European Journal of Law Reform

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Issue 1-2, 2023 Expand all abstracts

Access_open Beyond Speculation

The Transformative Power of Blockchain Technology in Various Industries

Keywords blockchain technology, industries, transformation, applications, adoption
Authors Hatem Mabrouk
AbstractAuthor's information

    Blockchain technology has the potential to revolutionize several industries, from supply chain management and financial services to healthcare and voting systems. This article discusses how blockchain technology has begun transforming those industries by presenting real use cases demonstrating that blockchain is much more than just a tool for speculation. The article concludes by underlining blockchain’s potential for future innovation and growth.

Hatem Mabrouk
Hatem Mabrouk is Professor of International Business, University of Tecnológico de Monterrey, Mexico. Blockchain Leader at EGADE Business School Center of Digital Evolution. Cofounder and COO at LinkBridge. ORCID ID: 0000-0001-5816-7290.

Frank Emmert
Prof. Dr. Frank Emmert, LL.M., FCIArb, Indiana University Robert H. McKinney School of Law.

Access_open MiCA: The Introduction of an EU-wide Regulatory Framework for Crypto-assets

Keywords MiCA, financial regulatory law, crypto-assets, asset-referenced tokens, e-money tokens, asset segregation, property law
Authors Maurice van Oosten and Laurens Hillen
AbstractAuthor's information

    The Markets in Crypto Assets Regulation (MiCA) will become directly applicable in the European Union (EU) as of 30 June and 30 December 2024, respectively, and will provide a harmonized legal framework for the regulation of crypto-assets in all Member States of the European Union. This will fundamentally change the regulatory landscape for the European crypto sector. In this article, the authors consider the purpose and scope of MiCA and highlight important requirements introduced by MiCA. The authors explore the different types of crypto-assets defined and regulated under MiCA and discuss the important topic of asset segregation. In doing so, the authors also elaborate on property law aspects connected to these topics, including custody of crypto-assets and client funds. The article aims to give readers a good overview of what to expect under MiCA and when market participants within the crypto sector start falling under MiCA’s scope.

Maurice van Oosten
Maurice van Oosten (LLM), lawyer at Finnius Advocaten, a financial regulatory boutique firm in Amsterdam, the Netherlands.

Laurens Hillen
L.G.B. Hillen (LLM), lawyer at Finnius Advocaten, a financial regulatory boutique firm in Amsterdam, the Netherlands.

Access_open The Regulation of Digital Currency in China

Past, Present, and Future

Keywords China’s digital currency regulation, China’s regulatory approach to cryptocurrency, future of money, central bank digital currency, e-CNY
Authors Ying Chen and Michael Adams
AbstractAuthor's information

    China has been at the forefront of experimenting with digital currencies, starting from the decentralized cryptocurrencies (cryptos) in the late 2000s to the most recent state-controlled central bank digital currency (CBDC). This article reviews China’s history of digital currencies and examines its unique regulatory approach to both cryptos and CBDC. Reflecting on China’s concerns and ambitions, this article further explores the anticipated future of digital currencies in China with a particular focus on China’s regulatory developments. It concludes that e-CNY, a state-controlled CBDC, is China’s future of money, although that means China must navigate an increasingly complex regulatory landscape.

Ying Chen
Dr. Ying Chen is Associate Professor, Bond University, Faculty of Law, Gold Coast, Australia. Email: yinchen@bond.edu.au.

Michael Adams
Professor Michael Adams is Head of Law School, University of New England, Australia. Email: michael.adams@une.edu.au.

