Regulation Of Crypto Assets Research Articles

Conceptualizing an Institutional Framework to Mitigate Crypto-Assets’ Operational Risk

Extent ecosystems of crypto financial assets (crypto-assets) lack parity and coherence across the globe. This asymmetry is further heightened with a knowledge gap in operational risk management, wherein the global landscape of crypto-assets is characterized by unprecedented external risks and internal vulnerabilities. In this study, we present a critical examination and comprehensive analysis of current crypto-asset operational guidelines across geographies. We benchmark these guidelines to the Basel Committee for Banking Supervision (BCBS) risk classification framework for crypto-assets, identifying gaps in the operations across organizations. We, hence, conceptualize a novel institutional framework which may help in understanding and mitigating the gaps in operational risks’ regulation of crypto-assets. Our proposed Crypto-asset Operational Risk Management (CORM) framework determines how operational risk associated with crypto-assets of financial institutions can be mitigated to respond to the increasing demand for crypto-assets, cross border payments, electronic money, and cryptocurrencies, across countries. Applicable to firms irrespective of their size and scale of operations, CORM aligns with global regulatory initiatives, facilitating compliance and fostering trust among stakeholders. Strengthening our argument of CORM’s applicability, we present its efficacy in the form of alternate hypothetical outcomes in two distinct real-life cases wherein crypto-asset exchanges succumbed to either external risks, such as hacking, or internal vulnerabilities. It paves the way for future regulatory response with a structured approach to addressing the unique operational risks associated with crypto-assets. The framework advocates for collaborative efforts among industry stakeholders, ensuring its adaptability to the rapidly evolving crypto landscape. It further contributes to the establishment of a more resilient and regulated financial ecosystem, inclusive of crypto-assets. By implementing CORM, institutions can navigate the complexities of crypto-assets while safeguarding their interests and promoting sustainable growth in the digital asset market.

Central bank digital currencies as an element of the payment-centric model of global financial regulation

The article examines the current state of implementation of one of the largest regulatory projects in to examine the role of international cross-border payment regulation in the context of global financial architecture and to see how a modernized national payment infrastructure could be optimally embedded in the global payment infrastructure. To achieve this purpose, this article systematizes the standard setting documents and analyzes doctrinal sources. Special attention is paid to BIS Innovation Hub projects. The study analyses area E of the G20 Roadmap, which covers the development of new means of payment, including CBDCs and stablecoins. In particular, the paper provides an overview of analytics and specific projects pertaining to the introduction of central bank digital currencies (CBDC). The article also analyzes how the issuance of CBDCs relates to the international framework being created for regulating crypto assets. The authors conclude that global financial regulation is becoming more payment-centric since the issue of regulating cross-border payments lies at the intersection of several important policies and international legal regimes. In particular, this involves international policies pertaining to the regulation of financial services, macroprudential regulation, regulation of the global monetary system, regulation of crypto assets, countering illicit financial flows in the global economy, and ESG regulation. The article systematizes the features and risks of the payment-centric model for global financial regulation. It concludes that international cooperation and coordination are necessary if cross-border projects related to payments are to be successfully implemented.

