule-making procedures, the SEC will enhance liquidity, price accuracy, and price discovery and reduce regulatory uncertainty in secondary cryptocurrency trading markets.
The author examines the impact of blockchain and smart contracts on the legal profession. After all, the lawyer is entitled to draft smart contracts. For a few years now, in information technology, the lawyer has promoted the writing of so-called agile contracts in connection with projects run by “agileȁ methods. However, the smart contract, whether described as a contract or simple algorithm, challenges the lawyer by its philosophy (“code is law”) and by its writers who are no longer jurists but developers. He discusses whether this technology will be “killing off” the legal profession. Before over-hastily assuming this apocalyptic demise of the lawyer, the author suggests to think about the role and the status of the lawyer in his general mission of advice and defense, and considers whether information technology can be a substitute for the lawyer or simply a new tool that could be used.
Digital assets are hot right now. Whether cryptocurrencies, like bitcoin, or initial coin offerings and tokens, this new asset class has captured the imagination of American investors. While it remains to be seen if this phenomenon has staying power, there is no doubt that these assets and their promoters have attracted the attention of the Securities and Exchange Commission. But neither Congress nor the SEC has formally elucidated which digital assets are securities and which are not. This Article seeks to provide clarity in determining which digital assets are securities. It proposes two tests that operationalize the Supreme Court’s test in SEC v. W. J. Howey Co. The first test is the Bahamas Test, which asks whether a digital asset is sufficiently decentralized such that it is not a security. The second test is the Substantial Steps Test which is used to determine whether an investment is made with an expectation of profit. This Article takes a rules-based approach to provide clarity and begin a conversation about crafting more predictable jurisprudence and regulation in this area.
Sustav za nagrađivanje korisnika koji dijele podatke namijenjen je demonstraciji Plasme kao jednog od predloženih rješenja za skaliranje platforme Ethereum. Plasma je skup pravila i najboljih praksi koje određuju način na koji se povezuju podlanci s glavnom lancem sustava Ethereum. Glavni lanac, u ovom slučaju, preuzima ulogu suca u svim sporovima koji se događaju na Plasma podlancu. Sustav za nagrađivanje odabran je kao primjer zato što generira vrlo veliku količinu transakcija u produkcijskoj okolini. U stvarnom svijetu, podatci generirani s korisničkih senzora stvorili bi konstantan tok podataka koji bi morao biti obrađen na pametnom ugovoru - aplikaciji koja se izvodi u raspodijeljenoj okolini sustava Ethereum. S obzirom na probleme propusnosti transakcija s kojima se sustav susreće, potrebno je rješenje koje će uvelike povećati kapacitet sustava u smislu količine obradivih transakcija u sekundi. Oslanjajući se na prakse definirane Plasma pravilima, sustav za nagrađivanje razvijen na podlancu omogućuje upravo to. Korisnicima je omogućeno konstantno dijeljenje podataka, za koje su nagrađeni od strane sustava koji validaciju vrši putem pametnog ugovora objavljenog na podlancu. Kako bi korisnici imali koristi od nagradnih tokena koje im dodijeli sustav, omogućeno im je sigurno i jednostavno prebacivanje sredstava s Plasma podlanca na glavni lanac sustava Ethereum. U okviru ovog rada je razvijen sustav u raspodijeljenoj okolini, s visokom propusnošću transakcija i visokom razinom sigurnosti koji garantira platforma Ethereum.
SELECTED ASPECTS OF BITCOIN AND ITS IMPLICATIONS FROM THE STANDPOINT OF THE LAW AND ECONOMICS Abstract Bitcoin is one of the best-known examples of a decentralized convertible cryptocurrency based on blockchain technology. The diploma thesis deals with the main aspects of bitcoin and bitcoin payment networks in complex economic analysis based on the use of standard economic apparatus. The economic analysis is backed by a thorough and relevant legal research. The main goal of the diploma thesis is complex economic and legal analysis of bitcoin. In economic analysis, the emphasis is put on the use of supply-demand analysis, which outlines the basic factors affecting supply and demand for bitcoins. Based on a clear delineation of these factors, the thesis is able to analyse specific aspects of bitcoin. Diploma thesis analyzes the impacts of decentralized setting, as well as risks associated with anonymity of users, crime in connection with bitcoin, time delays in transaction verification, technical and energetic demands on mining, high transaction costs and internet connection needs. Each of these aspects is compared to existing payment institutions or systems. The thesis also examines the legal regulation of bitcoin. Due to the absence of a complex legal regulation, the diploma thesis tries to apply the...