Access_open The Swiss Association as a Legal Wrapper for a Global DAO and vis-à-vis the MiCA Regime

Keywords MiCA, DLT, DOA, legal wrapper, Swiss Association
Authors Marcel Hostettler and Piotr Wojtowicz
AbstractAuthor's information

    The article explores the utilization of decentralized autonomous organizations (DAOs) and the legal framework of Swiss associations as a possible legal wrapper – particularly for globally operating DAOs. All against the backdrop of a steadily growing regulation to the likes of the EU’s MiCA framework.
    The discussion encompasses the essential characteristics of DAOs, emphasizing their decentralized nature, shared purpose, autonomy, and predefined rules.
    The article highlights the legal complexities around DAOs. Considering many DAOs operating without a deliberately chosen legal structure, the argument is made that even though DAOs might be set up with the idea to not be regulated at law, the contrary might be the case. Legal concepts to the effect of ‘joint ventures’ or ‘simple partnership’ may lead to the inadvertent formation of legal entities. Thus, legal risks may very likely loom over participants of DAOs whether they may desire that outcome or not.
    The article emphasizes liability as a driving force behind the need of a quest for legal wrappers. To mitigate unintended liabilities, selected solutions are being proposed. The text discusses further benefits of a legal wrapper. The argument is made that DAOs should deliberately chose a legal wrapper mirroring their nature and fitting their needs.
    The discussion then turns to the Swiss association as an attractive choice for globally operating DAOs. The autonomy granted to Swiss associations under Swiss Law providing for freedom, self-governance, and flexibility mirror the nature of a DAO. The features of the Swiss association and its benefits as a legal wrapper for DAOs are then being scrutinized. The text posits the establishment of a Swiss association as a solution to limit liability for DAOs participants. Ultimately, the Swiss association is presented as a wrapper offering not only liability protection but also additional benefits for DAOs, which are further explored.

Marcel Hostettler
Marcel Hostettler, MBA and MAS in finance, is an attorney at law, admitted in Switzerland. He is partner at the law firm Allegra LAW in Zürich, Switzerland and a member of the Regulatory Board of the Swiss stock exchanges, with focus on financial market law, especially business models involving new technologies, such as blockchain. His main area of interest is the financial market regulation of blockchain projects.

Piotr Wojtowicz
Piotr Wojtowicz, LL.M. (Cardozo School of Law New York), is an attorney at law admitted in Switzerland and in New York. He is senior associate at the law firm Allegra LAW in Zurich, Switzerland, with focus on corporate law and new technologies, especially blockchain-focused businesses. His main area of interest is the corporate law design of blockchain projects. He is member of the New York State Bar Association (NYSBA) and chair of the NYSBA International Section Entertainment and Sports Law Committee (including digital aspects).

Access_open The United Kingdom Cryptoasset Regulatory Framework

Keywords United Kingdom, cryptoassets, regulation, blockchain, safekeeping, securities
Authors James Burnie and Meghan Millward
AbstractAuthor's information

    An overview of the United Kingdom regulatory framework for cryptoassets, including current legislative position and expected changes in the near future. Currently, the key determinants of whether cryptoasset activity are twofold. Firstly, the features of a cryptoasset will determine whether it fits within the definition of being a specified investment for the pruposes of the traditional regulatory regime. Cryptoassets which, for example, function like securities would fall within this regime, and so certain specified activities in relation to such would require a licence from a UK regulator. Secondly the acts of exchanging, making arrangement with a view to the exchange of, and safekeeping cryptoassets require registration with a UK regulator if performed from an establishment in the UK. Recently, a regime requiring approval of financial promotions of fungible transferrable cryptoassets has come into force, and there will also likely be further new regimes in the future, for example in connection with stablecoins used for payment services.

James Burnie
James Burnie, blockchain and Web3 partner at gunnercooke llp. James is a financial services and regulation partner at gunnercooke llp. He has been involved in crypto since advising on the first successful UK-based ICO and the first equity issuance settled on-chain. Recent work has included advising the Mauritius FSC, as well as three other regulators, on designing their legal and regulatory frameworks for cryptoassets. He has given evidence to the UK All-Party Parliamentary Group on Blockchain and Cryptoassets, is an advisor to the Law Commission’s DAO panel, and a named contributor to the UKJT legal statement on cryptoassets and smart contracts. He is a co-author of both the RegTech and PayTech books.

Meghan Millward
Meghan Millward is a trainee lawyer at gunnercooke llp. Meghan advises on wide a range of issues across Web3, DeFi and metaverses, including commercial contracts, SAFTs, staking, gambling, regulatory perimeter issues, the regulatory treatment of tokens, use of tokens for payments, international set-up considerations, and how to deal with issues when setting up and contracting with DAOs and exchanges. As regards crypto funds set-up, she advises on the full end-to-end fund launch process, document drafting, and overall project management to ensure cost and time efficiency. Meghan has published in the Journal of International Banking & Financial Law and assisted the Mauritius FSC with drafting its legal and regulatory framework for cryptoassets.

