Academy
While the impact of Blockchain technology is becoming clear in many fields and will inevitably revolutionize overall industries, governments and institutions are looking for ways to regulate cryptocurrencies.
Wait, blockchain and cryptocurrencies are different? Yes, Blockchain refers to an emerging technology, while cryptocurrencies are tokens that are issued using cryptography - often related to tokens on a blockchain network.
A cryptocurrency can play various roles and its value depends on how it is being used. It can be a medium of exchange, a unit of account, or a store of value. It can have monetary value (like money), utility value (to do something), investment value (like traditional securities), or governance value (voting power in DAO).
Depending on the angle a legal body looks at a cryptocurrency, they would consider it to be security (e.g., U.S. Securities and Exchange Commission - SEC), property (e.g., Internal Revenue Service - IRS), or commodity (e.g., U.S. Commodity Futures Trading Commission - CFTC) and require involved parties to respect the corresponding regulations. For example, security law requires cryptocurrency issuers to register their activity before issuing tokens and distributing tokens to “investors”. IRS will apply tax treatment to any cryptocurrency transaction. CFTC will regulate cryptocurrency as a commodity correspondingly.
Beyond those aspects, cryptocurrencies are tied to the financial sector and commerce (esp. e-commerce), so I suspect, it will follow the regulation law of financial services and also commercial law.
It is without a doubt that innovation is the backbone of sustainable development and of the future economy. All governments always encourage new technologies, new infrastructures that accelerate value creation and lead to new values. Is it true that an open environment, without any limitation would be the best for innovation?
“Regulation can at times be a powerful stimulus to innovation”, as suggested by a study of EU legislation [1]. And if reasoning from market point of view, regulation is essential to maintain efficiency, integrity, and resiliency of markets. Innovation shapes or reshapes markets and creates new conditions for market players. A fair game seems impossible without a set of rules for players both for allocating resources and for monitoring behaviors or actions.
Relating to cryptocurrencies, avoiding any market failures due to fraud, misinformation, abuse or negligence; or promoting fairness for everyone; or protecting stakeholder interests seem to all of importance.
For more information and reading regarding this topic, please have a look at the references as follows.
Reference:
[1] Jacques Pelkmans and Andrea Renda, How can EU legislation enable and/or disable innovation, https://ec.europa.eu/futurium/en/system/files/ged/39-how_can_eu_legislation_enable_and-or_disable_innovation.pdf
[2] Related publications from International Monetary Fund (IMF): https://www.imf.org/en/Search#q=fintech&sort=relevancy
[3] Harvard Law School, Fintech Law: The Case studies, https://projects.iq.harvard.edu/fintechlaw/home
