Abstract

Since the world’s first virtual currency was issued on the Bitcoin blockchain network in 2009, there has been a proliferation of various other private digital token offerings on blockchain networks—in particular, on the Ethereum blockchain. Milkau and Bott (2018) report that several governments are considering implementing digital currencies as a “complement to cash.” Blockchain technology holds great promise for innovative applications capable of facilitating any number of business operations, and several large companies including IBM, American Express, Toyota, JP Morgan Chase, Goldman Sachs, Walt Disney, Oracle, and Facebook have already invested heavily in the emerging technology. Crowdfunding is also a popular application of blockchain technology. Tech entrepreneurs have issued digital tokens for virtual currency as a means of circumventing the tedious regulations of the SEC governing the raising of capital. The regulatory status of these digital tokens and their associated trading platforms has been approached with a certain degree of ambiguity and controversy. This paper explores and explains the regulatory issues of fintech regarding digital tokens, making a valuable addition to the scarce literature on this topic.

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