Access_open Cryptocurrency Regulation in a Robust Market

The Vietnamese Approach

Keywords cryptocurrency, regulation, Vietnam
Authors To Van Hoa and To Vu Nhat Minh
AbstractAuthor's information

    The Vietnamese market has consistently demonstrated impressive levels of grassroots adoption of cryptocurrencies and, therefore, is always a prospective market for cryptocurrency development. This is one of the driving factors behind the need for effective cryptocurrency regulation in the country, so that investors and consumers are properly protected. However, as is the case with all new elements of the economy, regulating cryptocurrencies is a delicate process of balancing between economic development and protection of parties with limited leverage. If laws are too strict, then the market momentum is stifled and an economic opportunity is missed. Conversely, if laws are too lax, then the market is poorly regulated and fraud may become widespread and cause severe damages. This article aims to demonstrate the overall Vietnamese position on cryptocurrency regulation, including how it is being executed and how it might be executed in the foreseeable future.

To Van Hoa
Associate Professor To Van Hoa is a Vice Rector at Hanoi Law University. E-mail: tovanhoa_dhl@yahoo.com; tovanhoa@hlu.edu.vn.

To Vu Nhat Minh
Mr. To Vu Nhat Minh is an Associate at Anhisa LLC. E-mail: tovunhatminh@gmail.com; mitovun@iu.edu.

Access_open The Crypto Regime in India: A Confused Policy

Keywords cryptocurrency, legality, regulation, taxation, policy decision
Authors Nivedita Pundale
AbstractAuthor's information

    With the advancement of financial technology, cryptocurrencies have gained much traction globally. Their largely unregulated and decentralized nature has made them controversial and a topic of hot debate in most countries. Governments and financial institutions across the globe have recognized the significance of the new asset class in the markets and have observed the upsurge in exchanges in mainstream society. Its ever-increasing popularity has pushed governments to deliberate and implement policy decisions for their regulation. Currently, there exists no uniform international law pertaining to the regulation of cryptocurrency despite its cross-border trade. While some countries have affirmed its legality, others have remained silent or have imposed a ban. India has witnessed some interesting developments in its legislative, executive and judicial domains. From the imposition of a ban on services that facilitate the trade of virtual currencies to its subsequent retraction by the judiciary, the Indian spectators are left guessing the government’s next move. While a Draft Bill calling for the ban on cryptocurrency trading sits dormant in the Indian Parliament, crypto users continue to pay a hefty 30% tax on the profits from the sale or exchange of any crypto assets since its imposition in the Union Budget of 2022-2023. The legality of the cryptocurrency itself remains unsettled, and the country awaits a governmental policy decision on the same.

Nivedita Pundale
Nivedita Pundale is a final-year law student at Jindal Global Law School

Access_open Property Rights in Blockchain Assets: Emerging Issues from a U.S. Perspective

Keywords blockchain, NFT, tokenization, token, tokenize
Authors Douglas J. Pepe, Marvin J. Lowenthal and Randall W. Bryer
AbstractAuthor's information

    Blockchain has the power to revolutionize the way we transact in and track ownership of assets, including by helping reduce counterparty risk, expediting transaction settlement, and improving asset provenance and recordkeeping. As technological innovations make blockchain transactions faster, easier, and more user-friendly, and as blockchain continues gaining widespread acceptance, individuals and businesses will seek to use blockchains to transact in a wider range of assets. Ownership interests in virtually any type of asset can be reposited on a blockchain, including real or personal property and digital assets, as can the right to temporarily use property owned by someone else. There are, however, numerous unsettled issues under U.S. law that could inject uncertainty into transactions in blockchain assets. This article examines some of the key issues that must be resolved if blockchain is going to be more widely utilized and how certain courts and legislatures have weighed in on these issues to date.

Douglas J. Pepe
Prof. Douglas J. Pepe, The George Washington University Law School and Cohen & Gresser LLP.