НАПРЯМИ ЗМІН У ПРАВОВОМУ РЕГУЛЮВАННІ ОБІГУ КРИПТОАКТИВІВ: АНАЛІЗ ЗАРУБІЖНОГО ДОСВІДУ

The proliferation of cryptocurrency transactions and the increase in their value raises the question of the need for a final solution to the problem of legal regulation of their circulation. The urgency of this task is exacerbated by the fact that leaving cryptoassets out of the legal field promotes their use in illegal activities and deprives the state of significant revenues from their proper taxation. The purpose of this article is to study the approaches to the legal regulation of the circulation of cryptoassets, which are recently formed in the world, to determine the positive experience and opportunities to borrow successful legislative decisions. The article analyzes approaches to the regulation of relations arising from cryptocurrencies in the United States, Canada, Great Britain, Germany, Austria, Estonia, China, Singapore and Australia. Particular attention is paid to the analysis of the European unified approach to the regulation of cryptocurrencies for all European countries, as well as cryptocurrency services. According to the results of the study, it is concluded that today the attitude to cryptocurrencies differs depending on the level of development of the country. However, recently there has been a tendency to focus efforts on the implementation of cryptoassets in the legal field and ensure legal regulation of their circulation. In general, 2020, the year of the pandemic and the transfer of life to the online format, was marked by special attention to the development of legal regulation of cryptocurrency circulation. Of particular concern to the authorities are features of cryptocurrencies such as decentralization and anonymity, which allow these assets to be used to launder criminal proceeds and finance terrorism. It is in this direction that government regulation of cryptocurrency circulation has been moving recently. Most countries in the world of cryptocurrency regulation focus on licensing cryptocurrency exchanges, identifying their users, taxing, and countering money laundering and terrorist financing. These principles are the basis of the unified approach to the regulation of cryptocurrency activities for all European countries proposed by the European Commission. It is noteworthy that both in the European unified approach to the regulation of cryptoassets and in their legal regulation in some European countries and the United States, it is proposed to classify cryptocurrencies and divide them into several categories depending on the functions they perform. These approaches to the classification of cryptoassets should be considered when determining the legal framework for regulating the circulation of cryptoassets (virtual assets) in Ukraine.

Challenges Ahead for the EU Banking System

The present paper discusses some recent and current challenges for the banking system in the European Union (EU). While Section 1 develops on its overall robustness before the onset of the pandemic crisis and briefly overviews the regulatory and supervisory responses to preserve its stability amidst that crisis, Section 2 focuses on two challenges relating to potential threats to banking stability in the EU: non-performing loans and negative central bank interest rates. Section 3 addresses then the challenges linked to EU regulatory developments in the fields of sustainable and digital finance. Finally, Section 4 contains a final assessment and the concluding remarks. Global Financial Crisis (GFC), pandemic crisis, financial stability, “Basel III impact”, non-performing loans (NPLs), negative interest rates, Sustainable Finance Strategy, management and supervision of ESG risks, Digital Finance Package, regulation of crypto-assets

Blockchain in accounting research: current trends and emerging topics

PurposeThis paper provides a structured literature review of blockchain in accounting. The authors identify current trends, analyse and critique the key topics of research and discuss the future of this nascent field of inquiry.Design/methodology/approachThis study’s analysis combined a structured literature review with citation analysis, topic modelling using a machine learning approach and a manual review of selected articles. The corpus comprised 153 academic papers from two ranked journal lists, the Association of Business Schools (ABS) and the Australian Business Deans Council (ABDC), and from the Social Science Research Network (SSRN). From this, the authors analysed and critiqued the current and future research trends in the four most predominant topics of research in blockchain for accounting.FindingsBlockchain is not yet a mainstream accounting topic, and most of the current literature is normative. The four most commonly discussed areas of blockchain include the changing role of accountants; new challenges for auditors; opportunities and challenges of blockchain technology application; and the regulation of cryptoassets. While blockchain will likely be disruptive to accounting and auditing, there will still be a need for these roles. With the sheer volume of information that blockchain records, both professions may shift out of the back-office toward higher-profile advisory roles where accountants try to align competitive intelligence with business strategy, and auditors are called on ex ante to verify transactions and even whole ecosystems.Research limitations/implicationsThe authors identify several challenges that will need to be examined in future research. Challenges include skilling up for a new paradigm, the logistical issues associated with managing and monitoring multiple parties all contributing to various public and private blockchains, and the pressing need for legal frameworks to regulate cryptoassets.Practical implicationsThe possibilities that blockchain brings to information disclosure, fraud detection and overcoming the threat of shadow dealings in developing countries all contribute to the importance of further investigation into blockchain in accounting.Originality/valueThe authors’ structured literature review uniquely identifies critical research topics for developing future research directions related to blockchain in accounting.

