Emerging regulatory approaches to blockchain based token economy

Abstract

Blockchain-enabled digital scarcity has opened up a whole new dimension of possibilities for the token economy, particularly with regard to rights and assets that have not been traded electronically before. Blockchain-based tokenization of rights and assets has also brought a new set of legal and regulatory challenges. Regulators and legislators are yet to address many of the issues raised by blockchain-based tokenization, from decentralisation and token characterisation to cross-border harmonisation and regulatory compliance with traditional market infrastructure. Lack of regulatory alignment can undermine many of the benefits of the token economy. Lack of legal certainty may not only stifle innovation and slow down mainstream adoption of blockchainbased tokenization, but can also raise the risks for investors and harm the reputation of the industry. The emerging regulations vary in approach. Liechtenstein became the first country to have a comprehensive technology-neutral regulation of the token economy. Malta and Singapore also represent progressive jurisdictions for blockchain regulation. However, most jurisdictions, including the United States and the European Union, have not yet formed a clear policy for blockchain regulation, and many legal questions remain open. The paper examines whether there is an emerging predominant regulatory approach or prevailing regulatory direction for the future of the token economy. It also highlights the existing regulatory void and divergent approaches to blockchain-based tokenization. Finally, the paper concludes that there is an urgent need to provide a clear legal and regulatory framework if the potential of the token economy is to be realised.

NFT of NFT: Is Our Imagination the Only Limitation of the Metaverse?

“…Overall, our analysis of 10-K reports suggests that most public corporations are moving more slowly to the token economy than suggested by media coverage or do not yet recognise the impact the token economy will have on their business. The nascent and evolving legislative and regulatory infrastructure around the token economy complicates adoption of these technologies and recognition of material impacts [6]. This makes us ask: Will incumbents be ready for the disruption caused by the token economy?…”

A Regulatory System for Optimal Legal Transaction Throughput in Cryptocurrency Blockchains

“…Regulators have identified that the illegal use of blockchain based virtual currencies includes money laundering and terror financing [9]. There have been studies conducted for establishing emerging regulatory approaches for the future of blockchain based token economies [21]. None of the existing blockchain protocols, be them permissionless or permissioned, are designed with regulation in the consensus mechanism itself [26,28,29].…”

Those who control the code control the rules: How different perspectives of privacy are being written into the code of blockchain systems

“…This further complicates efforts to generalise acceptable levels of privacy threat across different users and contexts. Fourth, designing regulation is challenging when technologies are still maturing, as the nature and scale of risks are typically unclear, and governments do not want to act prematurely and impede innovation (Ferreira, 2020; Hamburg, 2012; Kiviat, 2015; Roca et al, 2017). This reticence by governments could open the door for other regulators, but it is not clear which other entities, if any, have the right or means to impose regulation.…”

“…Meanwhile, regulators see the lack of control around blockchain as a potential blind spot for criminal activity such as money laundering and terrorist financing (cf. Amarasinghe et al, 2019; Bordo and Levin 2017; De Filippi, 2014; Elias, 2011; European Banking Association (EBA), 2019; Ferreira, 2020; Foley et al, 2019; Genkin et al, 2018; Goodell and Aste, 2019; Gruber, 2013; Juels et al, 2016; Miller et al, 2017; Molloy, 2018; Möser et al, 2013; Rueckert, 2019; Weber et al, 2019; Zyskind et al, 2015).…”