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The Regulation of Cryptocurrencies: Between a Currency and a Financial Product
Hadar Y. Jabotinsky
Article

  The full text of this Article may be found here.

31 Fordham Intell. Prop. Media & Ent. L.J. 118 (2020).

Article by Hadar Y. Jabotinsky*

 

ABSTRACT

[C]

ryptocurrencies are electronically generated and stored currencies by which users can trade either real or virtual objects with one another. As these digital assets gain popularity, the issue of how to regulate them becomes more pressing. Cryptocurrencies are attractive due in part to their decentralized, peer-to-peer structure. This makes them an alternative to national currencies which are controlled by central banks. Given that these cryptocurrencies are already replacing some of the “regular” national currencies and financial products, the question then arises—should they be regulated? And if so, how? This paper draws the legal distinction between cryptocurrencies which are in fact currency and those which are securities disguised as currency. It further suggests that in cases where a token is indeed a security, regular securities regulation should apply. In all other cases, anti-fraud measures should be in place to protect investors. Further regulation should only be put in place if the cryptocurrency starts increasing systemic risk in the general financial system.

* Cegla Visiting Research Fellow at Tel Aviv University Law School, Israel and Research Fellow at the Hadar Jabotinsky Center for Interdisciplinary Research of Financial Markets, Crisis and Technology. I thank Lisa Bernstein, Stijn Claessens, Jesse Fried, Rob Nicholls, Mathias Siems, Omri Ben-Zvi, Kenny Pyetranker, Dean Steinbeck and the participants of the Digital Society Conference in Berlin (2017), and the Regulation of Virtual Currencies Workshop in Jerusalem (2018) for their helpful comments. I would also like to thank the Oxford Business Law Blog (OBLB) and the Columbia Law School Blue Sky Blog for featuring a news post about this Article. Last, many thanks to Satoshi Nakamoto for making this Article possible. This research was conducted with the support of the Israeli National Cyber Directorate (INCD).