Regulation of Cryptoassets in Mainland China, Hong Kong, Macau and Taiwan

The regulation of digital financial assets has been a topic of discussion for many countries over the last decade. China is among the world leaders in the digitalization and blockchain technologies. Under the “one country, two systems,” two different approaches to the digital financial assets have been implemented in the PRC. Although the COVID-19 pandemic has stimulated many investors to diversify their investment portfolios to include digital financial assets, the People’s Bank of China has not changed its prohibitive position on tokens and cryptocurrencies and even launched a campaign against miners and crypto exchanges. Macau and Taiwan have also prohibited initial coin offerings and the transfer of cryptocurrencies due to the risks of money laundering connected with the citizens of mainland China. Macau, Taiwan, and the Monetary Authority of Hong Kong have implemented less stringent regulations of digital financial assets. Comparative analysis demonstrates that Hong Kong acts as an intermediary for China to the digital financial assets.

Europe in the digital age: regulating digital finance without suffocating innovation

ABSTRACT The expansion of the cryptocurrency market in the last 10 years has been exponential and a ‘watch and wait strategy’ towards the regulation of crypto-assets is no longer appropriate and justifiable. Opportunely, the European Union (EU) has recognised the need for a digital finance strategy to address regulatory gaps and help relaunch and modernise the European economy in the aftermath of the COVID-19 pandemic. The philosophy behind the EU Digital Finance Strategy, in particular the proposed Regulation on Markets in Crypto-Assets (MiCA) and the proposed Digital Operational Resilience Act (DORA), is innovation-friendly. The EU legislative initiatives seek to unlock the potential of crypto-assets while mitigating the risks to financial stability, market integrity and consumer protection. This will lead to additional and better financial products for consumers, improving financial inclusion and financing of businesses.

The regulation of crypto-assets in the EU – investment and payment tokens under the radar

Based on the guidelines issued by the European Securities and Market Authority and by the European Banking Authority, the article deals with the legal qualification of blockchain-based crypto-assets under EU law. Focusing on crypto-assets that function as a) investment instruments (that is, investment tokens) and as b) electronic money (that is, payment tokens), the work outlines shortages and drawbacks in the applicability and enforcement of existing EU legal frameworks regulating investment activities and payment services. With such analysis, the article seeks to inform the ongoing debate within European institutions on the need of regulatory intervention in this area, and it points out pressing questions to be tackled by further research.

The Sec, Cryptoasset Markets, and Game Theory: When Strategic Goals and Tactics Don’t Meet

This article contributes to the academic discourse on the regulation of cryptoassets in capital markets. The current cryptoasset policy of the Securities and Exchange Commission (“SEC”) is built on enforcement of the pre-crypto regulations without reform. This article analyzes the data on SEC enforcement, applies cost-benefit analysis to the regulation via enforcement approach, and examines manually collected issuer filings. The main conclusion is that the SEC has spent considerable resources on achieving an inefficient equilibrium in the crypto-market. The current status quo is characterized by the following antipodean trends: The SEC regulates via enforcement and ignores the significant “pure-information” component of the crypto-markets. The issuers, attempting to avoid enforcement actions, comply with the federal securities law in the most rational way by resorting to private placements. In the end, the crypto-investors, particularly the less sophisticated cohorts of investors, are exposed to the information asymmetry and agency costs of private placements aggravated by the unique risks of crypto-offerings. At bottom, the SEC has forced crypto-issuers to spend resources and comply with the laws that do not generate material benefits to investors, which suggests that the strategy of active enforcement is Kaldor-Hicks inefficient.