Marvin J. Lowenthal
Marvin J. Lowenthal, Cohen & Gresser LLP.

Randall W. Bryer
Randall W. Bryer, Cohen & Gresser LLP.

Access_open Wyoming’s DAO Statutes

A Model for Wider Adoption

Keywords DAO, cryptocurrency, Wyoming, securities, Howey, crypto
Authors Adam Kashin
AbstractAuthor's information

    This article examines the first American statutes that address the legal organizational structure of decentralized autonomous organizations (DAOs). In 2021, the state of Wyoming folded the cryptocurrency-based organizations into the state’s definition of limited liability company (LLC), a legislative move that almost immediately drew widespread attention and criticism, while prompting the introduction of mirrored legislation in other states. This article addresses Wyoming’s novel statutory framework, securities regulation in this context, the practicality of treating DAOs as LLCs, and the first DAO organized under this statutory regime.

Adam Kashin
Adam Kashin holds a J.D. from Indiana University Robert H. McKinney School of Law, and a B.A. from Wabash College. He has extensive experience researching, utilizing, and writing about decentralized technologies. Motivated by the radical transparency that is central to most decentralized networks, Adam seeks to contribute to legal systems that both support these networks and address their pitfalls.

Access_open DAO Regulation and Legislation

Keywords Wyoming DAO Law, DAO, LAO, DAO Law, decentralized autonomous organization
Authors Rick Tapia, Andrew Bull and Tyler Harttraft
AbstractAuthor's information

    This article explores the contrast between traditional centralized corporate entities and Decentralized Autonomous Organizations (DAOs) in the U.S. financial regulatory landscape. While traditional entities operate with a centralized structure and clear managerial hierarchies, DAOs disrupt this paradigm with their decentralized, democratic, and digital nature, thanks to blockchain technology. DAOs face significant legal challenges due to their unique structures, including regulatory uncertainty and liability issues. The paper highlights the need for regulatory clarity and adaptation to accommodate the participatory structures of DAOs. It concludes that while existing financial regulations apply to DAOs, they often fall short due to DAOs' unique nature, necessitating an update in regulatory approaches to appreciate the specific virtues of DAOs and Legal Autonomous Organizations (LAOs). The evolving landscape of DAOs demands close observation and involvement from various stakeholders in the blockchain industry to address these regulatory challenges effectively.

Rick Tapia
Rick Tapia, Associate at Bull Blockchain Law LLP, https://bullblockchainlaw.com/rick-tapia/.

Andrew Bull
Andrew Bull, founding partner at Bull Blockchain Law LLP, https://bullblockchainlaw.com/andrew-bull-esq/.

Tyler Harttraft
Tyler Harttraft, partner at Bull Blockchain Law LLP, https://bullblockchainlaw.com/tyler-harttraft-esq/.

Access_open The Regulatory Response and the Current and Future Legal Status

Keywords non-fungible tokens, Crypto, Digital Assets, securities regulations, Securities and Exchange Commission
Authors Kaleb Britton
AbstractAuthor's information

    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.

Kaleb Britton
Kaleb Britton is JD candidate at Indiana University Robert H. McKinney School of Law. He is a healthcare information systems analyst at Indiana University Health and a veteran of the United States Marine Corps. For comments or questions, please e-mail krbritto@iu.edu.

    This article provides a brief overview of the main characteristics of the existing two-tier public money payment architecture while emphasizing the numerous trade-offs that are necessary to achieve the second-best arrangement currently in use. Reforming this arrangement requires taking into account many of the old economic and legal constraints while considering the benefits of new available technologies. Some possible avenues for the joint development of central bank digital currencies (CBDCs) and cryptocurrencies and assets are outlined. Particular attention is paid to the role and function of money in a digital, data-driven economy.

Mihnea Constantinescu
Mihnea Constantinescu, (https://orcid.org/0000-0002-2700-2589), University of Amsterdam and National Bank of Ukraine, email: m.constantinescu@uva.nl. Disclaimer: The views expressed in this paper are solely those of the author and do not necessarily reflect those of the National Bank of Ukraine.