Crypto Assets under Private Law and Supervisory Regulation: European Perspectives

Abstract

There is broad consensus among international regulators and practitioners that Crypto Assets as an emerging new asset class and related Distributed Ledger/Blockchain Technology (DLT) will have an immense potential for innovation end efficiency gains in the financial sector. Crypto Assets and tokenisation might revolutionise the financial markets in similar ways as securitisation in the past. Considering that, in view of the finance industry forging ahead, the EU Commission has taken up the subject by the initiation of formal proceedings, time has come to attempt an overarching analysis of the current state. So far it seems that academics and practitioners have focused primarily on the regulatory aspects of Crypto Assets. Nevertheless, the outcome of the private law analysis might well have a major impact on the stance of international regulators towards the subject matter, which, apart from AML and fraud combating, is driven by considerations in respect of financial stability and investors’ protection. There is no doubt that significant risks and legal uncertainties are involved in both private and regulatory law. The overarching question is whether the national and international legal systems - private and public law - are prepared to ensure legal certainty and appropriate protection of market participants as well as of the public good without hindering innovation. The key questions to be answered are as follows: Can a Crypto Asset be classified as property? What is the legal status of the Distributed Ledger/Blockchain: is it a register or at least a means of documentary evidence? Which are the legal formalities for the transfer of Crypto Assets? Are they backed by legal recognition? Until to-date, the results differ between individual jurisdictions. This is why individual national legislators have taken up the subject with Liechtenstein and Switzerland leading the way. The EU itself and Member Countries will have to master these challenges to position themselves as an attractive location through legal certainty, efficient regulation and good reputation in the field. The EU Commission has initiated formal proceedings - related proposals are expected to be published in Q 3 2020.