The Development and Regulation of Cryptoassets: Hong Kong Experiences and a Comparative Analysis

Cryptoassets have emerged as a new category of financial products in recent years and have attracted a great deal of attention from market participants and regulators. While the characteristics of cryptoassets, such as anonymity and disintermediation in transactions, bring significant benefits, they come with a range of significant risks concerning investor protection and market integrity. Due to the difficulties in regulating cryptoassets under the traditional framework, Hong Kong has set up its first comprehensive regulatory regime on cryptoassets in November 2018, imposing new standards on cryptoasset fund managers, distributors and platform operators. By means of a comparison with four major jurisdictions overseas, including Mainland China, the US, the UK, and Singapore, the strengths and potential concerns of Hong Kong’s new regime are analysed. Overall, the new regulatory regime for cryptoassets in Hong Kong is a significant development, addressing the issues of regulatory gaps and regulatory arbitrage that existed under the previous framework as well as introducing enhanced regulatory standards. This has the effect of improving investor protection, but there are some remaining concerns. Chief amongst them are the problems with regulatory scope, the application of traditional regulatory standards to cryptoassets that do not fall within the definition of securities or futures, problems with the sandbox mechanism, and ultimately as a matter of regulatory philosophy, the need for a better balance between investor protection and market development.

The Development and Regulation of Cryptoassets: Hong Kong Experiences and a Comparative Analysis

Cryptoassets have emerged as a new category of financial products in recent years and have attracted a great deal of attention from market participants and regulators. While the characteristics of cryptoassets, such as anonymity and disintermediation in transactions, bring significant benefits, they come with a range of significant risks concerning investor protection and market integrity. Due to the difficulties in regulating cryptoassets under the traditional framework, Hong Kong has set up its first comprehensive regulatory regime on cryptoassets in November 2018, imposing new standards on cryptoasset fund managers, distributors and platform operators. By means of a comparison with four major jurisdictions overseas, including Mainland China, the US, the UK, and Singapore, the strengths and potential concerns of Hong Kong’s new regime are analysed. Overall, the new regulatory regime for cryptoassets in Hong Kong is a significant development, addressing the issues of regulatory gaps and regulatory arbitrage that existed under the previous framework as well as introducing enhanced regulatory standards. This has the effect of improving investor protection, but there are some remaining concerns. Chief amongst them are the problems with regulatory scope, the application of traditional regulatory standards to cryptoassets that do not fall within the definition of securities or futures, problems with the sandbox mechanism, and ultimately as a matter of regulatory philosophy, the need for a better balance between investor protection and market development.

Regulation of Crypto Assets

Regulation of Crypto Assets

Anti-money laundering regulation of crypto assets in Europe’s smallest member state

The paper critically examines the framework for the regulation of crypto assets in Malta, with a particular focus on anti-money laundering and funding of terrorism. It identifies the risks relating to crypto assets, and how these are addressed through Malta's Virtual Financial Assets Framework. To this end, the paper argues that the Maltese framework goes beyond the EU's fifth Anti-Money Laundering Directive. In this connection, the paper also argues that the Maltese framework could possibly be a model for a more extensive EU regime in this context. Finally, the paper sets forth recommendations towards action which may be taken at an EU level in order to address the money laundering and terrorism financing threats associated with crypto assets.

A critical examination of the VFA framework – the VFA agent and beyond

Malta is one of the first countries to have enacted a framework for the regulation of crypto assets. This paper examines the Maltese initiative and compares this framework with developments in other jurisdictions, particularly France, which is the only EU Member State other than Malta, to have a sui generis framework for the sector. It also examines in detail the regime applicable to VFA Agents, which have a critical role in ensuring that only operators that are fit and proper get access to Malta’s financial system, thus acting as a first line of defence against the abuse of the system. The paper outlines how, through checks on an applicant for registration as a VFA Agent’s governance, business model, level of competence and systems and controls, the MFSA is ensuring that registered agents can perform as the Authority’s extended supervisory arm, thereby strengthening the level of monitoring in this field.

The regulation of crypto assets in Malta: The Virtual Financial Assets Act and beyond

This paper critically examines the regulation of crypto assets in Malta, which has become a jurisdiction of choice for operators in this field. It analyses the Virtual Financial Assets Act [VFAA] a...