For many, the appeal of bitcoin is in its detachment from government regulation. \nHowever, the Coffee bonding theory, which initially arose in the context of foreign \nstocks, suggests certain benefits of regulation for bitcoin, including increased \nlegitimacy. By invoking the Coffee bonding theory, this Article offers another \nperspective on the regulation of bitcoin.
Although many people equate blockchain with bitcoin, cryptocurrency, and smart contracts, the technology also has the potential to transform the way companies look at governance and enterprise risk management, and to assist governments and businesses in mitigating human rights impacts. This Article will discuss how state and non-state actors use the technology outside of the realm of cryptocurrency. Part I will provide an overview of blockchain technology. Part II will briefly describe how public and private actors use blockchain today to track food, address land grabs, protect refugee identity rights, combat bribery and corruption, eliminate voter fraud, and facilitate financial transactions for those without access to banks. Part III will discuss key corporate governance, compliance, and social responsibility initiatives that currently utilize blockchain or are exploring the possibilities for shareholder communications, internal audit, and cyber security. Part IV will delve into the business and human rights landscape and examine how blockchain can facilitate compliance.
Specifically, we will focus on one of the more promising uses of distributed ledger technology – eliminating barriers to transparency in the human rights arena thereby satisfying various mandatory disclosure regimes and shareholder requests. Part V will pose questions that board members should ask when considering adopting the technology and will recommend that governments, rating agencies, sustainable stock exchanges, and institutional investors provide incentives for companies to invest in the technology, when appropriate. Given the increasing widespread use of the technology by both state and non-state actors and the potential disruptive capabilities, we conclude that firms that do not explore blockchain’s impact risk obsolescence or increased regulation.
The research objective of the article: The aim of the paper is to present the challenges and opportunities of Initial Coin Offering (ICO) procedure (sometimes appearing in literature and official documents as the Initial Token Offering (ITO)) from the point of view of a company as well as verify the hypothesis about ICO as a cheap form of capital rising that is often presented in websites dedicated to ICO. There are enumerated the differences and similarities to the Initial Public Offering and possible advantages over other methods of capital rising. The paper points out the most important barriers to the use of ICO. The research method applied: As there is shortage of available research papers and literature related to the topic that are focused on financial aspects such as comparison between ICO and other methods of capital rising, there was conducted the analysis of reliable internet sources and a case study method of Ethereum – the first company that applied the Initial Coin Offering procedure. The mentioned research method has its limits, as it is necessary to verify received information. That is the reason why only professional websites dedicated to the topic were used. The outcome of the research (considerations, analyses), main conclusion(s): the Initial Coin Offering procedure is recognised as a very controversial topic. It is clearly visible that ICO has many advantages over traditional forms of rising capital for the company, but, so far, ambiguous legal status, cost level and high risk of scams and other possible abuses make it difficult to become widely applied by newly created companies.
2017 was a landmark year for cryptocurrency. In that year, it burst onto the global economic scene and attracted investments from people and organizations all around the world. Its popularity gave rise to cryptocurrency exchange platforms, which seemed to further herald its arrival into the mainstream. However, these entirely unregulated exchange platforms have fostered insider trading that has no discernable recourse—and U.S. policymakers have done little to stop it. As such, this article explores the phenomenon that is cryptocurrency, the trend of insider trading, and the difficulties facing U.S. officials as they attempt to reconcile cryptocurrency’s novelty with its need for stability. The article concludes this discussion by outlining and recommending three solutions to the cryptocurrency insider trading conundrum.