Global Currencies and Domestic Regulation: Embedding through Enabling?

Abstract

This article identifies cryptocurrencies and other virtual currencies as global currencies that could have a major impact on national jurisdictions. Regulation concerning cryptocurrencies can be described in the terms of the ‘double movement’ that Karl Polanyi identified for the expansion of the market society in the 19th and 20th centuries. Cryptocurrencies have been developed by anti-establishment individuals and groups, and other opponents of the global financial system that – in Polanyi’s terms – belong to a collectivist counter-movement. The effect they have produced, though, is rather to expand global markets and the market system. This has spurred a counter-movement to the counter-movement, or what could be called the ‘anti-countermovement.’ The response of the anti-countermovement to the expansion and influence of the global currencies is paradoxical if not schizophrenic. The anti-countermovement treats global currencies both as currencies and as a technology. This has led to various regulatory measures in different jurisdictions. When viewed as currency, cryptocurrencies are regulated both as money and commodities leading to an indifferent approach to their regulation or a command-and-control approach or various intermediate approaches. When viewed as a technology, different jurisdictions have taken an enabling approach to the regulation of cryptocurrencies by establishing ‘innovation hubs’ and ‘regulatory sandboxes’ for FinTech companies. This paper concludes by discussing the dangers of embedding cryptocurrencies through enabling them, namely the problem of more finance, and possibly an internal clash of domestic agencies. The way to mitigate the dangers of embedding through enabling is by regulating the new cryptocurrency intermediaries.